1 The travel and tourism industry - Pearson Schools - Teaching

1UNIT 1: THE TRAVEL AND TOURISM INDUSTRY

The travel and tourism industry

Introduction

The travel and tourism industry is one of the biggest and fastest growing

industries in the UK. This unit will give you an introduction to the industry,

providing a sound basis for further study. You will find out about the nature of the

industry, its size and scale, and you will be introduced to the types of organisations

that form its structure.

In addition you will investigate the development of the industry and the factors

which have affected the growth of travel and tourism.

How you will be assessed

This unit is assessed through an external assessment set by Edexcel. A variety of

exercises and activities is provided in this unit to help you develop your

understanding of the industry and prepare for the external assessment.

After completing the unit you will achieve the following outcomes:

✱ Understand the nature and characteristics of travel and tourism and the traveland tourism industry

✱ Understand the development of the travel and tourism industry

✱ Explain the structure of the travel and tourism industry

✱ Explain the scale of the travel and tourism industry.

U N I T

1

2 MANDATORY UNITS

1.1 The nature andcharacteristics of traveland tourism and the traveland tourism industry

What is tourism?Defining tourism is not a simple matter, as it is a complex industry made up of many differentbusinesses, the common theme being that theyprovide products and services to tourists. Themost usually accepted definition of tourism isthat provided by the World TourismOrganisation:

‘Tourism comprises the activities of personstravelling to and staying in places outside theirusual environment for not more than oneconsecutive year for leisure, business and otherpurposes.’

This definition includes the word ‘staying’ andsuggests that tourists stay at least one night.However, we must acknowledge that day visitorsmake a huge contribution to the tourist industryand some regions and organisations choose toinclude day visitors in statistics. Most UKstatistics separate spending and volume of dayvisitors from overnight tourists.

According to the Department of Culture,Media and Sport, the total value of the tourismand travel sectors in 2002–2003 in the UK was£91.8 billion, most of which comes from domesticrather than overseas visitors.

It is acknowledged by the World TourismOrganisation that tourism is the fastest growingeconomic sector, bringing foreign exchangeearnings to countries and creating jobs. Jobs arenot only created directly in tourism but in relatedindustries, for example in construction. Muchtourism development occurs in developingcountries, bringing economic opportunities tolocal communities.

Different types of tourismFor the purposes of statistics tourists arecategorised as leisure, business or visiting friendsand relatives (VFR) travellers. Thus, they arecategorised by the purpose of their visit.

Leisure tourists (usually described as leisuretravellers in statistics) are travelling for thepurpose of leisure so they are likely to be onholiday or taking a short break.

Business tourists are travelling to go to ameeting, conference or event associated with theirbusiness. This is an important and growingmarket in the UK as more resorts and hotelsprovide conference facilities.

Visiting friends and relatives (VFR) tourists arevisiting family or relatives and therefore they areunlikely to spend as much on tourism as they arenot using accommodation facilities.

There are some other types of tourism that youshould know about.

Incoming tourists or inbound tourists are thosewho visit a country which is not their country ofresidence for the purposes of tourism. If thetourist comes from France to the UK then they areoutbound from France and incoming to the UK.Overseas visitors or incoming tourists to the UKspent about £11.9 billion in 2003.

Domestic tourists are those people who aretravelling within their own country for tourismpurposes.

We have already noted in the tourismdefinition that, strictly, people are only tourists ifthey stay in a place outside their usualenvironment. This means that people on day tripsare not officially tourists, which statistics count asthose who stay at least one night in a place. Aday-tripper is also known as an excursionist.

Key term

Tourism The World Tourism Organisation providesthe most commonly used definition of tourism:

‘Tourism comprises the activities of personstravelling to and staying in places outside theirusual environment for not more than oneconsecutive year for leisure, business and other purposes.’


Day-trippers spend money in the tourismsector and boost the economy, so it is important tomeasure the value of their spending. In the UK,this is measured in the Day Visits Survey. Dayvisits are defined as trips which last three hours ormore and which are not taken on a regular basis.Day visitors spent almost £30 billion in 2003, evenmore than those on overnight stays, so they mustbe taken note of.

Outgoing tourists are those who leave their owncountry, in this case the UK, to visit anothercountry. Thus, if you go on summer holiday toFrance or Spain, you are an outgoing tourist.

Adventure tourists are those who areparticipating in sports or adventurous activities

whilst on holiday, for example whitewater rafting. It is difficult to measure them statisticallyas there is no agreement on what actuallyconstitutes ‘adventure’. Many tour operators usethe term loosely to attract certain types ofcustomer.

Package holiday tourists are those who havebooked a ‘package’ from a tour operator. This willinclude their holiday accommodation, transportand transfer to resort.

Independent tourists are those people who havearranged all their own transport andaccommodation without using travelprofessionals. This group is increasing as theInternet becomes more widely used.

Skills practice

Study each of the examples below. What kind of tourists are they? Note that the examples might fitinto more than one category.

Example Type of tourist

Janine is taking a holiday in the UK. She lives in France.

Salim is going on holiday to Brighton. He lives in Loughborough.

Miguel and Jose are visiting Wales on holiday from Spain. They are going on a hang-gliding course. They booked the course, accommodation and flight with a Spanish tour operator.

Maria and Ken are going to Spain for a weekend break. They live in Glasgow.

Marguerite is a doctor. She has to attend a conference in Tenerife.

The Patel family are going on holiday to Disney in Florida. They booked directly with Thomson in their home town of Swansea.

Suzie is going to New York for two days and has booked a flight on the British Airways website. She also booked a hotel on the Novotel website.

Peter goes to visit his sister in Ireland every Christmas.

Miguel is visiting the UK to attend a language course for two weeks.

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Characteristics of the tourismindustryTypes of businessMany of the businesses in tourism are very small.Government figures show that the tourismindustry consists of 127,000 businesses and 80 percent of these have a turnover of less than £250,000per year. In spite of this, the industry isdominated by a few large companies. They havethe greatest market shares and the most influencein shaping the industry. These are companies youwill have heard of, such as Thomson, First Choiceand Thomas Cook. They are tour operators butalso have retail travel businesses with hundreds ofoutlets. In each sector the same situation occurs.There are thousands of small hotels and bed andbreakfasts, but the major hotel groups, such asHoliday Inn and Accor, dominate. In the airlinesector, British Airways is still a major player,although it is challenged by some low-costoperators like Ryanair.

Most organisations in the travel and tourismindustry are privately owned. These organisationsmay be huge companies, such as British Airways,or small businesses. They usually aim to make aprofit and are commercial companies. When theyfail to make a profit over a period of time they arelikely to cease trading. All theme parks,restaurants, tour operators and travel agents in theUK are privately owned. There are different typesof private ownership, ranging from sole traders topublic limited companies. Sole traders are smalland run by one person, as the name suggests. A public limited company is listed on the stockmarket and is owned by its shareholders, whomay buy and sell shares as they see fit.

Use of new technologyEarly forms of technology in the travel and tourismindustry were systems which linked tour operatorsto travel agencies via terminals and allowed travelagents to make bookings through the system. Thesewere ‘Viewdata’ systems. By today’s standards,Viewdata is unsophisticated and out-of-datetechnology, although it is still used.

Meanwhile, airlines developed computerreservation systems (CRS). Airlines started to usecomputers in the 1950s to store and change thehuge amount of information they needed toaccess. The CRS was used internally by airlines,and agents would use the OAG publication tolook up flight times etc., and then telephone theairline to make a booking. Today, travel agencieshave direct access to the CRS systems.

Global distribution systems (GDS) wereintroduced to link up several CRS systems to makethem accessible to the travel agent. With the latestof these products, the travel agent can make lateavailability searches and view brochures anddestination information online. The product allowsmulti-operator searches, a feature which savesconsiderable time for the travel agent. Informationis also available on coach, rail, air and sea travel,and currency conversion. Some global distributionservices include fully integrated back officesystems. This means that a travel agency’s bookingand accounting procedures can be automated.

The Internet is growing rapidly as a means ofbooking our holidays and flights. It is estimatedthat the British book between 5 per cent and 10per cent of their holidays and trips on the Internet.In America, this figure is about 30 per cent. Thegrowth in Internet booking for flights can beattributed to the low-cost airlines, which haveeducated passengers in how to book quickly andeasily via the Internet, and offered discounts fordoing so. Travel agents and tour operators are alsousing the Internet to present their products andservices and many, but not all, accept bookingsonline.

Here are some other examples of the use ofnew technology.

Self check-in at airports Where this service isavailable, passengers can save time by checking inat a kiosk where they can choose their seat and

Key term

Public limited company This is a business whichis owned by shareholders. Its shares are boughtand sold on the London Stock Exchange.

Do not confuse this type of business with onewhich is ‘in the public sector’. It is not the samething. A business in the public sector is ownedand usually financed and run by national or localgovernment.

CASE STUDY


print their own boarding pass. From there theycan go to a ‘fast bag drop’ and leave their holdbaggage. Passengers without baggage can gostraight to the boarding gate.

Online check-in for airlines This is an alternativewhere passengers can check in without even beingat the airport. From home or the office they goonline and follow instructions to check in,

choosing their seat and printing their boardingpass. It is not offered by all airlines.

Online brochures Kuoni (a tour operator) hasbeen one of the first to present online brochures,as well as providing traditional ones. Thecustomer can browse the brochure at home onlineand Kuoni saves money on printing anddistributing brochures.

Air France

The extract shows information about a bordercontrol system trialled by Air France.Participants, who are volunteers at themoment, have prints taken of their indexfingers which are filed along with theirpersonal data. When going throughimmigration control at Charles de Gaulleairport in Paris, a passenger is authenticated by placing their fingers on a scanner.

1 What do you think are the benefits of thesystem?

2 Are there any drawbacks?3 Find out more at www.airfrance.fr in the

e-services section.

‘To enhance customer comfort and security and

to assess the impact of new technologies on the

fluidity of airport border crossings, Air France is

trialling an experimental automated security

screening system dubbed PEGASE (Programme

d’Expérimentation d’une Gestion Automatisée

et Securisée). It is based on a biometric

fingerprint identification technology

developed by Sagem and is to be tested on

volunteer customers for a six-month period at

Paris-Charles de Gaulle airport’s Terminal 2F.

Click on our website www.airfrance.fr,

section e-services, for the exact dates.’

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External pressuresCurrency fluctuationTourism is an invisible export. This means that iftourists spend their money in the UK it brings thesame benefit to our economy as if they buy goodsin their own country that have been exported fromthe UK. By the same token, when we travel abroadwe spend our money in another country and thisequates to buying imported goods of that countryin the UK. The government would prefer us tospend our money in our own country and take ourholidays here rather than go abroad, so it promotesdomestic tourism. It also wishes to encourage moreoverseas visitors to come to the UK.

The value of one currency against anothercurrency is known as the exchange rate. Thevalue of the pound, or sterling, against anothercurrency affects the cost of coming here forinbound tourists. Our appeal to them willincrease when sterling is weak, as they will getmore pounds for their money. Conversely, ifsterling is strong, overseas visitors get lesspounds in exchange for their money and are lesslikely to want to come here. In recent yearssterling has been very strong against the dollar,or the dollar has been weak against sterling –which amounts to the same thing. This hasmeant that it has been relatively cheap for UK-outbound tourists to visit the United States and more expensive for Americans to come tothe UK.

