Understanding Tourism Lecture 2 PDF

TLM Baku Understanding Tourism Lecture 2 Markus W. Eitle 17.09.2024 Schedule 2 Agenda 1. Recapitulation 2. Distribution Channels 3. Tourism Market Segements 3 Attendance Check 4 I Recapitulation 1. Recapitulation Gr...

TLM Baku Understanding Tourism Lecture 2 Markus W. Eitle 17.09.2024 Schedule 2 Agenda 1. Recapitulation 2. Distribution Channels 3. Tourism Market Segements 3 Attendance Check 4 I Recapitulation 1. Recapitulation Graded Assessments 1. Written Exam – Monday, 23.09.24 Classical written exam Mix of short and open questions (2:1) Content: Topics presented during the block week from 16.9 - 20.9.2024 (Mo-Fr) Rating: 60% of final grade 2. Group Assessment – Thursday, 31.10.24 Travel guide written and designed as group work of three students Approx. 20-30 pages, DIN A5 format Formal requirements: Single line spacing, line paging, sentence case, PDF format Upload via Microsoft Teams Rating: 40% of final grade 6 1. Recapitulation Graded Assessments 2. Group Assessment – Thursday, 31.10.24 Cover Page List of Contents  Introduction Country  Maps (Country, important cities)  State & Economy  Languages & Society  History  Art & Culture  Food & Beverages  Touristic Cities & Regions  Baku  Quba  Samaxi  …. 7 Literature Sources & Copyrights 1. Recapitulation Graded Assessments: Groups 8 1. Recapitulation 9 6 1. Recapitulation How would you define tourism? Myth or Reality? Most employment in tourism is in The majority of tourism in the world is the hospitality sector and involves international. little travel. Large multinational companies such The majority of trips are by as hotel chains and airlines dominate surface transport; mainly by car tourism. 10 6 1. Recapitulation Tourism History 11 6 1. Recapitulation Tourism History 12 6 1. Recapitulation Tourism History 13 6 1. Recapitulation Leipers Model Historical factors Socio-economic factors Socio-cultural factors Environmental factors 14 6 1. Recapitulation Tourism Streams Historical factors Socio-economic factors Socio-cultural factors Environmental factors 15 6 II Distribution Channels 2. Distribution Channels 17 2. Distribution Channels Travel Industry SUPPLIERS = PRODUCERS – TOUR OPERATORS (WHOLESALERS) – TRAVEL AGENCIES (RETAILERS) TOURISTS = CONSUMERS 18 2. Distribution Channels Travel Industry Principals or Service Providers Originators of tourism products and services providing the core tourism offerings. Set the foundational experience for travelers. Examples: Airlines, hotels, car rentals or and attraction operators Wholesalers Purchase large quantities of tourism products from principals and package them into bundled services. They often sell these packages to retailers or directly to consumers, providing cost advantages through bulk purchasing. Examples: Tour packagers offering combined tours, flights, and accommodation 19 112 2. Distribution Channels Travel Industry Retailers Intermediaries between wholesalers or principals and consumers, selling tourism packages or individual services to end consumers, either through brick-and-mortar agencies or online platforms, offering advice, personalization, and booking services. Examples: Travel agents, online platforms Consumers Final link in the chain purchasing tourism products or services. Their needs, preferences, and behavior influence how products are packaged and distributed across the chain, and their satisfaction determines the success of the entire distribution process. Examples: Future tourists of different segments 20 112 2. Distribution Channels Travel Industry - Network of Sectors 21 2. Distribution Channels Direct Distribution Channels 1. Direct Distribution Channels Simplest form of distribution: Without intermediary between supplier and customer Purchase directly from the supplier World Wide Web is increasing the direct availability of information and purchase; Airlines encouraging the use of the Web and ticketless travel 22 2. Distribution Channels Direct Distribution Channels 1. Direct Distribution Channels Can you think of any differences between Do you know examples ? different tourism products/services where no intermediaries are in the transaction? Can you think of any differences across different types of travellers? 