Theoretical aspects of tour operator services in tourism industry

The tour operator has five (5) sources of income:
2. By seeking and negotiating or cost savers and concessions. Some
components are given by the suppliers on a complimentary basis, but
included as a cost in the package.
3. Through the sales of optional tours, excursions and extensions. This
source of revenue is generated after the sale of the basic package.
4. For tour group movements, souvenir shops grant the tour operator
shopping commissions on sales generated. This commission is normally
shared with the tour guide.
5. Through direct sales to end-users, thus avoiding the payment of
commissions to the travel agents. However, this is a short-sighted
policy that is not accepted by the travel industry at large. Tour
operators who condone and practice this policy do not last long as they
lose the support and credibility of the retail travel agents.
Occasionally, a tour operator earns or loses money on foreign exchange rate
fluctuations. Sometimes it makes use of advance deposits and cancellation
fees.
A Tour Operator can therefore be characterized as follows:
1. A wholesaler who transacts business primarily with, and protects the
interest of the retail travel agents.
2. Acts as a conduit to and a middleman of suppliers.
3. Have variable but limited profit margins. Capitalizes on cost-savers and
concessions.
4. Generates additional revenues by selling optional tours, excursions and
extensions.
5. Can, but should not, by pass the retailers, and sell direct to the endusers.
TYPES OF TOUR OPERATORS
There are four (4) types of tour operators, namely; Local, Domestic, Inbound
and Outbound.
The Local Tour Operator (LTO) services Filipino and/or foreign traffic to
national destination by way of regular sightseeing tours or tour package,
taking into consideration the popularity of the destination, site or sight.
The Domestic Tour Operator (DTO) services Filipino traffic to national
destinations, on an ad-hoc basis, as and when contracted, by providing
itineraries/programs tailor-made to the needs of the client.
On Inbound Tour Operator (ITO) services foreign traffic to national
destinations, on an ad-hoc and regular packages basis, taking into
consideration the specific requirements of the contracting party abroad. Its
source of traffic is mainly foreign tour operators.
An Outbound Tour Operator (OTO) designs and assembles tour packages for
residents of the Philippines, either foreign or local, to foreign destinations,
such as Hong Kong, the U.S.A. or Europe.
They differ based on the following: (1) area of operations, (2) nationality of
travelers, (3) market or source of traffic, and (4) type of tour packages
offered.
1. Area of Operations. This refers t the geographical area visited in the
course of delivering the tour product. It is the physical area, with all
attractions (natural or man-made), all activities whether spontaneous
or planned, the experience of events, and in some instances, where the
tour operator is based. e.g.: Ilagan City, Province of Albany, Northern
WHAT IS TOUR OPERATIONS?
Briefly described, tour operations are the preparation and implementation of
all activities within an itinerary, within a given time frame, and within the
estimated costs, in order to meet the expectations of the paying clients.
Meeting the expectations of the clients is also termed as customer
satisfaction. Customer satisfaction, in the case, is the delivery if what has
been requested by the buyer (traveler) and what has been committed by the
supplier (seller), through the middleman (travel agent and tour operator).
What is requested and confirmed varies – it may simply be a one-way transfer
from the airport to the hotel, or a complex, 14-day itinerary to seven (7)
different destinations or locations in any country, involving hotels, resorts,
airplane charters, rental of motorized outriggers, cars, and tour guide
services.
Before discussing the organizations of a tours department, it is important to
first understand the activities involved in tour operations. For the sake of
good order, let us divide these into two parts: Quotations & Reservations and
Field Operations.
The activities involved in Quotations & Reservations are mainly within the
physical confines of the office and take place prior to the actual arrival
handling of the travelers and immediately after their departure. Field
Operations are always outside the office in the field and take place
immediately upon arrival and up to the travelers’ departure from the area of
operations.
Let us look at the Quotations & Reservations first. Before Mr. Traveler
First, somebody has to determine how much it costs to provide Mr. Traveler
with what he needs. This activity is called Contracting which is the
process of negotiating for rates below those published from the suppliers.
These suppliers are hotels, restaurants, tourist sights and sites, and
transportation companies, and then collating these. These rates are known
as contracted rates. Published rates less commission due travel agents are
not contracted rates. Contracted rates are discounted by 30% to 50% off the
published rates. These are committed by the suppliers on the basis of the
tour operator’s potential to produce business, proven track record and/or its
reputation and credibility.
Costing is putting together the costs of the various components,
activities or services included in the itinerary, depending on the number of
travelers availing of the package. After calculating the approximate
desirable profit from each component and adding this to the cost, the result
is a Quotation which is cost + profit. It includes costed-in concession.