The fluctuation in currency rates can affecttourism in other ways. Tour operators will findthat the fees they have agreed with hoteliers andtransporters in other countries will increase ordecrease in line with currency movements. Fuelprices are similarly affected. These problems canbe mitigated by tourism businesses if they‘hedge’, that is, agree a price at a fixed rate ofexchange for hotels or fuel in advance. This wouldbe done through their banks.

Legislation The following are some of the legislation whichhas specifically impacted on travel and tourism.

Development of Tourism Act 1969This established a British Tourist Authority andtourist boards for England, Scotland and Wales.The British Tourist Authority (BTA) and theEnglish Tourism Council (ETC) have now beenmerged to form VisitBritain. The Act’s aim was toco-ordinate all the organisations that make up thetourism industry and provide it with a singlevoice.

Transport Acts 1980 and 1985The 1980 Act ended licensing regulations affectingexpress coach routes and tours of over 30 miles. It led to competition between National Bus (then apublic company) and private companies. The 1985Act brought about wholesale de-regulation. Thismeant private companies could operate on anyroute.

Package Travel, Package Holidays andPackage Tours Regulations 1992As a result of an EC Directive, since 1992 all UKtour operators offering package holidays havebeen subject to the Package Travel Regulations.The regulations set out the tour operators’responsibilities to their customers and what thosecustomers can do if the regulations are breached. If there is a breach, the customer has a case againstthe tour operator not each individual supplier.

More recent legislation will impact on thetourism industry in the UK, including changes tolicensing laws and bans on smoking in public places.

Skills practice

Track sterling against the euro for a month.Imagine you are changing £1000. Draw a graphshowing how many euros you would get oneach day.

Think it over ...

What impact will the changes in licensing lawshave on tourism?

ClimateClimatic disasters have a devastating impact ondestinations and on their tourist industry. Recentexamples include the hurricane which hit Grenadabadly in 2003 and the tsunami which devastatedSouth East Asia in late 2004. The tsunami resulted


in the deaths of hundreds of thousands of peopleacross twelve countries. Apart from the appallinghuman toll, the livelihood of the survivors isthreatened because of the devastation of theinfrastructure and the reluctance of many touriststo return to the area.

Even minor climate change affects tourism. Ifthere is a particularly hot summer in the UK thereis usually an increase in domestic tourism and acorresponding decrease in outbound tourism thenext year.

Terrorist attacksThe devastating terrorist attacks on New York’sWorld Trade Centre on 11 September 2001 alsohad an impact on the UK and the worldwidetourism industry, as people were afraid to fly,particularly American tourists. The result was adecline in visitors to Britain and a decline inworldwide travel for leisure and for business.

In October 2002 terrorists bombed a resort inBali, killing over 200 people. The tourism industryin Bali was ruined at the time and only began topick up again two years later.

There have also been terrorist bombings inIstanbul, in Kenya and in Madrid in the past fewyears. Each of these events results in loss oftourism for the area affected, until travellers beginto feel safe to travel to these areas again.

Economic climateThe economic health of a country has an impacton the travel and tourism industry. A country thathas a strong economy can afford to invest intourism, in terms of new infrastructure,supporting the industry through the public sector,and mounting promotional campaigns such asthose organised by VisitBritain. However, thestrength of the economy will result in a strongcurrency and therefore, as we saw earlier, impacton the affordability of a destination for visitors.

Impact on host environmentThe impacts of travel and tourism on a hostenvironment can be both positive and negative. It is vital to the future of the travel and tourismindustry that positive impacts are maximised andnegative impacts are minimised. The impacts canbe economic, environmental, social and cultural.

Positive economic impacts include:

✱ Tourists bring increased income with theirspending on travel, accommodation, etc. Thegovernment also benefits from increasedrevenue as it receives taxes from businessesearning revenue from tourism and in VAT fromgoods and services bought by tourists.

✱ Tourism creates jobs both directly andindirectly in related industries.

✱ Development may also bring about improvedinfrastructure which can be used by touristsand local people alike.

The negative economic impacts can include:

✱ Leakage. This is when economic benefits arelost due to high imports of goods and servicesused in tourism, for example if food and drinkfor hotels are imported rather than boughtlocally. Similarly, if materials and workers forconstruction projects are imported, then thelocal economy does not benefit as it would iflocal materials and workers were used.

✱ Economic distortion can occur when one regionof a country is highly developed for tourismwhile other areas have no development.

The positive environmental impacts include:

✱ The conservation and preservation of historicsites and properties.

✱ National parks and other conservation bodiesproviding information and education fortourists to increase their environmentalawareness.

✱ The regeneration of the environment. Both thebuilt and natural environment benefit fromupgrading and regeneration when a touristopportunity is uncovered by local and nationalgovernment.

Key term

Leakage This is the term used for the amounts oftaxes, the money spent on imports, wages paidoutside the region and company profits, subtractedfrom direct tourism expenditure in an area.

8 MANDATORY UNITS

The negative environmental impacts include:

✱ Traffic congestion where there is a highconcentration of popular tourist attractions, forexample the Lake District.

✱ Pollution from noise and petrol fumes, forexample jet skis and motor boats in coastalresorts. Pollution may disturb or destroy thenormal activities or habitats of wildlife, as inthe case of marine life in coastal areas.

✱ The influx of tourists pressuring scarce resources.An example is the use of water, which is a scarceresource in many places, which is made worsewhere there are tourists, who tend to use morewater than local people. In locations with golfcourses and gardens even more water is used.

The positive social impacts include:

✱ The introduction of community facilities andservices, primarily to cater for tourists, butwhich are also of benefit to locals, in time. Forexample, where sport and leisure facilities areintroduced to cater for tourists, the standard ofliving for the host community may generallyimprove.

✱ The education and training of local people toenable them to take up jobs in tourism.

The negative social impacts include:

✱ Conflict between tourists and the hostcommunity may occur. Tourists sometimescause irritation and offence by failing torespect the customs and traditions of the hostcountry. Also, the host population may resentthe perceived wealth of the incoming tourists.

✱ When tourism is regionalised in a country peoplemay leave their homes and communities to takeup jobs in tourism. This is known asdisplacement.

The positive cultural impacts include:

✱ Reinforcement of cultural identity if visitorsare interested in the host culture.

✱ Traditional customs and crafts can be sustainedby tourist interest and purchase of local goods.

The negative cultural impacts include:

✱ Changes in cultural tradition when traditionalevents and dances are degraded through use asentertainment for tourists.

✱ Destinations can lose some of their culturalidentity as tourists demand products andservices they are accustomed to at home, forexample the insistence on having a Englishbreakfast every morning and drinking in‘British pubs’.

Choose three organisations, one from each ofthe following categories:

• Tour operator or travel agency

• Transport principal or accommodationprovider

• Public sector organisation such as Visit Britain.

Carry out research into your chosenorganisations and find out the following:

• Ownership of the organisation

• Use of new technology by the organisation

• External pressures currently affecting theorganisation

• Impact of the organisation on theenvironment.

Present your findings in a comparative report.

Skills practice

1.2 The development ofthe travel and tourismindustryKey stages in the development ofthe travel and tourism industryEarly tourismIn ancient times people travelled for the purposeof war, religious pilgrimage and trading. From thethird century the ancient Greeks, for example,travelled to visit the sites of their gods and to visitthe temples and the Parthenon in Athens.

During the Roman Empire, citizens of Rometravelled freely to those countries their armies hadconquered, using their own currency and nothaving to worry about border restrictions. TheRomans built long straight roads along whichtheir armies could march and goods could be

CASE STUDYNottingham Goose Fair The Goose Fair was first mentioned in theNottingham Borough Records of 1541. There,in the Chamberlain’s accounts, is a referenceto an allowance of 1s 10d for 22 stalls takenby the city’s two sheriffs on Goose Fair Day.No one knows for how many centuries thefair existed before these references weremade. The Charter of King Edward I, the firstcharter to refer to the city fairs, makes it clearthat a fair on the Feast of St Matthew wasalready established in Nottingham in 1284. Itis possible this occasion has come downthrough the ages to be today’s Goose Fair,particularly as, until 1752, it was always heldon St Matthew’s Day (21 September). On thatday there was worship at what was then thetiny church of St Mary.

1 Use the Internet to find out when theNottingham Goose Fair is held. Find outwhat happens at the Fair.

2 Research the history of local fairs in yourown area. Do they have religious origins?Present your findings visually withexplanatory notes. You could produce aposter or a leaflet.


transported. In countries they conquered, theRomans established trade and created leisurefacilities such as spas – the most famous examplein this country is the Roman spa in Bath. Thosewho could afford to travelled to newly conqueredcountries and to visit their friends and relatives.With the fall of the Roman Empire around 400AD,and for a period after, only the most adventurousor those involved in international trade travelledabroad. In the Middle Ages people seldomtravelled, apart from going on pilgrimage,however there were holidays, or rather ‘holy’days. These were days on which a religiousfestival was celebrated. Many of the UK’straditional fairs can be traced to this period.

During the Middle Ages most transport was byfoot or on horseback, though some people couldafford a wagon. In the early 1600s the sprungcoach was introduced. This was more comfortablebut could only be afforded by the very rich. In theearly seventeenth century wealthy young menwere travelling across Europe on the Grand Tour,spending as long as a year visiting the capitals ofEurope, as part of their education. Anotherdevelopment in travel at this time was the takingof ‘a cure’ by the wealthy, who visited the variousspa towns to take the waters, which were reputedto provide a cure for a range of ailments. Theseresorts became very popular, and there are stillspas today at Buxton, Bath and Harrogate. By1815, tarmac had been developed for use as a roadsurface, which led to further developments in theroad system in the UK and to an increase in themovement of people and vehicles.

The development of the railways increased theopportunity for travel. With the opening of thefirst rail services in 1825, people could travellonger distances for excursions to the seaside, forexample. Steamships increased sea travel,particularly between England and France on theDover–Calais route. People had a strong desire fortravel to escape the dreary working and livingconditions of the factories and towns that emergedduring the industrial revolution of the nineteenthcentury. The development of transport made thispossible. However, whatever holidays factoryworkers took, they were not paid during them.Paid holidays were not introduced until 1938.

