Travel Agency and Tour Operations Business Student Handbook Notes

THE CONSTITUTION OF INDIA

• Preamble

  • WE, THE PEOPLE OF INDIA, having solemnly resolved to constitute India into a SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC and to secure to all its citizens:

  • JUSTICE, social, economic and political;

  • LIBERTY of thought, expression, belief, faith and worship;

  • EQUALITY of status and of opportunity; and to promote among them all

  • FRATERNITY assuring the dignity of the individual and the unity and integrity of the Nation;

  • IN OUR CONSTITUENT ASSEMBLY this twenty-sixth day of November, $1949$, do HEREBY ADOPT, ENACT AND GIVE TO OURSELVES THIS CONSTITUTION.

FUNDAMENTAL DUTIES OF INDIAN CITIZENS

• ARTICLE 51A - Fundamental Duties

  • It shall be the duty of every citizen of India:

    • (a) To abide by the Constitution and respect its ideals and institutions, the National Flag and the National Anthem;

    • (b) To cherish and follow the noble ideals which inspired our national struggle for freedom;

    • (c) To uphold and protect the sovereignty, unity and integrity of India;

    • (d) To defend the country and render national service when called upon to do so;

    • (e) To promote harmony and the spirit of common brotherhood amongst all the people of India transcending religious, linguistic and regional or sectional diversities; to renounce practices derogatory to the dignity of women;

    • (f) To value and preserve the rich heritage of our composite culture;

    • (g) To protect and improve the natural environment including forests, lakes, rivers, wild life and to have compassion for living creatures;

    • (h) To develop the scientific temper, humanism and the spirit of inquiry and reform;

    • (i) To safeguard public property and to abjure violence;

    • (j) To strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of endeavour and achievement;

    • (k) To provide opportunities for education to his/her child or, as the case may be, ward between age of $6$ and $14$ years.

OVERVIEW OF THE TOURISM INDUSTRY

• Economic Significance and Status

  • Tourism is recognized globally as a major economic activity.

  • India is considered a top-tier global destination, offering attractive tourism spots for all types of tourists throughout the calendar year.

  • Increased importance of tourism has led to focused attention from the Indian Government, public and private organizations, and the academic sector.

• Leisure and Tourism Phenomenon

  • The new millennium has seen growing interest in how people spend non-work and leisure time.

  • Leisure time is increasingly seen as a period dedicated to travel and holidays, which are concentrated periods of non-work activity.

  • ‘Tourism’ is defined as the use of leisure time to visit different places, destinations, and localities.

• Business Opportunities

  • The growth of tourism provides vast opportunities for establishing service providers such as travel agencies and tour operators.

  • The Government of India and the Central Board of Secondary Education (CBSE) work together to train professionals to meet the manpower demands of the industry.

EVOLUTION OF THE TRAVEL BUSINESS

• Early History and Middlemen

  • The term "travel trade" originated in the early $19\text{th}\,\text{century}$, though travel agency and tour operation activities occurred much earlier.

  • Historically, travel middlemen assisted merchants traveling for trade and individuals traveling for religious reasons.

• Global Milestones

  • $1670$: The Grand Tour concept was developed for educational purposes.

  • $1730$: Health experts suggested sea water could cure diseases, leading to English Coast resorts.

  • $1815$: Steamboat services were introduced from London to Gravesend, necessitating the construction of piers at major resorts.

  • $1820$: European cultural centers became accessible to British travelers.

  • $1830$: A rail link was established between Liverpool and Manchester.

  • $1838$: The Peninsular and Oriental (P&O) Steam Company began services to India and the Far East.

• Cox & Kings

  • COX & KINGS is the longest-established travel company in the world, celebrating its $250\text{th}$ anniversary in $2008$.

  • Historically, Richard Cox was appointed as a regimental agent to the Foot Guards (later Grenadier Guards) in May $1758$ during the French and American Indian War.

  • Regimental agents handled military pay, clothing, and the buying/selling of commissions.