23 2. Distribution Channels Direct Distribution Channels OTA: Online Travel Agency = no direct supplier 24 116 2. Distribution Channels Two Level Distribution Channels 2. Two Level Distribution Channels Add another level of intermediary such as tour operators Intermediary between tourism suppliers and travel agents, B2B (sometimes directly to tourists too…B2C) Also termed tour packager or tour wholesaler Improving service delivery through cooperative systems: – Global distribution system (GDS) – Computer reservation system (CRS) – Airlines Reporting Corporation (ARC) 25 2. Distribution Channels Two Level Distribution Channels 2. Two Level Distribution Channels 26 2. Distribution Channels Two Level Distribution Channels – Tour Operators 2. Two Level Distribution Channels Tour Operators: – Purchase tourism services in bulk and then mark up the price and resell in packaged form – Plan, prepare, market and often operate vacation tours – Also termed tour packager or tour wholesaler – Many financial risks in the tour packaging business – Receptive service operator is a local company that handles the group’s needs while in its location 27 2. Distribution Channels Three Level Distribution Channels 3. Three Level Distribution Channels: Tour operators Travel agencies are the “department stores” of the travel industry Intermediary between tour operator and tourist Tour Products: – A package of two or more tourism services priced together – Four primary forms of tours: Independent Escorted tour Guided tour hosted Tailor-made packages 28 2. Distribution Channels Three Level Distribution Channels 3. Three Level Distribution Channels: Tour operators Low customer loyalty generated for tour operators; incentive-related… Travel agents today have much more to fear from advances in technology that will allow access to operators’ CRSs by the travelling public. This is a reality in the USA and Western Europe Such access lets customers compare the availability and price of travel products in real time… 29 123 2. Distribution Channels Three Level Distribution Channels 30 2. Distribution Channels Three Level Distribution Channels 31 2. Distribution Channels Three Level Distribution Channels “The beneficiaries are Ryanair, easyJet and Airbnb, with all of their customers booking online. The losers are package holiday companies shackled to expensive high street chains. Thomas Cook owned about 560 high street outlets …” 32 126 2. Distribution Channels Three Level Distribution Channels “The traveller used to go about the world to encounter the natives. A function of travel agencies is now to prevent this encounter.” Daniel J. Boorstin, The Image: A guide to pseudo-events in America, Vintage, 1961, p. 91 33 127 2. Distribution Channels Three Level Distribution Channels – Business Travel Agents Three Level Distribution Channels – Business Travel Agents Travel agencies specialized for business travelers and companies Added services like insurance, company rates, etc. 34 2. Distribution Channels Level Comparison 35 125 2. Distribution Channels Tour Operating & Travel Retailing Tour Operator = Producer Travel Agency = Retailer Accommodation, F&B, transport, Sales „on-demand“ attractions,.. no stock – little risk Buying services „in bulk“ Revenues through commission (%) => economies of scale IT-based reservation & sales Horizontal & vertical systems (CRS/GDS) integration 36 2. Distribution Channels Horizontal and Vertical Integration Vertical integration: Purchase/foundation of enterprises of consecutive levels of production Horizontal integration: Purchase/foundation of enterprises of potentially competing enterprises in the same production level/industry 37 2. Distribution Channels Horizontal and Vertical Integration Vertical integration: Examples Disney (Walt Disney Parks & Resorts) Carnival Corporation (Cruise Lines) Started primarily as a theme park operator and Carnival operates several cruise lines and entertainment company, later expanded into owning travel has expanded its operations by offering agencies, cruise lines, and hotels (e.g., Disney Cruise Line, complete holiday packages, including flights, Disney Vacation Club, and Disney resorts). hotel stays before and after cruises, and Allowing to provide a seamless vacation experience shore excursions. from booking to accommodation and entertainment. Benefit: Manage the full journey and offer Benefit: Control all aspects of the vacation experience, better deals to customers by bundling enhancing brand consistency and customer satisfaction. services. 