Twentieth and twenty-first centurydevelopments

1908 Ford introduced the motor car1919 Commercial air services began1936 First Butlins holiday camp opened1938 Holidays with Pay Act1939–45 Second World War1949 First package tour was organised by

Vladimir Raitz – to Corsica with 32passengers on a DC3 aeroplane

1949 First British fully jet-poweredpassenger aircraft – the de HavillandComet

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1954 de Havilland air service suspendedafter two early models crashed

1954 Boeing 707 passenger aircraftintroduced

1959 Boeing 707 goes into commercialservice

1963 Boeing 727 introduced1969 Boeing 747 Jumbo jet introduced,

capable of seating 500 passengers1969 Development of Tourism Act

established tourist boards in the UK1976 Collaboration between Air France and

British Airways produced Concorde1979 Exchange control restrictions lifted,

allowing holidaymakers to take moremoney out of the country

1986 Anglo-French Channel Tunnel Treatysigned

1993 Deregulation of European skiesallowed low-cost airlines to develop

1994 Channel Tunnel opened 2001 First non-stop flight around the world

without refuelling2003 Concorde taken out of service2004 EU accession – now 25 states2005 Introduction of the Airbus A380,

capable of carrying up to 800passengers

Factors leading to the growth ofthe UK tourism industryMotivating factorsWhy do people travel? One view is that there aretwo basic reasons for travel: ‘wanderlust’ and‘sunlust’. Many young people have the desire totravel and see other cultures and experience howother people live; this is wanderlust. Other peoplewant to go somewhere warm and escape from ourclimate for a while; this is sunlust.

There are other motivating factors. Theseinclude:

✱ Relaxation

✱ Escape from a boring job/family/home

✱ Socialisation with friends – e.g. hen/stagparties

✱ Rest

✱ Prestige.

These motivating factors have not really changedover the years. However, the ways we are able toindulge them have changed, as enabling factorshave changed.

Think it over ...

After the Second World War the commercialaviation industry in the UK quickly expanded.Wartime pilots were available to fly commercialairlines and the technological advances made duringthe war were being applied to commercial services.What effect do you think these developments in theaviation industry had on the travel and tourismindustry after the Second World War?

Key term

Deregulation of European skies Withderegulation of the air travel industry, theairlines of the European Union could establishthemselves in any member state and obtain anoperating licence. All routes within the EU areavailable to all EU carriers.

Think it over ...

The Channel Tunnel opened in 1994. Its originalbudget was £4.8 billion, but its final costexceeded £10 billion. Do you think the cost wasworth it in terms of the impact the ChannelTunnel has had on travel and tourism betweenthe UK and Europe?

Skills practice

Choose three of the developments illustrated inthe timeline. Research them in more depth. Thenproduce a set of notes explaining thedevelopment and impact on travel and tourism atthe time, and the residual effect today.

Think it over ...

What were your motivating factors last time youwent on holiday? Discuss them with a colleague.


Enabling factorsYou might have motivators for wanting to go onholiday, but there are reasons why you cannot go.The obvious ones are time and money. If you can’tafford it you can’t go. Having enough money andtime are examples of enabling factors.

Other enabling factors include:

✱ Availability of travel – e.g. flights to differentlocations, the Channel Tunnel, low-cost flights

✱ Suitable products – e.g. a range of differentholidays

✱ Owning a car – to travel more easily

✱ Marketing of a destination – bringing it to yourattention

✱ Ease of booking.

These enabling factors allow us to act on ourmotivators. You will find more examples ofenabling factors throughout this section as weinvestigate changes in consumer needs and insociety.

Socio-economic changesCar ownership and useFigure 1.1 shows the car use figures in the UKfrom 1992/1994 to 2003.

not have access to a car in 2003, compared with 33per cent 10 years previously.

Car ownership has a strong impact on traveland tourism. The car is used to drive to domesticdestinations and to drive to airports to pick upflights abroad. The Channel Tunnel and car ferriesallow outbound tourists to use their cars fortravelling to destinations in Europe.

IncomeThe UK economy is one of the strongest inEurope, levels of disposable income and consumercredit are rising and expenditure on leisure isgrowing at around 6 per cent.

Walk Car Bus, coachand rail

Other modes

1992/1994 2003

Trips per person per year

700

600

500

400

300

200

100

0

Figure 1.1 Car use in the UK, 1992/1994–2003

Key term

Disposable income This is the income you haveleft after tax, national insurance and pensioncontributions are deducted from pay.

Car ownership in the UK has increasedconsiderably in recent decades: today it is notuncommon for a household to own two or morecars. Only 27 per cent of households in the UK did

As a nation we are wealthier now than we haveever been, and have higher expectations of traveland tourism. Most people today will havetravelled abroad and expect to take at least oneholiday a year. We are also better educated thanever before, leading to increased personal income.The more educated we are the more we are awareof the world and its possibilities; we are curiousabout different cultures and languages and keento experience them. As we live in a multiculturalsociety and are more familiar with differentreligions, foods and cultures, we are less anxiousabout travelling to new places.

The grey marketOne of the most important markets in travel andtourism is the ‘grey’ market. This is made up ofolder people who are fit and healthy, have plentyof time and available funds, and want to travel.Having contributed to private pension schemesover their working years has given many olderpeople a good income in retirement.

Technological factorsWe have already discussed the use of technologyin the travel and tourism industry (see pages 4–5).The main impact of new technology on consumershas been the Internet, which has given people theopportunity to be more independent and make

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their own travel and holidayplans and arrangements. Thelong-term effects of thesedevelopments on the industryare yet to be seen.

Technological developmentshave also led to new transportproducts, some examples ofwhich are given in the nextsection.

Product developmentand innovationHoliday products aredeveloped to meet changingconsumer needs andexpectations. The demand for shorter, morefrequent holidays, for example, has led to city-break products. The more aware consumersbecome about the dangers of sunbathing on abeach holiday, the greater the demand for activityor adventure holidays. Those seeking safety andreasonable cost, can choose an all-inclusiveholiday.

The ‘spa’ holiday is another area of growth.Activities such as yoga are included and guestshave massage and treatments included in theprice of the holiday. Many hotels are nowdescribed as ‘spa hotels’.

The increase in car ownership led to morepeople choosing to drive to their destinationrather than take a train or a coach. It also led to ademand for car use on holidays, given that peopleare accustomed to the convenience of using cars intheir daily lives, so why not on holiday. This ledto huge growth in the car-hire industry, whichbecame international. In response, tour operatorsdeveloped ‘fly-drive’ holidays to give customersflexibility.

Developments in the commercial aviationindustry have led to larger planes carrying morepassengers to destinations around the world. Thelatest is the Airbus A380, which was introduced in2005, though at present it has still to make its firstcommercial flight. It can seat between 555 and 800passengers and will provide a range of facilities,including jacuzzis!

High-speed train routes, such as France’sextensive TGV network, have helped maintain the

success of the railways in some countries. TheTGV is operated by SNCF, the French nationally-owned and subsidised rail company, and travelsat speeds of over 300 km/hour (186 mph).

The European high-speed rail network hasbeen extended, with TGV services now runningdirect from Paris, the Channel Tunnel andBrussels to German destinations. The Belgianhigh-speed trains are known as Thalys.Remember, enabling trains to travel at these highspeeds involves substantial investment in suitablenew tracks.

Changing consumer needs andexpectationsChanges in consumer needs and the developmentsin travel and tourism are inextricably intertwined.The more products consumers demand the morepressure there is on tourism professionals to makethem available. The more products anddestinations on offer, the more consumers expect,and the quicker they tire of the old and search forthe new.

Technological advances in transport andcommunication have made the world moreaccessible to more people, and aroused the desireto experience more of it. Greater incomes in thewestern world and increased leisure timecontribute to demand. As other countries develop,the desire for travel and tourism grows amongtheir people. China and Eastern Europe areexamples of the development of the freedom andmeans to travel not available even ten years ago.

The Airbus A380


1.3 The structure of theUK travel and tourismindustryIn this section we will examine the differentsectors that make up the travel and tourismindustry. You will carry out research to find outabout key organisations in each sector, what theirproducts and services are, and you will describetheir objectives and values.

We will examine the function of each sectorand its roles and responsibilities. You will developan understanding of the interrelationships andinterdependencies within the industry and howhorizontal and vertical integration apply in theindustry.

TransportThe function of the transport sector is summarisedin this quote from Sir Michael Bishop, chairman ofbmi: ‘Transport is the backbone of a sustainableeconomy; it brings people together, facilitatestrade and sustains tourism.’

Principals in the transport sector include airlinesand airports, ferry and cruise companies, car-hirebusinesses, coach operators, Network Rail andtrain-operating companies. Each of them has arole to play in the travel and tourism industry.

Air travel AirportsThe British Airports Authority (BAA) is the majororganisation in airport ownership in the UK. It owns:

✱ London Heathrow

✱ London Gatwick

✱ London Stansted

✱ Glasgow

✱ Edinburgh

✱ Aberdeen

✱ Southampton.

BAA also has management contracts or stakes inten other airports outside the UK, plus retailmanagement contracts at two airports in the USA.Nearly 200 million passengers travel through BAAairports every year. Other major UK airports areBirmingham, Manchester and London Luton, allowned by different consortia.

Ancillary services

Transport

Tour operators

Travel agents

Attractions

Accommodation

SECTORS OF THETRAVEL AND TOURISM

INDUSTRY

1 Try to remember the holidays you have beenon. List them. Then, note the types ofactivities you did while on those holidays.

2 Now, talk to two older people, one mucholder, such as a grandparent, and one ofmiddle age, such as a parent.

Interview these two people and make noteson their holiday experiences up until theywere the same age as you are now.

Some of the questions you may ask are:

• Did you have holidays and day trips?

• Where to?

• How did you travel?

• Who did you go with?

• Where did you stay?

• How many holidays a year did you have?

• What did you do on holiday?

3 Make a chart or poster comparing the threesets of experience.

Skills practice

Figure 1.2 Sectors of the travel and tourism industry

14 MANDATORY UNITS

Manchester airport is in public ownership,whereas BAA is a public limited company andtherefore in the private sector. Manchester airportis part of the Manchester Airports Group Plc(MAG), which is the second largest airportoperator in the UK and comprises the airports ofManchester, Nottingham East Midlands,Bournemouth and Humberside.

MAG is wholly owned by the ten localauthorities of Greater Manchester:

✱ The Council of the City of Manchester – 55%

✱ The Borough Council of Bolton – 5%

✱ The Borough Council of Bury – 5%

✱ The Oldham Borough Council – 5%

✱ The Rochdale Borough Council – 5%

✱ The Council of the City of Salford – 5%

✱ The Metropolitan Borough Council ofStockport – 5%

✱ The Tameside Metropolitan Borough Council –5%

✱ The Trafford Borough Council – 5%

✱ The Wigan Borough Council – 5%

Think it over ...

What difference do you think public or privatesector ownership makes to the running of anairport? Think about the impact on airlines,passengers and the local community.

Running an airport is a complex, lucrativeoperation. An airport provides products andservices to various groups of people andbusinesses:

✱ Airlines are provided with the infrastructureand services to operate their flights

✱ Customers are provided with facilities, such asrestaurants, toilets and shops

✱ Other businesses get a location in which tooperate their business, for example car hire,retailing, ground handling.

An airport receives revenue from all these sourcesbut also has to work at keeping all its groups ofcustomers happy.

CASE STUDYAmbitious Kent airport expansionoutlinedPlans have been unveiled to expand a littleused UK airport to handle two millionpassengers a year by 2014.

Lydd airport in Kent (renamed LondonAshford airport) – part of a Middle East-basedcompany, FAL Holdings – plans a newterminal and extended runway to handleflights to European and North African holidaydestinations.