  • By the end of the $18\text{th}\,\text{century}$, Cox acted as agent for $14$ cavalry, $64$ infantry, and $17$ militia regiments.

  • The company merged with Henry S. King bank in $1922$, later selling the banking branch but remaining a global travel leader specializing in Destination Management, Leisure Travel, and MICE (Meetings, Incentives, Conferences, and Exhibitions).

• Thomas Cook: The Father of the Travel Agency Business

  • In $1841$, Thomas Cook organized a train trip for $570\,\text{members}$ of the South Midland Temperance Association over a distance of $22\,\text{miles}$.

  • Cook purchased railway tickets in bulk and resold them.

  • In $1845$, he established the ‘World’s First Travel Agency’ to organize excursions.

  • In $1855$, due to low railway commissions ($5\,\text{percent}$), he diversified into tour operation, starting package tours and creating the concept of the "inclusive tour."

• American Express and Early Innovations

  • In $1841$, Henry Wells started a freight business in the USA, which evolved into American Express.

  • In $1870$, the ‘Circular Note’ (a precursor to the Traveler’s Cheque) was introduced to eliminate the threat of highway robbery.

TRAVEL TRADE IN INDIA

• Organizational Origins

  • The travel business in India began in an organized manner with the establishment of the Travel Agents Association of India (TAAI) in Mumbai in $1951$.

  • Prior to this, foreign firms like Thomas Cook and Sons and American Express dominated the market.

  • Early Indian companies included Jeena and Co., Lee and Muirhead India Pvt. Ltd., and N. Jamnadas and Co. Ltd.

• Travel Corporation of India (TCI)

  • In $1961$, Jeena and Co. and two other Indian agencies merged to form the Travel Corporation of India Ltd. (TCI).

  • SITA was established in $1963$.

• Meaning and Nature of the Business

  • Travel business is an economic service industry involving the continuous buying and selling of travel-related services to satisfy human wants.

  • It is considered an "experience industry" where travel experience is sold as a commodity.

  • Economy is generated by service transactions related to motivation, formalities, travel, and stay.

TYPES AND STRUCTURE OF TRAVEL ORGANIZATIONS

• Travel Agency

  • Acts as an "image builder" of a country by packaging attractions, access, amenities, and ancillary services.

  • Services include ticketing (air, rail, road, sea), documentation (passport, visa), accommodation, entertainment, travel insurance, and foreign currency exchange.

  • Types of Agents:

    • Retail Travel Agency: Sells products directly to the public on behalf of suppliers for a commission or mark-up price.

    • Wholesale Travel Agency: Organizes package tours in bulk for resale through retail networks or direct divisions. Wholesalers often receive volume discounts from airlines and hotels.

    • Consolidator: A wholesaler who sells individual product components (air tickets, rooms) without assembling them into packages.

• Tour Operator

  • Acts as a "manufacturer" of tourism products by purchasing services in bulk and combining them into package tours with their own price tags.

  • Types of Tour Operators:

    • Inbound Tour Operators: Handle arrangements for foreign tourists within the host country.

    • Outbound Tour Operators: Promote tours from the home country to foreign destinations.

    • Domestic Tour Operators: Combine components into inclusive tours for travelers within their own country.

    • Destination Management Companies (DMC)/Ground Operators: Act as handling agencies for overseas operators, organizing local arrangements like beach, wildlife, or cultural tours.

• Organizational Structure

  • Small/Medium Scale: Informal, often without explicit charts or role descriptions.

  • Large Scale (e.g., Thomas Cook, SITA): Divided into managerial hierarchies (top to junior), departments like Research and Planning, Travel and Tour Division, and Support Services (Accounts, HR, PR).

MARKET TRENDS AND BUSINESS INTEGRATION

• Decline in Commissions and Rise of Fees

  • Standard $10\,\text{percent}$ airline commissions began tapering in $1995$ and were largely eliminated by $2002$.

  • Agencies shifted to charging service fees and focusing on cruises and tour packages.

• Impact of the Internet

  • E-commerce allows airlines to bypass intermediaries and engage in direct relationships with consumers.