38 2. Distribution Channels Horizontal and Vertical Integration Horizontal integration: Examples Marriott International and Starwood Hotels Merger Airlines In 2016, Marriott International acquired Starwood Hotels & In recent times established airlines founded Resorts, creating the world’s largest hotel chain. Both inexpensive airlines offering a less extensive companies were operating in the same sector (hospitality) service package at lower prices and merged to expand their global footprint. - British Airways  Easy Yet Benefit: The merger increased Marriott’s global - Lufthansa  German Wings presence, expanded its brand portfolio (e.g., Sheraton, - Turkish Airlines  Ajet Westin, St. Regis), and allowed for more significant market control while enhancing loyalty programs. Benefits: Increased Market Share,Route Network Expansion, Cost Efficiency,Better Competitive Position,Synergies and Resource Optimization 39 2. Distribution Channels TUI - Horizontal & Vertical Integration 40 https://www.tuigroup.com/en-en/about-us/about-tui-group/our-business/all-brands-of-the-tui-group 41 42 43 2. Distribution Channels New Business Models: Large Tourism Companies Large tourism companies Example: KUONI tourism company operating various services including: – Charter and scheduled passenger airlines – Package holidays, cruise lines, and hotels in destinations around the world across nine different geographic regions 44 2. Distribution Channels New Business Models: Online Travel Agencies Some OTAs are also called “Aggregators” are search engines or booking agencies that combine information about hotels, transportation providers, tours, etc One of the core focuses and services of OTAs is revenue management with smart pricing strategy: Up to 30% commission Examples: Expedia Group, Inc. include: Expedia.com, Vrbo (previously HomeAway), Hotels.com, Hotwire.com, Orbitz, Travelocity, trivago and CarRentals.com. Booking Holdings (Booking.com, Priceline, Agoda, KAYAK, Rentalcars) Google Flights SkyScanner Online travel marketplaces (AirBnB) 45 2. Distribution Channels New Business Models – Online Travel Agencies Tourism Study Austria 2023: Please indicate up to three booking platforms that you have used most frequently to book your trips so far. 46 138 2. Distribution Channels New Business Models Dynamic Packaging Trip or vacation with in-built flexibility and ‘pick and mix’ functions bookable via an OTA or online tour operator. Tour operator buys block of flights and overnight stays from wholesalers and sells them on to customers. In the 21st century, OTAs and online tour operators have made dynamic packages a core focus of their businesses. Customers making purchases on sites such as Expedia and Booking.com are sourcing flights, accommodation and car rental in real- time. 47 2. Distribution Channels New Business Models: Affiliate Marketing Affiliate-marketing Relationship between a merchant and a publisher can flourish using an affiliate marketing strategy When the merchant set up a travel affiliate program, you hope that consumers will be aware of the great deals you offer, such as cheap flights. Affiliate managers at your company are responsible for recruiting publishers within the travel industry. Establishment a commission rate for your affiliate (e.g. offering a flat rate for every action taken), then the affiliate will write blog posts or banner ads, ensuring their affiliate links are placed on these places in order to drive traffic and increase leads to your company’s website. 48 2. Distribution Channels New Business Models: Retail partnerships Retail partnerships: Diversification into travel retailing by non-tourism businesses to tap into each other’s audience base and resources The two brands aren’t direct competitors, enabling them to give each other a boost in sales and brand awareness. Examples Rewe Austria Touristik www.itsbilla.at Hofer Reisen (eurotours) www.hofer-reisen.at 49 2. Distribution Channels 50 142 Until: 51 III Tourism Market Segments 3. Tourism Market Segments Demand for tourism “Of all noxious animals, the most noxious is a tourist” Reverend Francis Kilvert, Kilvert’s Diary: 1870—1879 53 6 54 7 3. Tourism Market Segments Demand for tourism Maslow’s hierarchy of needs: 55  3. Tourism Market Segments Demand for tourism – The New Reality? Foto queue on Mt. Everest 56 10 3. Tourism Market Segments Demand for tourism – Nationalities 57 11 3. Tourism Market Segments Demand for tourism – Nationalities American Tourists in Europe A group of American tourists stands in front of the Eiffel Tower in Paris, holding guidebooks and maps. They are taking photos and exploring the historic landmarks. Americans are known for their strong demand for cultural and historic experiences in European cities like Paris, Rome, and London. Chinese Tourists in Luxury Shopping Districts Chinese tourists are seen in front of luxury boutiques such as Gucci or Louis Vuitton in a major European shopping district. They carry shopping bags and admire the window displays. Chinese tourists are known for their high demand for luxury goods while traveling abroad, particularly in cities like Paris, Milan, and London. German Tourists at Mediterranean Beaches A family of German tourists relaxes under umbrellas on a sunny Mediterranean beach in Spain. They are sunbathing, swimming, and playing in the sand. Germans are known for their preference for warm-weather beach holidays, particularly in destinations like Spain, Greece, and Italy. 