The owner of Lydd airport expects to createup to 4000 jobs on its Romney Marshlocation in nine years time if the plans receiveofficial approval. A 75-room hotel is part of theplanned expansion.

More than £7 million has been spent onimproving the existing runway and infra-structure, including a 13-acre aircraft parkingapron and a VIP terminal for executive jet users.

The airport owners believe Lydd wouldprovide an ‘environmentally friendly’ solutionto runway and airspace congestion in thesouth-east of England.

The company claims that air travellers inKent, Surrey and Sussex are being forced to drivenorth to Luton or Stansted due to constraints atHeathrow and Gatwick, resulting in addedvehicle emissions and environmental pollution.

Chief consultant Jonathan Gordon said:‘The problem is that Gatwick is now at thelimit of its runway capacity and with thedominance of scheduled services, it no longeroffers room to grow for the leisure sector.

‘Lydd is the closest UK airport to thepopular European and North African holidaydestinations and we are currently developingexcellent facilities for the leisure sector.’

Source: Report by Phil Davies www.travelmole.com 30 June 2005

1 What is the relationship between FAL Holdings and Lydd (London Ashford)airport?

2 Do research and find out more about FAL Holdings.

3 What kind of arguments could be madeagainst the expansion?


AirlinesBritish Airways, one of the world’s most famousairlines, is the largest airline in the UK and thesecond-largest international airline. It flies to morethan 200 destinations around the world. In theyear to March 2004, more than 36 million peoplechose to fly with the airline. British Airways’ mainbases are at the London airports of Heathrow andGatwick. The airline’s products include fourdifferent types of cabin service, ranging fromeconomy to Club World. It is owned entirely byprivate investors. It also fully owns subsidiariessuch as British Airways CitiExpress.

Low-cost airlines The principle behind theoperation of a low-cost airline is to keep costs aslow as possible with few or no ‘extras’ offered tothe customer without extra charge. In this way thelow-cost operators are able to offer very cheapfares. They practise a system known as ‘yieldmanagement’, which means that bookings areconstantly monitored and prices adjustedaccordingly. This means that in periods of highdemand, such as school holidays or weekends,prices will be higher, and can be more expensivethan traditional airlines.

One of the most successful low-cost airlines isIrish-based Ryanair, which reported net profits of268 million euros in 2005. The low-cost airlinesare scheduled airlines. They follow a businessmodel where costs are kept as low as possibleand any ‘extra’ services are charged to thepassenger.

Airport charges These charges are paid perpassenger and vary depending on who owns theairport and the deal negotiated by the airline.Low-cost airlines often fly to regional airportsbecause of lower charges.

Aircraft Low-cost airlines usually have a fleetof aircraft, all of the same type, often Boeing 737s.This gives flexibility as the planes can be movedto any route as needed; it also means thatmaintenance is simpler.

There is no business class on a low-cost flight,which means more seats can be added to theplane. Ryanair’s new planes do not have recliningseats or pockets for magazines, which enable it tomake further savings.

Advertising The airlines rely on heavynewspaper advertising, which is costly, howeverthey do carry advertising for other companies ontheir websites and on their seatback covers,giving an extra source of revenue.

Ancillary services The airlines charge thecustomer – and steeply – for food, drink, payingby credit card, and even lottery tickets on boardsome flights. The airlines also sell hotel rooms, carhire and insurance for commission.

All UK airlines are privately owned. Other majorUK airlines include British Midland and VirginAtlantic, which are scheduled airlines. The UK alsohas many charter airlines, such as Monarch andBritannia Airways. Hundreds of other airlinesfrom all over the world fly in and out of UKairports, paying for the services they use.

Skills practice

Find out what products and services are availableto British Airways customers. Compare theeconomy service with Club World and make atable charting your comparison. This informationis available at www.ba.com

Key terms

Scheduled airline service These run to aregular timetable that is changed only for thewinter and summer season. They must depart onschedule even if not all the seats are booked.

Charter airline service These are usuallycontracted for a specific holiday season and runto a timetable set by the operator. For example,each major tour operator will need seats for itssummer passengers flying to the Mediterranean.They fill every seat on the contracted aircraft andeach seat forms part of the holiday package.

The distinction between scheduled and charterservices is becoming less clear as airlines moveinto different markets. For example, major touroperators often own their own charter airlinesand some have ventured into the low-cost(scheduled) market. An example is My Travel, atour operator which has two airlines, My Traveland My Travelite. Similarly, Monarch, also acharter operator, has begun scheduled services.

16 MANDATORY UNITS

Support services for the airline sectorThe Civil Aviation Authority (CAA) regulates theUK aviation sector. The CAA is an independentstatutory body; its responsibilities are outlinedbelow:

✱ It ensures that UK civil aviation standards areset and achieved

✱ It regulates airlines, airports and national airtraffic services economic activities andencourages a diverse and competitive industry

✱ It manages the UK’s principal travel protectionscheme, the Air Travel Organisers’ Licensing(ATOL) scheme, licenses UK airlines andmanages consumer issues

✱ It brings civil and military interests together toensure that the airspace needs of all users aremet as equitably as possible.

The CAA also advises the government onaviation issues. It receives no governmentfunding but is funded by the charges it makes for its services.

The Air Transport Users Council (AUC) is theUK’s consumer council for air travellers andreceives its funding from the CAA. It acts as theindependent representative of air passengers andaims to complement and assist the CAA in itsduties to further the reasonable interests ofpassengers.

National Air Traffic Services (NATS) is theorganisation responsible for air traffic control. It isa public/private partnership owned by thegovernment, a consortium of seven airlines, andNATS staff. It looks after UK airspace and theeastern part of the North Atlantic. NATS handlesmore than two million flights a year, carrying over180 million passengers.

The major air traffic control centres are atSwanwick in Hampshire, West Drayton in

Middlesex and Prestwick in Scotland. There arealso air traffic control services at the country’smajor airports.

Sea travel Ferry travelThe main mode of transport to the continent istraditionally by sea travel across the EnglishChannel. When the Channel Tunnel opened in1993 it was expected that ferry services acrossthe Channel would be threatened. The tunneldid take about 50 per cent of the market, butpassenger ferries have also been severely hit bylow-cost airlines offering cheap fares to Europe.It is often cheaper to fly and drive rather thantake your own car. In 1997, 21 millionpassengers passed through Dover, which is thebusiest port in Britain. By 2003 numbers haddeclined to less than 15 million. However, theferry companies work hard to remaincompetitive on price and many passengersprefer the sea trip to the tunnel.

Skills practice

Visit the website of a low-cost airline and findout what products and services are on offer at anextra charge. Try to determine which productsbring direct revenue to the airline and which paya commission.

DOVER FERRY PASSENGERS

1990 15,532,585

1991 15,989,318

1992 17,941,400

1993 18,458,557

1994 19,123,743

1995 17,872,712

1996 18,979,719

1997 21,463,570

1998 19,441,608

1999 18,276,988

2000 16,232,191

2001 16,002,464

2002 16,442,680

2003 14,681,003

2004 14,333,633Source: Dover Harbour Board

Figure 1.3 Dover ferry passenger numbers, 2004

CASE STUDYFerry travelNot all ferry travel is across the Channel. Hereare some examples of other important routes:• Stranraer to Belfast• Fleetwood to Larne• Fishguard to Rosslare Stena Line• Holyhead to Dublin Port• Holyhead to Dun Laoghaire

• Hull to Zeebrugge• Hull to Rotterdam

P&O Ferries

• Holyhead to Dublin• Pembroke to Rosslare

Irish Ferries

1 Check all these ports on a map and makesure you know the location and the country.

2 Choose one route and produce aninformation sheet detailing the servicesprovided and extra products available onthat route. A ferry brochure will help you.


The Channel Tunnel and low-cost flights are notthe only competition faced by the ferry operators,there are also high-speed catamarans operated bynewcomer SpeedFerries, which is offering lowfares to attract customers.

Other operators in the Channel includeHoverspeed, Norfolk Line and Trans Europa,which sails from Ramsgate to Ostend. Brittanyferries operate on longer routes to France andSpain, for example Poole to Cherbourg, Plymouthto Santander and Portsmouth to Caen, St Malo orCherbourg.

In the event of business failure, the PassengerShipping Association provides financial protectionto the customers of some tour operators who offercruise and ferry-based holidays.

The cruise marketThe cruise sector has enjoyed steady growth overthe past decade or more. The growth is accountedfor by greater demand for cruises, but also byincrease in capacity. Many new ships, includingthe Queen Mary 2, were launched in 2003–2004,five are set for delivery in 2005, and many moreare scheduled for delivery in 2006. There were1.14 million people from this country who wenton a cruise in 2004, an increase of 8 per cent on2003. Cruise companies are doing their utmost toreach new markets, such as families and youngerpeople, rather than just the older groups whotraditionally take cruises.

Most cruises take place on the sea and mostpassengers from the UK take fly-cruises. This meansthey fly to their cruising starting point rather thanstart at the UK coast. The Mediterranean and theCaribbean are very popular cruise destinations.Those looking for a difference might take a cruise toa colder place, such as the Arctic, to experience thebeautiful scenery and the wildlife.

Not all cruises take place in the sea. Rivercruises are also growing in popularity and thedestinations include rivers such as the Rhine,Moselle, Danube and the Nile.

Major cruise companies are P & O, Cunard,Royal Caribbean and Princess Cruises.

Here you will participate in a class discussion.The topic is whether the Channel Tunnelencourages more tourists to come to the UK ormore UK tourists to go abroad.

Points to consider:

• Statistics for use of the tunnel (Eurostar andthe Shuttle)

• Whether the tunnel creates new business

• Competition with air and sea routes

• Services and facilities built up around theterminals.

Skills practice

Road travelThe private car dominates road travel, and mostdomestic holidays and day trips in the UK aretaken by car. In addition, many people choose tohire a car when abroad, which has led to thegrowth of the car-hire sector.

Skills practice

Got to a local travel agent and choose a cruisebrochure. Go though the brochure and outlineall the facilities and services included in the priceof the cruise.

18 MANDATORY UNITS

Car hireMajor car-hire groups in the UK include Hertz,Avis and Europcar. All have internationaloperations. Their products and services havebecome very sophisticated, making car hire veryeasy and convenient for customers. They offer thefollowing:

✱ Online or telephone pre-booking

✱ Airport pick-up or drop-off

✱ Wide range of choice of vehicles

✱ All insurances included in fixed prices

✱ One-way rentals – i.e. you don’t have to returnthe car to the same pick-up point.

One of the largest companies in car hire isHoliday Autos, which claims to be the world’slargest car rental service with access to over750,000 cars worldwide. Holiday Autos is part ofthe Lastminute.com group.

CoachesCoach operators have adapted their products tomeet consumers’ changing needs and coachestoday are very luxurious. Fly/coach holidays areoffered so that customers do not have a lengthyinitial journey, but have the benefits of coach travelfor touring, as on tours in California, for example.