The Marketing & Sales people will determine the market demands and on
this basis quotations can be prepared. These quotations are compiled in a
rate sheet which is commonly known as a Confidential Tariff. A Confidential
Tariff is a listing of products offered by the tour operator, with corresponding
pre-costed rates and concessions, based on specific or projected number of
participants.
Special Quotations are prepared for Ad Hoc Tour packages. These are
costed based on a required minimum number of participants and in
accordance with the specific activities, inclusions and requirements of the
client.
The ideal organizational set-up of the tours department must be developed
along the concept that operation involves both office activities and field
operations – one should complement the other in a manner that the areas of
responsibility is clearly defined.
The Tours Department Manager overseas both activities, but the respective
supervisions are responsible for each activity.
On the office side, (1) Contracting and (2) Tariff Costing are yearly activities,
which the Manager normally handles. Quotations (3), including Ad Hoc
requests and costing are one activity, while Reservations (4) is the other.
The messenger provides support to the office operations staff.
On the field side, the Tour Coordinator/Airport Rep handles the Transfers (5)
and overseas the actual delivery of Accommodations and Meals (5), while the
Courier reconfirms Passage (5) requirements. These functions are
interchangeable, in order to economize.
The tour guide is responsible for the delivery of the sightseeing tour or tour
package (5). The tour guide is normally a free-lance and is not an employee
TOURS DEPARTMENT MANAGER
OPERATIONS SUPERVISOR FIELD SUPERVISOR
QUOTATIONS RESERVATIONS
MESSENGER
TOUR
COORDINATOR
COURIER
TOUR GUIDES/ESCORTS
of the tour operator. The Tour Guide’s functions and responsibilities will be
taken up in deal in Chapter X.
The chart below provides a description of the job summary and duties and
responsibilities of each position in the Tour Department of a travel agency.
TOUR PACKAGES
The product of Tour Operators is the Tour Package, a combination of two or
more travel components. The basic components of a tour package are:
*Transportation by air, sea or land, to and from a point of origin to a
destination, or destinations and back to the point of origin.
*Transfers refer to transportation to and from a destination’s gateway
such as an airport, pier or bus station to the place of lodging, and viceversa.
*Tours or Sightseeing tour, are a combination of transportation within
the destination to a sights and sites of interest, tour guide’s services,
entrance fees, entertainment or activities and sometimes, snacks and
meals.
*Hotel and Resort Accommodations refer to lodging and meals within
the lodging establishment.
*Tour Escort an individual who travels with the clients from the point of
origin and back, and acts as the manager of the tour group, also known
as Tour Leader.
A combination of two or more of these components is a tour package.
Tour guide’s services are provided in connection with sightseeing in a
locality, and sometimes during transfer services. Tour Escorts are individuals
who travel with the clients from the point of origin and back. They normally
manage all activities of the tour’s itinerary and insure the client well-being.
Depending on the number of components tour packages have different labels:
*If only tours and transfers are included, it is called ground arrangements
package.
*If tours, transfers and hotel accommodations with some meals are included
this called land arrangements package.
*If tours, transfers, hotel accommodations and some meals, plus
transportation to and from the destination(s) are included, this is called
inclusive tour package.
*If all components are included, including a tour escort, this is called an
inclusive escorted tour package.
TYPES OF PACKAGES PER TYPE OF TOUR OPERATOR
As discussed, there are four (4) types of Tour Operators, each with different
areas of operations, nationality of travelers, market of source of traffic and
type of package/s offered/operated.
LOCAL TOUR OPERATOR
The local tour operator’s (LTO) source of business comes from both local and
foreign travelers, visiting the destination where the tour operator is based.
Its source of traffic is generally off-the-street or over-the-counter sales and
sometimes other tour operators in the country. It operates regular
sightseeing tours or tour packages, taking into consideration the popularity
of the destination, site or sight. The LTO is primarily a retailer but
occasionally acts as wholesaler.
GENERAL SEQUENCE OF EVENTS
A –The LTO determines the popularity and demand of a given destination,
site or sight, and prepares a package by contracting suppliers capable of
providing the different components.
B –Markets, promotes and sells its package directly to the end-user in the
locality and occasionally to other tour operators based elsewhere.
C –actually delivers/operates the package to the specific popular destination.
VARIATIONS OF TOUR PACKAGES
Tour packages vary according to any of the following:
1. Duration – Refers to the number of days and nights included in the
package. Normally three days would mean two nights. However, when a
package crosses the international dateline or spends an overnight
inside an aircraft, the number of nights in the package is the same as
the number of days.
2. Destination(s) – A package may be for a single destination, or for
multiple destinations, i.e. two or more.