58 3. Tourism Market Segments Demand for tourism – Nationalities Japanese Tourists at UNESCO World Heritage Sites Japanese tourists are gathered at a UNESCO World Heritage site, such as the Colosseum in Rome or Machu Picchu in Peru. They are taking detailed photographs and following a guide. Japanese travelers have a strong interest in cultural and historic landmarks, particularly world- famous heritage sites. British Tourists on Safari in Africa A group of British tourists is in a safari jeep, observing wildlife in an African national park like the Serengeti or Kruger National Park. They have cameras and binoculars, excitedly watching lions and elephants. British tourists have a notable demand for adventure and wildlife tourism, particularly in African safari destinations. 59 11 3. Tourism Market Segments Demand for tourism – Individual Decision Making HOWEVER NO two individuals are alike and differences in attitudes, perceptions, images and motivation have an important influence on travel decisions. It is important to note that: 1. Images are sets of beliefs, ideas and impressions relating to products and destinations (stereotypes; misinformation etc); 2. Attitudes depend on an individual’s perception of the world; 3. Perceptions are mental impressions of examples a destination or travel company 60 3. Tourism Market Segments Demand for tourism 61 13 3. Tourism Market Segments Demand for tourism – Tourist Planned Behaviour Icek Ajzen 1991 Human behavior is the result of three different beliefs: Behavioural beliefs: About the likely consequences of behavior Normative beliefs: About expectations of others Control beliefs: About the factors that may facilitate or impede the adoption of the behavior 62 3. Tourism Market Segments Demand for tourism – Travel Motivations PUSH FACTORS: Encourage potential consumers to travel Desire for escape Exploration Evaluation of self (experiences) Rest and relaxation (R&R) Prestige Regression (return to point of origin) Enhancement of social interaction Novelty seeking Education Health & fitness Adventure Hobbies Do you know other factor specific for Aseri tourists? 63 3. Tourism Market Segments Demand for tourism – Travel Motivations PULL FACTORS: Encourage consumers towards a particular destination: Beaches Recreation facilities Historic sites Budget Cultural resources Undisturbed nature Ease of access Entertainment Education opportunities Cosmopolitan environment Opportunities to increase knowledge / business Opportunities to experience a different culture. 64 3. Tourism Market Segments Tourist classification Plog’s Model (1974) The ‘psychocentric’ type is derived from 'psyche' or 'self-centred' where an individual centres thoughts or concerns on the small problem areas of life. These individuals tend to be conservative in their travel patterns, preferring ‘safe’ destinations and often taking many return trips  Repeaters or Tradition-bound The ‘allocentric’ type derives from the root ‘allo’ meaning ‘varied in form’. These individuals are adventurous and motivated to travel/discover new destinations. They rarely return to the same place twice  Wanderers or Innovators 65 3. Tourism Market Segments Tourist classification Psychocentrics Allocentrics Prefer familiar in travel destinations Prefer non-touristy areas Like commonplace activities at travel Enjoy sense of discovery and delight in new destinations experiences, before others have visited the area Prefer sun ‘n’ fun spots, including considerable Prefer novel and different destinations relaxation Low activitiy levels High activity levels Prefer driving to destinations Prefer flying to destinations Prefer heavy tourist accommodations, family- Tour accommodations should include adequate-to- style restaurants, souvenir shops, cautious good hotels and food, not necessarily modern or chain type hotels Prefer familiar atmosphere, inward-oriented Enjoy meeting and dealing with people from a strange or foreign culture Complete tour packaging, appropriate with Tour arrangements should include basics and allow heavy scheduling of activities freedom and flexibility 66 3. Tourism Market Segments Tourist classification Plog’s Model (1974) 67 3. Tourism Market Segments Segmenting the Tourism Market “You can’t please all the people all the time!” is the underlying logic of market segmentation. Market segmentation is the process of dividing a large heterogeneous market