Rail travelNetwork Rail owns and operates the national railnetwork in the UK. Its role is to maintain theinfrastructure and renew tracks as necessary. In addition, there are train operating companies(TOCs) who lease trains from rolling stockcompanies. There are 25 train operatingcompanies in the UK and they compete forfranchises to run each service.

The Strategic Rail Authority issues thefranchises. This body also monitors the trainoperating companies to make sure the interests ofrail passengers are protected. They are able to finethe TOCs if they fail to meet agreed standards. TheTOCs are commercial companies and aim to makea profit but they do receive government grants.Examples of TOCs are Virgin Trains and CentralTrains. The National Express Group, a British-owned transport group, owns Central Trains.

Other important aspects of the rail system arethe London Underground, Docklands Light Railand Eurostar.

Eurostar is the passenger train service for theChannel Tunnel. It operates from London Waterlooand Ashford in Kent to Paris, Lille and Brussels.Eurostar is owned by London and ContinentalRailways and run by a management company.

1 Visit the website of Network Rail atwww.networkrail.co.uk Make notes on thefollowing. Ensure that the notes are in yourown words.

• Company objectives

• Company ownership

• Summary of services.

2 Choose a train operating company andresearch:

• Its role and responsibilities

• Its products and services

• Its relationship with Network Rail.

3 Analyse the interrelationship between the twocompanies.

4 Produce your findings as a short report orinformation sheet.

Skills practice

Tour operatorsThe role of tour operators is to put together all thedifferent components that make up a holiday andsell them as packages to the consumer. They makecontracts with hoteliers, airlines and othertransport companies to put the package together.All the holiday details are incorporated into abrochure which is distributed either to travelagents or directly to customers. There are threemain types of tour operators catering for thedifferent types of tourism:

✱ Outbound

✱ Inbound

✱ Domestic.

Four major tour operators dominate the outboundmarket. These are often referred to as the ‘BigFour’: TUI, My Travel, First Choice and Thomas


Cook. TUI UK is the UK’s largest holidaycompany and includes the leading UK brands ofThomson Holidays. Thomson Holidays has itshead office in London and about 3000 people areemployed, although most of them work overseasin resorts. The parent company, World of TUI, isthe largest travel group in the world.

MyTravel is a major player in the market forair-inclusive holidays and other leisure travelservices. It also has travel agents, hotels andairlines in its group.

First Choice has a major travel agent in itsportfolio and an airline. It offers destinations suchas Majorca, Menorca, the Canaries, Spain, Turkey,Greece and the Caribbean. Snow destinationsinclude France, Austria, Italy, Andorra, Bulgariaand Switzerland.

German-owned Thomas Cook also has travelagencies, airlines and hotels, as well as touroperator brands, including JMC, Thomas CookHolidays, and Club 18–30.

These companies produce an astonishing rangeof different holidays, packaged in brochuresaccording to type of holiday or type of customer.As the tour operators use many different brands itis not always evident to the customer which touroperator group they are booking with.

There are many other tour operators in themarket, some specialising in particulardestinations, for example Simply Spain, or in aproduct, for example diving holidays.

Cosmos is the UK’s largest independent touroperator and part of the Globus group ofcompanies, a family-run organisation establishedin 1928, which encompasses Cosmos Tourama,Avro, Monarch Airlines and Archers Direct, alongwith Cosmos.

Inbound tour operatorsInbound tour operators cater for the needs ofoverseas visitors to the UK. An example is BritishTours Ltd, which claims to be the longestestablished inbound operator. It offers tours fordifferent sizes of groups and has a wide variety ofproducts, including a Harry Potter tour. The toursare available in many languages.

Domestic tour operatorsDomestic tour operators package holidays in the UK for UK residents. Some of them are coach companies who place advertisements inthe local newspapers. Like outbound operators,they offer beach, city, touring and specialinterest holidays.

Support services for tour operators UK Inbound is the trade body which representstour operators and tourism suppliers to the UK. Itwas founded in 1977 to represent the commercialand political interests of incoming tour operatorsand suppliers to the British inbound tourismindustry. It is a non-profit-making body governedby an elected council and funded by subscriptionsfrom its members and from revenue-generatingactivities.

The Association of Independent Tour Operators(AITO) is an organisation which represents about160 of Britain’s specialist tour operators. AITOmembers are independent companies, most ofthem owner-managed, specialising in particulardestinations or types of holiday.

The Federation of Tour Operators (FTO) is anorganisation for outbound tour operators. It aimsto ensure the long-term success of the air-inclusiveholiday by influencing governments and opinionformers on the benefits to consumers of air-inclusive holidays compared to other types ofholiday. Members pay an annual subscriptionbased on the size of their organisation. All currentmembers are also members of the Association ofBritish Travel Agents (ABTA) and the twoorganisations work very closely together. In fact, it is likely that the two organisations will merge eventually.

Key term

Air Travel Organisers’ Licensing (ATOL) TheATOL protects air travellers and packageholidaymakers from losing money or beingstranded abroad if air travel firms go out ofbusiness. When a tourist books a holiday thecost of the financial protection is included in theprice. Any package firm that includes a flightshould by law hold a licence. ATOL is managedby the Civil Aviation Authority.

CASE STUDYABTA in annual declineThe number of ABTA agencies has decreasedby 100 every year since 1991 and this year willbe no exception, according to ABTA chiefexecutive Ian Reynolds.

He told delegates at the Abtech conferencein London that there were 2800 agencymembers in 1991, compared with only 1500this year. Reynolds attributed part of this fallto the consolidation within the industry as theBig Four bought up chains in the mid-1990s,and again more recently when the miniplesfollowed suit.

‘But aside from this, we are seeing anoverall decline in retail outlets,’ he said. ‘Itpeaked in 1999 at more than 7000, but this hasfallen by around 700 since then.

‘This is natural rebalancing by the bigvertically integrated groups as they drive newdistribution channels such as the Internet andcall centres.’

1 Explain the following terms:• The Big Four• Distribution channel• Miniples• Call centres.

2 Explain in your own words the reasons for the decline in numbers of retail travel agents.

20 MANDATORY UNITS

Travel agentsThe role of travel agents is to give advice andinformation and sell and administer bookings fora number of tour operators. They also sell flights,ferry bookings, car hire, insurance andaccommodation as separate products. Thus, theyare distributors of products. Many have a bureaude change. Increasingly, travel agents also do alittle tour operating, for example putting togethera holiday for a group. This is known as ‘tailor-making’ holidays. Some industry professionalsbelieve that the role of the travel agent is indecline as many people are booking their ownholidays and travel on the Internet or bytelephone directly to tour operators.

Implants are located within another business.They set up office within a company so that theyare on hand to deal with the travel requirementsof the company personnel.

Business travel agents specialise in the businessmarket.

The Association of British Travel Agents is thebody representing this sector. It also has touroperators as members.

Think it over ...

Last time you or your family went away onholiday, did you use a travel agent? Did you goon a package holiday? If so, why? If not, whynot? Discuss the advantages and disadvantagesof package holidays and making independentarrangements. Draw on your own experiencewhere possible.

Types of travel agentIt is estimated that there are about 6500 travelagency shops, ranging in size from the multiples,with several hundred outlets each, to theindividual shop. Most travel agents are part of amultiple chain. Examples you will be familiar withare Thomas Cook, Thomson and Going Places.These particular chains are linked to tour operatorsand may try to prioritise their own company’sproducts. There has been a slight reduction in thenumber of branches of multiple chains in the lastfew years as customers choose to buy travel andtourism products through other means.

Miniples are small chains of travel agents,covering a region of the country.

Independent travel agents are usually run by theirowner and a small team. There may be only one ortwo outlets. There are also independent chains. Anexample is Travelcare, which is the UK’s largestindependent travel chain with branches nationwideand sales in excess of £430 million per year. Thiscompany is part of the Co-operative group.

Call centresCall centres are widely used by banks andinsurance companies as well as in the travel andtourism industry. It seems that customers


increasingly prefer to book travel by telephoneor the Internet rather than by visiting a travelagent.

Call centres are often located in out-of-townlocations where rents, rates and labour arecheaper. TUI UK, a tour operator, has a call centreoperating out of Newcastle under its TeamLincoln brand. Team Lincoln sells holidays. Somecall centres are operator or airline owned and sellon behalf of that company exclusively, others arespecialist call centres and handle calls andbookings for many companies.

Call centres rely on high staff productivity tobe successful. They motivate staff throughincentives such as bonuses on sales targetsreached. Call answering time, call durations, salesand complaints ratios are carefully monitored.

WebsitesWebsites are the most recent means of distributingtravel and tourism products and services.

Attractions A survey of visits to visitor attractions isconducted annually by the national tourist boardsof England, Northern Ireland, Scotland and Walesto monitor visitor and other trends. According tothe survey, there are an estimated 6400 visitorattractions in the United Kingdom.

Attractions appeal to the domestic tourismmarket and the inbound tourism market. Thereare, of course, hundreds of different types ofattractions but we can broadly divide them asfollows:

✱ Natural attractions These include beautifulbeaches, lakes and landscapes. In order toprotect them, some are designated areas ofoutstanding beauty, national parks or heritagecoasts.

✱ Man-made attractions Man-made attractionsmay still be historic; in the UK we have awealth of historic houses, often cared for bythe National Trust or English Heritage. We alsohave museums and galleries such as the Tateand the Tate Modern, the Victoria and AlbertMuseum and the Museum of Moving Image.These examples are in London, however there

are museums throughout the country.Favourite man-made attractions are themeparks, for example Thorpe Park.

EventsEvents such as the Edinburgh Festival or theNotting Hill Carnival attract many visitors. Thereare many events in the business tourism sectortoo, such as the World Travel Market.

Another way of categorising attractions is aspaying and non-paying atractions. Museums, forexample, are usually free, on the principle that weshould all be able to view the nation’s heritage. Itis usually difficult to charge visitors to naturalattractions as it means creating barriers to access.Non-paying attractions are still important fortourism as they attract visitors to an area and theywill spend money on food, accommodation andshopping. Blackpool Pleasure Beach is the mostpopular free attraction, with an estimated 6.5million visits each year. However, this ismisleading, as although it is free to enter thePleasure Beach, you have to pay to go on a ride.

The Colossus ride at Thorpe Park theme park

22 MANDATORY UNITS

CASE STUDYTop attractionsThe charts below show the top ten paid admission and free admission attractions in the UK.