  • Major Online Travel Agencies (OTAs) include Expedia, Voyages, Travelocity, Orbitz, and Priceline.

  • Global Distribution Systems (GDS) used include SABRE, Amadeus, Galileo, and Worldspan.

• Business Integration Concepts

  • Horizontal Integration: Occurs at the same level of the chain (e.g., Two hotels merging; an airline forming a hotel division).

  • Vertical Integration: Linking organizations at different levels.

    • Forward (Downward): A tour operator buying a chain of travel agencies.

    • Backward (Upward): A tour operator buying its own airline.

  • Economies of Scale: Suppliers reduce unit costs by producing and selling more, passing savings to clients.

TRANSPORT NETWORKS IN TOURISM

• Air Transport

  • $12.5\,\text{percent}$ of all tourists travel by plane, but this rises to $40\,\text{percent}$ for international travel.

  • Aircraft Categories:

    • Short range: Regional jets like Bombardier CRJ or Embraer ERJ ($30$ to $100\,\text{passengers}$).

    • Medium range: Airbus A320 ($3,700\,km$ range) and Boeing $737$.

    • Long range: B-$747$, B-$777$, or A350 (ranges up to $17,400\,km$).

  • Indian Aviation: The Air Corporations Act of $1953$ was repealed to allow private participation. Private operators reached a $68.5\,\text{percent}$ domestic market share by $2005$.

• Rail Transportation

  • Dominant mass transport form before the $1950\text{s}$.

  • Mechanized systems began with the steam locomotive in $1829$.

  • Technical Constraints:

    • Gradient: Freight trains tolerate max $1\,\text{percent}$; total Support max $4\,\text{percent}$.

    • Turns: Curvature radius of $100\,m$ (standard), $1\,km$ for $150\,km/hr$, and $4\,km$ for $300\,km/hr$.

    • Gauge: Standard gauge is $1.435\,m$ ($60\,\text{percent}$ of world railways). Broad gauge is $1.520\,m$ (Russia/Eastern Europe).

• Road Transport and NHAI

  • The National Highways Authority of India (NHAI) was constituted by an Act of Parliament in $1988$ and operationalized in February $1995$.

  • Total National Highway length: $71,772\,km$.

  • National Highways Development Project (NHDP):

    • Phase I: Approved Dec $2000$, cost $Rs. 30,000\,\text{crore}$. Includes GQ ($5,846\,km$) and NS-EW Corridor ($981\,km$).

    • Phase II: Approved Dec $2003$, cost $Rs. 34,339\,\text{crore}$. Includes NS-EW Corridor ($6,161\,km$).

    • Phase III: Upgrading $4,035\,km$ (approved $2005$) and later $8,074\,km$ (approved $2007$).

    • Phase V: Six-laning $6,500\,km$.

    • Phase VI: $1,000\,km$ of expressways ($Rs. 16,680\,\text{crore}$).

    • Phase VII: $700\,km$ of Ring Roads and bypasses.

  • Car Rentals: ACRISS (Association of Car Rental Industry Systems and Standards) uses a $4$-letter code to describe vehicle size, door count, and gearbox.

• Shipping and Cruises

  • $90\,\text{percent}$ of international trade is carried by $102,194$ commercial ships.

  • Cruises: $18.3\,\text{million}$ tourists in $2010$. Market leaders are Carnival Corporation and Royal Caribbean Cruises ($70\,\text{percent}$ market share).

  • Star Cruises: $3\text{rd}$ largest cruise line; developed the Asia-Pacific market.

  • India’s Inland Waterways: Total navigable length $14,500\,km$ ($5,200\,km$ of river, $4,000\,km$ of canals).

ITINERARY PLANNING

• Types of Itinerary

  • Skeletal: Proposed preliminary schedule.

  • Technical: Specific details on transportation (arrivals/departures), sightseeing duration, and accommodation types.

  • Descriptive: Narrative of planned activities for marketing.

• Itineraries by Recipient

  • Tourist: Basic info (times, check-in).