3. Category of Accommodations – The category of accommodation
establishment may vary, from a five-star De Luxe (DLX) hotel, to fourstar First Class (FST), to a three-star Standard (STD), to a two-star
Economy (ECO), to a one-star Budget Hotel (BUD). Pension Houses and
Inns are normally not categorized.
Actual Operations
4. Meal Plan – Refer to the number of meals per day included in the
package, whether served in the place of lodging or outside in a
restaurant. If all meals are included, this is a Full-Board Basis, Full
Pension or American Plan. If only Breakfast and Lunch or Dinner is
included this is a Half-Board Basis, Demi-Pension or Modified American
Plan. If only Full Breakfast included, this is a Bed-and-Breakfast Basis.
If the Breakfast is Continental Breakfast this is a Continental Plan. If no
meals are included in the package, this is a European Plan tour
package.
Breakfast contents vary. Coffee or tea with rolls, jam and butter is a
Continental Breakfast. If eggs and bacon or ham plus toast are added, it
is an American Breakfast. If the toast is change to fried or plain rice
and the ham or bacon changed to “tapa” or “daing”, it is Filipino
Breakfast. Any breakfast with rice porridge (“lugaw”) and a number of
side condiments is an Oriental Breakfast. A table laden with breakfast
food and self-service is a Buffet Breakfast.
5. Mode and Class of Transportation – Mode of transportation refers to air,
sea or land travel and type of equipment. Class is the quality of the
transportation equipment, facility and amenities offered the
passengers. In air travel, the class divisions are First, Business and
Economy. In sea travel, they are Suite, Stateroom, Cabin, First Class,
Business Class, Tourist and Economy. In land travel, it is AirConditioned or Ordinary service.
TYPES OF SIGHTSEEING TOUR
Tours or sightseeing tours, are a combination of transportation within the
destination to sights and sites if interest, tour guide’s services, entrance
fees, entertainment or activities and sometimes, snacks and meals. These
are classified as follows:
Half-day Sightseeing - Operated mornings or afternoons. Normally
includes a snack.
Full-day Sightseeing - Eight to ten hours with lunch.
Evening Tours - Operates after six in the evening. Normally
includes dinner and a drink.
Optional Tours - Tours that are not included in the Tour Package,
for which the client pays extra.
Quotations & Reservations
CONTRACTING
Contracting is the process of negotiating with suppliers for the most
favorable rates, terms and concessions.
When negotiating with suppliers, the tour operator has one single objective:
to get the best available rate, with the most concessions, at the most
favorable terms.
More often than not, suppliers will assess the tour operator’s credibility,
potential, track record and credit worthiness before committing any
contracted rate. The tour operator on the other hand, will assess the
supplier’s ability to provide the services contracted reliably and within
specified standards.
The following must be clearly spelled out in the agreement for contracted
rates:
CLASS AND/OR TYPE OF SERVICE/CATEGORY AND/OR TYPE OF ROOM
For land transportation, equipment may be contracted from either tourist
transportation companies or commuter bus companies. The former have
more comfortable configuration and are equipped with a public address
system, sometimes with TV-VCR for long trips. The drivers are service
oriented and familiar with the sightseeing routes and sites. While the latter
are geared to service commuter passengers. In either cases the type and
capacity of equipment to be contracted is essential.
Contracted rates for land transportation equipment may be obtained on a
per-hour, per-trip, per-sector basis, and either on a per-person or per equipment type and size basis, subject to the commuter bus company or
tourist transport operator’s franchise, insurance, drivers’ training and the
like.
In air travel, class-first, business, or economy – has to be specified, as well
as the carrier’s frequency and schedule. In some cases, contracting for air
travel consists of chartering aircraft of specified configuration and range.
In cases of sea travel, the class of passage – with or without cabin, for
example – and the number of meals included, must be indicated.
In the hospitality industry, the room category is matched with a contracted
room rate. The same applies to contracted meal rates. Negotiations may
extend to other business and leisure facilities available at the hotel, resort
and similar accommodations suppliers.
For suppliers of entertainment and administrators of tourist attractions,
negotiated rates are for entrance fees to special shows and/or full use of a
special venue.
TAXES, INSURANCE FEES, SERVICE CHARGE
Contracted rates must indicate whether fees, taxes, and any other charged
are included. The commonly used term for a rate that includes all charges is
“net inclusive.” Contracted rates that do not include these charges are
commonly referred to as “plus-plus” (Net ++), the first “plus” being the taxes
due, and the second “plus” being the service charge. These are normally a
percentage of the base rate.