ATTRACTION REGION 2000 2001 2002 2003 % 02/03

British Airways London Eye LON 3,300,000* 3,850,000* 4,100,000 3,700,000 –9.8

Tower of London LON 2,303,167 2,019,183 1,940,856 1,972,263 1.6

Eden Project SW 498,000 1,700,000 1,832,482* 1,404,372 –23.4

Flamingo Land Theme Park & Zoo Y&H 1,301,000* 1,322,000* 1,393,300* 1,398,800* 0.4

Windermere Lake Cruises NW 1,172,219 1,241,918 1,266,027 1,337,879 5.7

Legoland Windsor SE 1,490,000 1,632,000 1,453,000 1,321,128 –9.1

New MetroLand NE 650,000* 650,000* 810,000* 1,200,000* 48.2

Chester Zoo NW 1,118,000 1,060,433 1,134,949 1,160,234 2.2

Kew Gardens LON 860,340 989,352 987,266 1,079,424 9.3

Canterbury Cathedral SE 1,263,140* 1,151,099* 1,110,529* 1,060,166* –4.5

ATTRACTION REGION 2000 2001 2002 2003 % 02/03

Blackpool Pleasure Beach NW 6,800,000 6,500,000 6,200,000 6,200,000 0.0

British Museum LON 5,466,246* 4,800,938 4,607,311 4,584,000 –0.5

National Gallery LON 4,897,690* 4,918,985* 4,130,973* 4,360,461* 5.6

Tate Modern LON 3,873,887 3,551,885 4,661,449 3,895,746* –16.4

Natural History Museum LON 1,576,048 1,696,176 2,957,501 2,894,005 –2.2

Science Museum LON 1,337,432 1,352,649 2,722,154 2,886,850 6.1

Victoria & Albert Museum LON 933,150 1,060,235 2,210,302 2,257,325 2.1

Pleasure Theme Park NW 2,100,000* 2,000,000* 2,000,000* 2,100,000* 5.0

Eastbourne Pier SE NK 2,000,000 1,900,000* 1,600,000* –15.8

Pleasure Beach EAST 1,500,000* 1,500,000* 1,500,000* 1,500,000* 0.0

Table 1.1 Top 10 paid admission attractions

Table 1.2 Top 10 free admission attractions

1 Study the tables and pick out the attractions with the biggest percentage change between 2002and 2003.

2 How do you account for the increases or decreases?You might need to research the individual websites of the attractions to find the relevantinformation.

3 Discuss your findings with your group.

* = estimate


Skills practice

To improve your knowledge of the UK visitor attractions sector, fill in the table below. Use your localTIC and the VisitBritain website to help you. Check your answers with your tutor.

Name of attraction Two national examples A local example

Historic house

Garden

Museum

Art gallery

Wildlife attraction

Theme park

Historic monument

Religious building

Whatever the visitor attraction, the main reasonfor the visit is the primary product or service. Ifyou visit a gallery it is to see an exhibition of art,if you go to a stately home it is to admire thebeauty of the architecture and learn about ourhistory. When we go to theme parks it is to havefun on the various rides.

The primary product or service can changefrom time to time but rarely changes completely. Ifit were always exactly the same then there wouldbe little reason for visitors to come back again. So,museums hold temporary exhibitions to attractpeople back again and theme parks introduce newrides regularly to entice us back. The primaryproduct and service serves to attract visitors but isnot always the main source of revenue.

Support services for the attractionssectorThe British Association of Leisure Parks, Piers andAttractions (BALPPA) was founded in 1936. It isnon-profit making and its role is to represent theinterests of owners, managers, suppliers anddevelopers in the UK’s commercial leisure parks,piers, zoos and static attractions sector. It hasabout 300 members.

The International Association of Amusement Parksand Attractions (IAAPA) is a similar organisation toBALPPA, but is an international association and

has members all over the world. The mission ofthe association is to promote safe operations,global development, professional growth andcommercial success in the amusement industry.

AccommodationTypes of accommodationThere are many different types of accommodationavailable in the travel and tourism industry. Theyinclude:

✱ Hotels

✱ Guest accommodation

✱ Holiday parks and campsites

✱ Self-catering

✱ Youth hostels

✱ Campus.

According to the British Hospitality Association,there are approximately 22,000 hotels andguesthouses registered with the tourist boards, withan additional 16,000 bed-and-breakfasts. In additionthere are thousands of unregistered establishments.

Hotels are in private ownership, with a largenumber of them having owner-operators, theaverage size being about 20 rooms. As with touroperations, the major groups have most influencein the industry.

24 MANDATORY UNITS

An example of a major hotel group in the UKis the Moat House Group. There are over 30 MoatHouse hotels across the UK, from Glasgow inScotland to Plymouth in the West Country. MoatHouse hotels are of three- or four-star standardand offer a range of good quality conference,meeting and business facilities to the corporatetraveller. All hotels also offer a range of leisurebreaks, which are featured on the website andwithin the Escapes brochure.

The major chains tend to be more impersonal,however they do provide consistency of qualitythroughout the world. For example, if you were tostay in a Mercure hotel in London or in Paris, theroom would offer exactly the same facilities, andeven the layout is often the same.

Many hotels are owned by internationalgroups who encompass several chains withinthem, aiming at different types of customers.Examples are:

✱ Hilton

✱ Radisson

✱ Holiday Inn

✱ Accor.

Guest accommodation includes bed-and-breakfasts, guesthouses and farmhouses.Homeowners who wish to capitalise on any extraspace they have available in their homes often runthis type of accommodation. Many tourists findstaying in a home environment charming and anopportunity to experience local culture. This typeof accommodation is very popular in Francewhere gîtes are rented out for holidays.

Holiday parks and campsites are popular withBritish tourists holidaying in France and Spain,although camping is probably less popular in theUK due to our inclement weather. Holiday parks,however, offer chalets and mobile homes so thattourists do not have to worry as much about theweather.

Self-catering accommodation may be on holidayparks or in rented apartments or houses. Cookingfacilities are provided.

The Youth Hostel Association (YHA), which isa charity serving the needs of young people, runsyouth hostels in the UK. However, you do not haveto be a young person to be a member. It is verycheap to join the YHA and some of the hostels areof a very high standard, almost as good as hotels.There are 226 youth hostels in both city and rurallocations. The original aim of the YHA was topromote love, care and understanding of thecountryside in principle and in practice. There isalso an International Youth Hostel federation with5000 hostels in 60 countries. The YHA does notonly provide accommodation but also a range ofactivity holidays.

Universities are keen to rent out their halls ofresidence outside term time. They encourageconference trade as they can also offer meetingrooms and catering facilities. This is an excellentmeans of using empty rooms and increasingrevenue during students’ holidays.

Grading standardsVisitBritain has created quality standards for a widesector of accommodation in England. Scotland,Wales and Northern Ireland have their ownschemes. Trained assessors determine the gradings.

Hotels are given a rating from one to five stars.The more stars the higher the quality and the greaterthe range of facilities and level of service provided.

1 Choose one of the above groups and conductInternet research to find out the following:

• How they operate – fully owned orfranchise

• How many hotels there are in the group

• Examples of country locations

• Products and services offered for thebusiness market

• Examples of costs.

2 Compile your findings into an informationsheet.

Skills practice

Hotels offer many products and services cateringfor different customers, and the prestigious andmore expensive hotels like the Sofitel brand offergreater luxury. In addition, hotels cater for bothbusiness and leisure customers, so they need tohave a range of products to suit each type.Conference customers may just come for the dayand will need different services to residents.


Guest accommodation is rated from one to fivediamonds. The more diamonds the higher theoverall quality in areas such as cleanliness, serviceand hospitality, bedrooms, bathrooms and food.

Self-catering accommodation is also star ratedfrom one to five. The more stars awarded to anestablishment, the higher the level of quality.Establishments at higher rating levels also have tomeet some additional requirement for facilities.

Holiday parks and campsites are also assessedusing stars. One star denotes acceptable quality,five stars denotes exceptional quality.

The aim of the grading system is to make iteasier for tourists to compare the quality of visitoraccommodation offered around the country.However, as the Scottish and Welsh tourist boardsuse different systems and the English system usesa diamond system and a star system, it is stillconfusing.

When you travel abroad, you will find thatthere is no standard system. The star gradingsystem is more or less accepted in Europe butcannot wholly be relied on. Tour operators tend touse their own grading standards so that they canindicate a level of quality to their customers. Anexample is the ‘T’ system adopted by Thomson.

Ancillary servicesMost of the support or ancillary services for tourismare in the public sector. We have already discussedsome of the public support and some of thevoluntary support bodies in each sector.

The Department for Culture, Media and Sport(DCMS) is responsible for supporting the tourismindustry at national level. In 1999 thegovernment’s overall strategy for the developmentof tourism was published in ‘Tomorrow’sTourism’. This policy was reviewed and updatedin 2004 and a new statement of the roles andresponsibilities in tourism of the DCMS,VisitBritain, regional development agencies, localgovernment and the Tourism Alliance was issued,covering the following areas for action:

✱ Marketing and e-tourism

✱ Product quality – introducing commonstandards for accommodation grading schemes

✱ Workforce skills, supporting People1st, thesector skills council

✱ Improved data and statistics.

Tourism Review and ImplementationGroup (TRIG)This group was established in 2004. It hasmembers from industry, the public sector andfrom education. Its role is to consider the widerissues affecting tourism and to monitor progressin the areas outlined above.

Tourism AllianceThis body was established in 2001 to represent thetourism sector. Its members are leading tradeassociations. It is a Confederation of BritishIndustry (CBI) supported initiative. The CBIprovides the secretariat and research capacity forthe Alliance. Its purpose is to present theindustry’s views and concerns more effectively tothe government and to the EU.

Other government departments haveresponsibilities for areas of tourism. TheDepartment for Transport looks after aviation,railways, roads, and the London Underground.The Department for Education and Skills hasresponsibility for sector skills councils andtraining organisations. The Department for theEnvironment, Food and Rural Affairs (DEFRA) isresponsible for issues affecting the countryside,wildlife and waterways, among others.

Another government department ofimportance to tourism is the Foreign andCommonwealth Office (FCO). The FCO providesa consular service around the world whosefunction is to help British nationals in trouble, andof course to promote Britain.

National tourist boardsThe United Kingdom has four tourist boards:VisitBritain, VisitScotland, the Northern IrelandTourist Board and the Wales Tourist Board.

VisitBritain reports to the Department forCulture, Media and Sport (DCMS). The WalesTourist Board reports to the National Assemblyfor Wales and VisitScotland reports to the ScottishExecutive.

26 MANDATORY UNITS

VisitBritainThe role of VisitBritain is to market Britain to therest of the world and England to the British.Formed by the merger of the British TouristAuthority and the English Tourism Council, itsmission is to build the value of tourism bycreating world-class destination brands andmarketing campaigns. It also aims to buildpartnerships with other organisations which havea stake in British and English tourism. Theseorganisations include the British Council, UKInbound, the British Hospitality Association andthe UK Immigration Service.

chiefly at high-spending US tourists but also atemerging markets like Russia. The magazinefeatures luxury British brands like Harrods,Barbour and Wedgewood, and carries articles ondestinations in Britain.

VisitBritain owns the VB-grading scheme,which is administered by the regional touristboards. This was covered earlier (pages 24–25).

Regional development agencies andregional tourist boardsRegional development agencies (RDAs) haveresponsibility for tourism in their regions andusually work closely with regional tourist boards.

Between 2003 and 2006, the RDAs are toreceive £3.6 million per annum from the DCMS,specifically for tourism. This money is to bepassed on to the regional tourist boards until theend of 2005. The RDAs will determine whatobjectives and targets the RTBs should meet inreturn for the funds. After this the money will stillbe earmarked for tourism but not necessarilythrough the tourist boards. This is because therehas been overlap between the role of RDAs intourism and the tourist boards.