  • Tour Manager: Comprehensive (passenger lists, confirmation numbers).

  • Vendor: For hotels/guides to schedule services.

  • Bus Driver: Route maps, pickup/drop-off points.

• GIT vs. FIT

  • GIT (Group Inclusive Tour): Minimum of $15\,\text{persons}$ traveling together. Often enjoys reductions like the IATA IT fare ($39\,\text{percent}$ reduction for min $4\,\text{persons}$ staying $14$ to $35\,\text{days}$ in India, Nepal, Ceylon, or Pakistan).

  • FIT (Foreign Independent Traveler): Individuals who have tours tailored to their needs. Can be prepaid (inclusive) or non-prepaid (economy-minded).

TOUR PACKAGING, COSTING, AND PRICING

• Package Components

  • Accommodation (approx. $1/3$ of total cost), Sightseeing, Airlines, Railways, Car Rentals, Events, Insurance, and Ground Handling.

• Costing Analysis

  • Direct Costs ($70\,\text{percent}$ total): Accommodation/Food ($25\,\text{percent}$), Airline tickets ($20\,\text{percent}$), Transfers ($15\,\text{percent}$), Agent Commission ($10\,\text{percent}$).

  • Indirect Costs ($15\,\text{percent}$ total): Administrative ($9\,\text{percent}$), Marketing/Promotion ($5\,\text{percent}$), Misc ($1\,\text{percent}$).

  • Margin (Mark-up): Usually $15\,\text{percent}$.

• Pricing Strategies

  • Cost-Based: Average cost + markup.

  • Competition-Based: Setting prices relative to competitors.

  • Consumer-Based: Targeted based on traveler socio-economic background.

  • Rack Rate: Full rate before discounts.

  • Last Minute: Discounts offered close to departure to reach break-even.

GOVERNMENT AND PROFESSIONAL BODIES

• Department of Tourism (DoT) Approval Rules

  • Agency must be operational for at least $1\,\text{year}$.

  • Minimum office space: $150\,sq.\,ft.$ ($100\,sq.\,ft.$ for religious/hilly areas).

  • Minimum paid-up capital: $Rs. 3.00\,lakhs$.

  • Must be approved by IATA or act as a GSA/PSA for an IATA member.

  • Recognition fee: $Rs. 3,000$.

• International Bodies

  • UFTAA (United Federation of Travel Agents’ Associations): Established Nov $22$, $1966$ in Rome. Representing interests before global bodies like IATA and UNESCO.

  • PATA (Pacific Asia Travel Association): Established $1951$. Focuses on sustainable development of the Asia-Pacific region.

  • ASTA (American Society of Travel Agents): Largest association, founded $1931$. Members subscribe to a $13$-point code of ethics.

  • IATO (Indian Association of Tour Operators): Formed Jan $13$, $1982$. National apex body with over $4,000\,members$.

  • TAAI (Travel Agents Association of India): Formed in $1951$ by $12\,leading\,agents$; over $2,300\,members$.

  • ATOAI (Adventure Tour Operators’ Association of India): Founded $1994$; over $150\,members$.

  • FIYTO (Federation of International Youth Travel Organisation): Merged with ISTC in $2006$ to form WYSETC (World Youth Student and Educational Travel Confederation).

GLOBAL DISTRIBUTION SYSTEM (GDS)

• Definition

  • A travel agency network connecting Airline Computer Reservation Systems (CRS) and agency terminals. A GDS holds no inventory of its own; it links to airline systems.

• Major Systems Data

  • Amadeus: Serves $217$ markets, $100\,million$ visitors/month, $90,274$ travel agency locations, and $75,284$ hotel properties.

  • Galileo: Connected to $49,000$ travel agencies in $116$ countries and $70,000$ hotel properties.

  • Sabre: Created in $1964$ with IBM. Connects $50,000+$ agencies, $77,000$ hotels, and $400$ airlines.

  • Worldspan: Connected to $21,000$ agencies in nearly $90$ countries.