into two or more smaller homogenous market segments; consumers with similar needs. The Segmentation Process: 1. Select segmentation approach 2. Create a detailed profile of segments 3. Forecast market potential of each segment 4. Estimate the likely market share of each segment 5. Decide which segment or segments to target and design appropriate marketing mix. 68 3. Tourism Market Segments Segmentation Rational Is there a cost-effective limit/rationale for segmentation? Five factors to consider Can the segment be easily identified and measured in terms of purchasing power and size? Is the segment large enough to be potentially profitable? Can a segment be reached effectively through advertising and promotion? Is the segment interested in the service offered? Is the segment likely to grow or shrink in the long term? 69 3. Tourism Market Segments Select Segmentation Approach A. Geographic variables – Continent, country and state or county B. Demographic variables – Age, gender, occupation and income C. Psychographic variables – Personality traits, attitudes to travel, beliefs D. Behavioural variables – Frequent purchaser? Heavy user? 70 3. Tourism Market Segments Select Segmentation Approach - Geographic Geographic Segmentation – Grouping potential tourism customers based on their location – Oldest and simplest basis for market segmentation – Group by nation, region, state/province, city – Common for tourism suppliers to market to a limited region: time and money involved in travelling are often a factor in travel decision making. Demographic Segmentation Grouping potential tourism customers based on objective characteristics Most popular basis of segmentation Demographic information routinely collected and widely available Collected by organizations such as Statistics Canada or U.S. Bureau of Census. 71 3. Tourism Market Segments Select Segmentation Approach - Geographic Psychographic segmentation: – Grouping potential customers on their lifestyle and personality – Lifestyle is the way people live, identified by their activities, interests and opinions – Plog’s model is pyschographic-based – Example: Family Getaway Traveler, Adventurous/Education Traveler, Romantics. Behavioural / Product-related segmentation Direct form of segmentation: Grouped based on their product-specific wants Can be grouped based on benefits sought Can be grouped based on the amount of use Can be grouped based on brand loyalty Leisure vs. Business Traveler is use of product-related segmentation. 72 3. Tourism Market Segments Specialized Segments: Business & Professional Travelers – Bread and butter of the industry because of price and seasonal fluctuations less common than with leisure travelers – Travel tends to be inelastic – Not as price sensitive as leisure travelers – Globalization has meant an increase in international business travel – Third largest expense for enterprises – Massively impacted by COVID-19 though 73 3. Tourism Market Segments Specialized Segments: Business & Professional Travelers  Led by the growth in world trade  Per capita revenue from business travellers exceeds that of leisure travellers  Meetings, incentive, conference and exhibitions (MICE) stimulate business travel 74 3. Tourism Market Segments Specialized Segments: Single Travelers – A person who lives alone and travels with or without a companion – All shapes and sizes – Many social trends have increased number of singles – Single supplement makes traveling without companion costly (?) – www.singlesholidays.com 75 3. Tourism Market Segments Specialized Segments: Mature Travelers and 3rd age Group Big potential market for tourism is age 65 + The largest and fastest growing age group in industrialized countries Spend more than younger travellers and account for 80% of all commercial vacation travel Wealthier and have more free time than other groups Cruise vacations, casinos, long trips, package tours, less interested in nightlife, value excellent food Least likely to use internet – travel agencies brick and mortar 76 3. Tourism Market Segments Specialized Segments: Special Interest Travelers – Travel in off-season periods providing revenue when businesses need it most – Can be divided into three segments; adventure, ecotourism, and sport tourism – Travel Industries Association of America estimates that nearly 40% of U.S. adults are sports event travelers. www.smokiesguide.com 77 Thank your for the attention Are there any questions? Prof. (FH) DI Dr. Markus W. Eitle, M.Sc. Institute Marketing & Wine Business Department of Business IMC Krems University of Applied Sciences Office Campus, Trakt U 3500 Krems, Austria +43 2732 802 153 [email protected]