BOOKING AND RESERVATION PROCEDURES AND CONDITIONS
Each supplier has its own reservations policies and procedures. These must
be and are usually clearly spelled out in the contract agreement. The
conditions to keep in mind are: option dates, cancellation penalties,
amendment policies, cut-off period, deposit payments and revisions.
An option date is a date preset by the supplier, by which time the tour
operator must firm up or cancel a confirmed reservation.
Cancellation penalties are levied by the supplier when confirmed
reservations are cancelled.
Amendments refer to a change of dates for a specific reservation. Some
suppliers consider amendments as cancellations and levy penalties
accordingly,
CUT-OFF PERIOD
Some suppliers grant tour operators free sale facilities. Free sale means that
a number of seats, beds, rooms and the like are allocated to a particular tour
operator to sell within a period of time leading to a cut-off date. Upon
reaching the cut-off date, the unsold seats, beds, rooms and the like
automatically revert to the control of the supplier. The tour operator may no
longer sell these after the cut-off date. Unlike an option date/time which is
given at the time of booking, the cut-off date is preset when the negotiations
for allocations are undertaken.
DEPOSIT PAYMENTS
Most suppliers will require a deposit payment to confirm reservations. If no
credit facilities exist between the supplier and the operator, the contract
agreement must specify this, including the refund policy and conditions in
case of non-utilization of confirmed reservations, subject to cut-off period
agreements.
Revisions refer to changes in number of seats, beds, rooms reserved or
changes in passenger’s names. Unlike amendments which refer to change of
date(s) for the delivery of a particular product or service, revisions maintain
the basic date(s) but the number of names of participants are revised.
FORM OF PAYMENT/CREDIT LINE
The contract agreement specifies the form of payment (e.g. cash, company
check, bank draft) and currency. It also specifies when payment is due (e.g.
“upon check-out”) and if credit lines are extended, the amount and time limit
to pay up is spelled out (e.g. P1000,000 or thirty days, whichever comes
first.)
When chartering equipment from transportations companies, the insurance
fee is normally included. However, in some instances, this fee appears
separately. The same applies to toll fees. Rates for passage on a per-person,
per-sector basis always includes the insurance fees. Terminal fees are taxes,
however, are reflected separately. The insurance fees and corresponding
coverage is more comprehensive for tourist vehicles than other commercial
vehicles.
It is very important to note here that violating the conditions of an insurance
policy, such as loading more passengers than those allowed by the nsurance
policy, or operating in sectors and areas not covered by the policy, renders
the insurance coverage null and void.
Cover charges in restaurants and discos are inclusive of tax. The minimum
charge policies of some disco houses, and pubs are subject to tax and, in
most cases, service charge.
APPLICABLE CONCESSIONS
Suppliers normally grant concessions to tour operators. Tour operator’s in
turn, pass these on to their clients. Transportation companies would
normally grant and free ticket for a specified number of full-paying tickets
issued, if these are travelling together on the same sector, flight and date.
Concessions when chartering transportation equipment may extend to one
hour of usage free, for every five full hours of usage.
In the hospitality industry concessions range from one (1) free bed for every
fifteen (15) paying beds, up to maximum four (4) beds, to free welcome drink
or breakfast included in room rate. As a rule of thumb, free meals are not
granted as concessions.
Each supplier will grant concessions in accordance to the perceived
potential or actual track record of the tour operator.
VALIDITY OF CONTRACTED RATES
Suppliers of services and products must indicate the validity of the
contracted rates, both in terms of time-year-round with peak/lean or high/low
seasons and markets. Some suppliers have different rates for different
markets. As a rule of thumb, rates are valid either 01 January through 31
December or 01 April through 31 March. For some European operators, the
season may be from 01 October through to 30 September. The following are
always considered peak seasons in the Philippines: Christmas, New Year,
Chinese New Year and Holy Week.
COSTINGS
Costing refers to the process of determining the actual cost of a tour
package by detailing the various components of the package, and attaching
the specific cost represented by the contracted rate to each, according to
the costing methods detailed in this section. Costing can be done for specific
sightseeing tours, Ad Hoc or Regular tour packages and for a Confidential
Tariff.
COSTING AN AD HOC OR REGULAR TOUR PACKAGES
A tour package, whether Ad Hoc or Regular, is best illustrated in an itinerary.
An itinerary is a schedule of activities and destination arranged in a
chronological order, these are three (3) types of itinerary namely:
Skeletal is a proposed, preliminary itinerary.
Technical is an itinerary that specifies the details like scheduled
transportation, arrival/departure times, duration of sightseeing, travel time,
type of accommodation and the like.
Descriptive is includes a description of the planned activities and, destinations
In the following the list I put information from lex. Uz 2019