Therefore, in some regions the regional touristboards have disappeared as separate bodies andhave been subsumed under the RDAs. In otherregions the role of the tourist board has beenaltered to that of ‘Destination ManagementOrganisation’ set up and monitored by the RDAs.

Below are some examples of the regionalorganisations:

✱ Tourism South East (www.seeda.org.uk)

✱ VisitLondon (www.londontouristboard.com)

✱ North West Tourist Board(www.northwesttourism.net)

✱ The Mersey Partnership(www.visitliverpool.com)

✱ Marketing Manchester(www.destinationmanchester.com)

The organisations are not totally dependent ongovernment funding. Funds can be raised frombusiness membership fees and from the provisionof training courses to tourism organisations andemployees.

You will use the VisitBritain website many timesduring your studies as it is an invaluable tourismresource. For this activity access the websitewww.visitbritain.com to find out the objectives ofthe organisation. Make a note of them andensure you understand the terminology used. Youshould be able to answer the following questions:

• What is a domestic tourist?

• What are the national tourist boards?

• What is meant by impartial touristinformation?

• Who funds VisitBritain?

• What is the current grant given to VisitBritain?

• What are regional development agencies?

• Where are VisitBritain’s overseas offices?

Skills practice

Part of VisitBritain’s role is to advise thegovernment and other bodies on issues that mightaffect the British tourism industry. The aim is toprovide advice that reflects the needs of both thetourism industry and the tourist, and torecommend courses of action to the government.

The overseas offices work closely with Britishdiplomatic and cultural staff, the local travel tradeand media to stimulate interest in Britain.

Another example of the role of VisitBritain isits campaign to persuade high-spending touriststo come to the UK. There is no point in having lotsof inbound tourists if they don’t spend theirmoney and boost our economy. VisitBritainlaunched a magazine called So British aimed


Local authority tourism departmentsLocal authorities have an important role insupporting the tourism industry because of theirstatutory duties and because they recognise thattourism is a major contributor towards theeconomy, so they have tourism departments andplans. Most towns also have a tourist informationcentre (TIC). These are run independently, andmost are subsidised by the local council. They allrely heavily on generating income to ensure theirfinancial viability.

Tourist information centres provide a fullinformation service for both residents and visitors.They give information on visitor attractions andon accommodation. They usually provide abooking service for accommodation. The TICoften incorporates a shop selling locally madecrafts and gifts as well as books on local interests.The shop is more than a service for visitors; it isan important means of generating funds.

Skills practice

Choose one of the example organisations listedand visit its website. Find out:

• Who runs the organisation?

• Who are the partner organisations?

• How does it raise funds?

• What is the primary role of the organisation?

Skills practice

Visit your local tourist information centre. Yourtutor may wish to organise a group visit. Findout what services it offers. Try to determine howmany of its services generate revenue for theTIC. Discuss your findings with the group whenyou return.

Support networksThe travel and tourism industry is made up ofdiverse businesses of all different sizes andlocations. It is essential that there are means bywhich these disparate organisations worktogether. In each sector of the industry theregulatory and trade bodies advise their members

and represent them, particularly to thegovernment. In addition, the role of the publicsector is one of supporting and guiding differentbusinesses so that everyone – tourists, employeesand management – can benefit from tourism,whilst minimising problems and issues.

Match up the following businesses with therelevant support organisations.

Business Support organisation

Travel agent starting up AUC

Passenger wishing to ABTAcomplain about an airline

Tour operator needing an TICoperating licence

Guest accommodation ATOLwishing to be graded

A traveller wanting FCOinformation about crime in Turkey

A tour operator targeting DCMSUS tourists

A regional development UK Inboundagency needing more funding for tourism development

If you cannot remember what all these initialsmean, look at the information earlier, in eachsection.

Skills practice

Interrelationships andinterdependenciesHorizontal and vertical integrationHaving looked at all the different sectors of thetravel and tourism industry, it is apparent that thevarious businesses cannot work in isolation. Eachof them relies on others for its success. In thissection we will examine how businesses worktogether and who needs whom.

Principals – i.e. hotels, airlines and other transport companies

28 MANDATORY UNITS

Consumer

Retailer

Producer

Manufacturer

Wholesaler

Consumers

Tour operators

Travel agencies

In the travel and tourism industry there is also atraditional chain of distribution:

Figure 1.4 The traditional chain of distribution

Figure 1.5 The traditional chain of distribution inthe travel and tourism industry

Key term

Economies of scale These occur when acompany is able to spread its costs over mass-produced goods or services. The economies can beachieved through discounts of bulk purchasing,rationalisation of administration systems andmanagement, and lower production costs.

Integration takes two forms: vertical andhorizontal. If a tour operator buys another touroperator at the same level in the chain ofdistribution, this is known as horizontal integration.In 2004, First Choice made 11 acquisitions at a costof £28.3 million. The acquisitions included theAdventure Company, Let’s Trek Australia, TripsWorldwide, StudentCity.com and the AdventureCenter.

Skills practice

Take a closer look at First Choice. Go to thehistory page on its website. Find out whichcompanies have been acquired and sold from2000 onwards. What do you think are thereasons for these sales and acquisitions? Makenotes and compare them with your group.

The chain of distribution and integrationThe chain of distribution is the means of gettingthe product to the consumer. It applies in anyindustry and traditionally takes this form.

In this traditional chain of distribution, businessesfit neatly into a category, for example travel agent,and perform the role of that business. However,the industry is much more complex than that, andin many cases the traditional chain has beenshortened. Figure 1.6 gives some examples.

In addition to these permutations, companiesdo not stick rigidly to one line of business. Theytend to buy or merge with other businesses,always striving for greater commercial successand market dominance. When companies do thisit is known as vertical and horizontal integration.Tour operators have bought or created airlines,hotels and travel agencies. This means they ownall the different components in the chain ofdistribution and are able to control the wholeoperation. They claim that this gives themeconomies of scale and allows them to offer betterprices to customers. It can also mean that smalleroperators are forced out of business.

CASE STUDY


Vertical integration occurs when two companies atdifferent levels in the chain of distribution mergeor are bought. This may be backwards integration,for example a tour operator buys a hotel, orforward integration, for example a tour operatorbuys a travel agency.

All of the major tour operators in the UK arevertically and horizontally integrated, owningtheir own travel agencies, airlines and hotels,besides different tour operating businesses. In facttheir operations are not limited to the UK; all areglobal operations.

There are those who think that verticalintegration is no longer suitable for today’s market.Capital is tied up in assets and is subject to risk.

Principal Internet Consumer

Principal Tour operator Call centre Consumer

Principal Call centre Consumer

Principal Tour operator Television Consumer

Figure 1.6 Shortened version of traditional chain of distribution

Key term

Horizontal integration This occurs whencompanies are bought out or merged at thesame level in the chain of distribution. Relevantexamples are one travel agency buying outanother one or a tour operator buying anotherone. Often original brand names are retained, sothe general public are unaware of the takeover.

Also, if customers do not want to buy from the highstreet agencies, then many of the chain stores willclose as tour operators invest in other types ofdistribution.

History1973: Eurocamp Travel founded

1988: Management Buy Out

1991: Eurocamp floated on the LSE

1995: Acquisition of Superbreak

1998: Acquisition of Keycamp

1998: Holding company renamedHolidaybreak

2000: Acquisition of Explore

2004: Acquisition of Dutch on-lineleisure business BRC

2005: Acquisition of Dutchadventure business Djoser

Holidaybreak

OverviewHolidaybreak is the UK’s leading operator ofspecialist holiday businesses, all with high standardsof service and product quality and market leadingpositions in the UK and other major European markets. In2004 the Group provided 2.3m holidays in over 100countries worldwide.

The business generates substantial cash, deliversdouble-digit margins and has proven resilient in the faceof changing market conditions. The Group has thefinancial strength to respond to changing market trendsand exploit opportunities for both organic and acquisitionbased growth whilst paying an attractive dividend.

30 MANDATORY UNITS

Hotel BreaksThe Hotel Breaks division’s core business specialises in UK and overseas leisure breaks. It is theprincipal provider of domestic short breaks to UK travel agents and has also been rapidlydeveloping direct and internet distribution. The division continues to introduce new productsand distribution channels to build on an outstanding record of success in recent years.• 2004 Turnover: £120.9m• 1.7m holidays sold in year to 30/9/04• Strong relationship with 3000+ hotels, 250+ hotel suppliers• Flexible cost base – no commitment to hotel room allocations• Fixed selling margin• Strongly cash generative – negative working capital• Operates in a growth sector• Acquired Dutch market leader in on-line leisure breaks Bookit (BRC) for £23.1m on

22 December, 2004

Adventure HolidaysThree businesses, Explore (UK), Djoser (Netherlands) and Regal Dive; market leaders in ‘soft’adventure and scuba diving holidays. Explore offers a range of cycling, walking and trekkingadventure short breaks and family adventures as well as the core worldwide, escorted toursprogramme. Explore adds genuine value to the customer experience, creating holidays whichwould be difficult or impossible for the DIY customer to replicate.• 2004 Turnover: £37.4m• 41,800 holidays sold in year to 30/9/04• Increasing demand for active, special interest and unusual holidays• Over 400 different tours to 107 countries• Tight control of tour load factors underpins profitability• Flexible cost base – Low commitment to flight seats• Acquired Dutch market leader Djoser for £15.7m on 19 January 2005

CampingThe original part of the Holidaybreak group. Provides pre-sited mobile-home and canvasholidays on high-grade, third-party owned campsites throughout Europe. Customers are mainlyfamilies who book direct, attracted by good quality self-catering accommodation in desirablelocations, with excellent leisure amenities. Flexibility, informality, independence and addedvalue services all add to the appeal.• 2004 Turnover: £123.2m• 570,000 holidays sold in year to 30/9/04• Market leading brands – Eurocamp and Keycamp• Customers from nine different countries, mainly UK, Holland and Germany• 9700 mobile-homes and 4500 tents on 212 campsites in France, Italy and seven other countries• High levels of customer satisfaction and repeats

1 What is a management buy out?2 Give examples of horizontal and vertical integration within Holidaybreak.3 Why do you think Holidaybreak operates in the Dutch market?4 Which was the most profitable division in 2004?5 Which division is expected to achieve most growth in the near future? Why?6 Find out what kind of adventure holidays are offered by Explore.


1.4 The scale of the UKtravel and tourism industryInternational tourismVisitor numbers and spendingInternational tourist arrivals reached an all-timerecord of 760 million in 2004, according to dataproduced by the World Tourism Organisation. Thisis an amazing increase when you consider thesetbacks international tourism has had to contendwith over the last few years, including disasterssuch as the 9/11 terrorism attack, Sars and the Iraqwar. However, 2004 figures do not reflect theimpact of the tsunami disaster as it occurred in thelast week of the year. The figures show an increasein international arrivals of 69 million.

The world’s top destination is France, as you cansee in Table 1.3. However, when you study Table1.4 you will note that although France receives themost visitors, it is the United States that makes themost in terms of receipts.

Study Figure 1.7, showing the origin of the‘new’ tourists, that is where the increases ininternational arrivals have originated.

Consider Europe and analyse the reasons for theincrease in numbers of tourists. You should consider:• Exchange rate fluctuations• The increase in members of the EU (to 25 states)• Emerging destinations• Economic factors.

6 million

16 million

34 million

2 nn million

11 million

Asia and the Pacific

EuropeAmericas

Africa

MiddleEast

Figure 1.7 Origin of international arrivals

International Tourist

Arrivals (million)Rank Series 2000 2001 2002

World 687 684 703

1 France TF 77.2 75.2 77.0

2 Spain TF 47.9 50.1 51.7

3 United States TF 50.9 44.9 41.9

4 Italy TF 41.2 39.6 39.8

5 China TF 31.2 33.2 36.8

6 United Kingdom VF 25.2 22.8 24.2

7 Canada TF 19.6 19.7 20.1

8 Mexico TF 20.6 19.8 19.7

9 Austria TCE 18.0 18.2 18.6

10 Germany TCE 19.0 17.9 18.0

International Tourism

Receipts (US$ billion)Rank 2000 2001 2002

World 473 459 474

1 United States 82.4 71.9 66.5

2 Spain 31.5 32.9 33.6

3 France 30.8 30.0 32.3

4 Italy 27.5 25.8 26.9

5 China 16.2 17.8 20.4

6 Germany 18.5 18.4 19.2

7 United Kingdom 19.5 16.3 17.6

8 Austria 9.9 10.1 11.2

9 Hong Kong (China) 7.9 8.3 10.1

10 Greece 9.2 9.4 9.7

Source: World Tourism Organisation (WTO)©(Data as collected by WTO September 2003)

Source: World Tourism Organisation (WTO)

Table 1.3 World’s top 10 tourist destinations

Table 1.4 World’s top 10 tourist earners

Key terms

Arrivals The number of visitors to a destination.International arrivals The total number oftourists visiting all destinations.Receipts The amount of money spent bytourists in a destination.International receipts The total amount spenton tourism throughout the world.

Skills practice

32 MANDATORY UNITS

Levels of employmentAccording to the World Travel and TourismCouncil, the travel and tourism industryworldwide will directly provide 74 million jobs in2005. This represents 2.8 per cent of totalemployment. However, travel and tourismimpacts on other industries and indirectly createsjobs in those industries. Examples includeconstruction, which employs people to buildroads and hotels, and agriculture, where farmersgrow produce for tourists. When these jobs areadded into the equation, the scale of employmentis even greater, representing 221 million jobs or 8.3per cent of total employment, worldwide.

UK tourismVisitor spendingTourism was worth £74.2 billion to the UKeconomy in 2003. Most of this expenditure is fromdomestic tourism, not from overseas visitors.

Table 1.5 Expenditure of overseas and domestictourists

The figures are calculated using the new tourismsatellite accounting (TSA) methodology, whichmeasures all tourism-related expenditure. Tourismsatellite accounting has been developed by theWorld Tourism Organisation, so that there is acommon system which can be used internationally.It is described by WTO as

‘a statistical instrument, a “satellite” revolvingaround the concepts, definitions and aggregatesof the system of national accounts, that makes itpossible to make valid comparisons with otherindustries, as well as between countries orgroups of countries’.

The impact on the economy of incoming andoutbound tourism is recorded in the Balance ofPayments. Each sector of the economy ismeasured in terms of its imports and exports.Travel services have their own balance, whichcontributes to the overall Balance of Payments.Unfortunately, the travel services balance shows adeficit (£15.8 billion in 2003) and has done so forsome years. This means that more money is spentby UK residents travelling overseas than byinbound tourists and domestic tourists. Transportis shown separately to travel services.

SPENDING BY OVERSEAS RESIDENTS £ BILLION

Visits to the UK 11.9

Fares to the UK carriers 3.2

SPENDING BY DOMESTIC RESIDENTS £ BILLION

Trips of 1+ nights 26.5

Day trips 31.8

Rent for second ownership 0.94

Study Tables 1.3 and 1.4 showing topdestinations (receivers) and top earners.

• Why are these two charts not exactly thesame?

• Give reasons for the appeal of the top threedestinations to international tourists.

• Determine which destinations are undergoinga decline or increase in arrivals and analysethe reasons for the increase or decline.Present your findings in a brief report.

Visit www.world-tourism.org for further research.You will need to find the facts and figures page.

Skills practice

Key term

Balance of Payments This is one of the UK’s keyeconomic statistics. It measures the economictransactions between the UK and the rest of theworld. It tells us the difference between spendingon imports and exports.

Skills practice

Find out what the current travel balance is. Youcan find this in The Pink Book, a governmentpublication, in your library or online. Look at thetransport balance also. Is there a deficit or asurplus? Discuss your findings with your tutor.

Think it over ...

How do you think the travel services deficit couldbe overturned?


Visitor numbersIncoming and outgoing touristsIn 2004 there was a record high of 27.7 millionincoming tourism visits, an increase of 12 per centon 2003. The value of this business to theeconomy was £13 billion. This represented a 10per cent increase in spending from 2003 (from 11.9 billion).

Figure 1.8 shows overseas residents’ visits tothe UK and UK residents’ visits abroad.

Remember that these figures are recordedseparately in the Day Visitors Survey.

Domestic tourism expenditure includesexpenditure as a result of resident visitorstravelling within their country and occurs enroute, at the place visited, and in advance onspending for the trip.

In 2003 UK residents took:

✱ 70.5 million holidays of one night or more,spending £13.7 billion

✱ 22.3 million overnight business trips, spending£6.1 billion

✱ 34.3 million overnight trips to friends andrelatives, spending £3.4 billion.

The UK Tourism Survey is very detailed andshows information including number of touristtrips, number of tourist nights, spending,breakdown between England, Scotland and Wales,and purpose of trip. You can find the survey dataat Star UK.

N F M A N F M A N2002 2003 2004

6000

5000

4000

3000

2000

1000

0

UK visits abroad

Overseas visits to UK

Figure 1.8 Overseas residents’ visits to the UK andUK residents’ visits abroad

In the same period, UK outgoing tourist visits alsorose, to 63.5 million visits. The number of visits toWestern Europe hardly changed, but visits to NorthAmerica rose by 15 per cent, possibly reflecting thestrength of the pound against the dollar.

Think it over ...

How do you think we know how many visitorscome to the UK? The data is collected in theInternational Passenger Survey for the Office ofNational Statistics. Inbound visitors arequestioned at airports and seaports, as arepeople travelling outbound. Around 250,000interviews are carried out per year, representing0.2 per cent of all travellers.

Skills practice

1 Are inbound tourists or domestic tourists moreimportant to the UK economy? Find currentstatistics to support your argument.

2 What can be done to

• encourage more domestic tourists

• encourage more inbound tourists?

Levels of employmentThere are an estimated 2.2 million jobs in tourismin Great Britain, some 7.7 per cent of all people inemployment in the UK. There are more jobs intourism than in construction or transport. Approximately 156,000 of these jobs are in self-employment.

Table 1.6 Employment in travel and tourism

Visitor flow within the UKDay visits represent the largest segment ofdomestic tourism with 60 per cent of expenditure.

TOTAL TOURISM-RELATED (MILLIONS) (MILLIONS)

Total employment 28.1 2.17

Employee jobs 24.4 2.01

Self-employment 3.6 0.16

Local tourism

34 MANDATORY UNITS

Key UK destination regionsThe distribution of domestic tourism is measuredby tourist board region, with the South West ofEngland attracting most tourists, closely followedby the South East. The North East attracts the leastnumber of domestic tourists.

Table 1.7 shows the top cities/towns visited byinbound tourists in 2003. Table 1.8 shows the topcities/towns visited by inbound tourists in 2002.

Skills practice

Visit the website for your own tourist boardregion. Find out how many visitors came to yourregion last year. Is there an increase or decreasein the number of tourists? How do you explainthe increase or decrease?

10 CITIES/TOWNS VISITED BY OVERSEAS RESIDENTS, 2003

City/Town Visits (000s)

London 11,700

Edinburgh 770

Manchester 740

Birmingham 720

Glasgow 420

Oxford 360

Cambridge 310

Bristol 290

Brighton/Hove 270

Liverpool 270

10 CITIES/TOWNS VISITED BY OVERSEAS RESIDENTS, 2002

City/Town Visits (000s)

London 11,600

Edinburgh 850

Birmingham 670

Manchester 590

Glasgow 400

Oxford 390

Bristol 310

Cambridge 280

Cardiff 280

Newcastle-upon-Tyne 240

Table 1.7 Top 10 cities/towns visited by inboundtourists in 2003

Table 1.8 Top 10 cities/towns visited by inboundtourists in 2002

Think it over ...

Why do you think the towns in the tablesopposite are the most popular with inboundtourists? Are domestic tourists likely to visit thesame towns?

CASE STUDYTourism in Cambridge – the overallpictureApproximately 4.1 million visitors visitedCambridge in 1999. This was higher thanpreviously estimated, largely due to a reviseddefinition of day visitors.

Fifteen per cent of the visitors stayed. Halfof staying visitors were from overseas. In addition to the 4.1 million visitors toCambridge City, 3.2 million visitors visitedSouth Cambridgeshire; 10 per cent of thesewere staying visitors.

The number of visitors to Cambridge morethan doubled from the mid-1970s to the late1980s. Since then growth has levelled off, andthe late 1990s saw a decline.

In 2000 there was a drop by 10 per cent invisitors to the tourist information centre (TIC),and a drop of 7 per cent in 2001.

The majority of visitors come during thepeak season: 38 per cent came in June, Julyand August in 2001. However, this is not astrue as it used to be. In 1975, 54 per cent ofvisitors came in the summer.

It is estimated that the overall value oftourism to Cambridge is over £260 million. Itsupports 5500 full-time jobs, about 8 per centof the total, and an additional 2000 part-timeand seasonal jobs.

1 Research tourism in your own area and tryto find similar information to that above.You should research your town councilwebsite, your regional tourist boardwebsite and your local tourist informationcentre.Try to find out:


Knowledge check

1 Give examples of three types of tourism.

2 What is the impact of the Internet on traveland tourism?

3 Explain what is meant by the exchange rate.

4 Give two examples of the positive economicimpact of tourism.

5 Give two examples of the negativeenvironmental impact of tourism.

6 How do low-cost airlines keep costs down?

7 Give three examples of motivating factorsfor tourism.

8 What is a scheduled airline?

9 What does ABTA do?

10 Who regulates airlines in the UK?

11 Name three types of accommodation.

12 Describe the traditional chain of distributionin travel and tourism.

13 An independent travel agent is bought outby a major travel agency chain. Is this anexample of vertical integration or horizontalintegration?

14 Give three examples of distribution methodsthat a tour operator could use.

15 Explain backwards integration.

16 Give examples of two tour operators whoalso own airlines.

• The amount of spending on tourism inyour area

• The numbers of inbound tourists• The numbers of domestic tourists • The number of jobs provided in tourism.

2 Compile a short report comparing yourtown with Cambridge.

1 The travel and tourism industry - Pearson Schools - Teaching

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