Tour operators are organizations or business entities which provide travel services to tourists and holidaymakers and travel services for other reasons not related to tourism. Holidays are used by various individuals to take breaks from normal career duties. There are varied numbers of products provided by the tour operators. These products range from using chartered planes for flights by tourists, then the tourists are relocated to various hotels or restaurants from airports; they then get local services from local tour operators. There are tour operators who have cut their own niches in the tourism industry (Beaver, 2005). They may decide to have specializations in skiing, boat riding, destinations, and sometimes each operator may also specialize in a number of combinations of various activities and services. The establishment of tour operations was prompted by the technicalities in arranging for tour travels in faraway regions of interest; this was also coupled with issues of currency, language, communications, and organization of accommodation problems. Some operators have a specialization in commercial travels alone while others have departments dealing with business or commercial travels1. The internet has played a crucial role in helping tourists to organize their travels by themselves; however, the role of tour operators still remains crucial for those who are not capable of doing the arrangements on their own. The tour operators always sum up all the requirements of a paid holiday and present them to consumers as packaged products2. Tour operators may sell their products directly to the customers or they can subcontract the services to travel agents (Beaver, 2005).
The Relationship between Tour Operators and Their Suppliers
The products sold to consumers by tour operators are known as package tours. Because of bulk purchases, the products are offered cheaply to the customers. The operators with all these goods and services choose to ignore the suppliers and instead deal directly with the consumers (Wohlforth, 2010). The tour operators and their suppliers work in chains. Holiday packages mainly comprise goods and services; these are provided by chains of suppliers who are normally contracted or subcontracted. These suppliers are organizations, companies, and agents who work with tour operators through clear policies. As much as tour operators and their suppliers have the responsibility of providing their customers with high-quality goods and services, they also have the obligation of participating in the process of mitigating the change in climate3. The travel industry has been identified as one of the contributors to changes in climate and therefore is expected to implement certain strategies throughout their operations to mitigate the problem. The tour operators are part of the wider travel and tourism industry and the roles they nowadays play widens beyond the business of offering wholesale services. Apart from the positive impacts, the activities of the tour operators have adverse effects on the environment; these effects include improper waste disposal, contamination of soil and water, destruction of wildlife habitats, excluding local communities from certain areas, poor disposal of wastewater and air pollution through emissions from transports. A small number of these tour operators, due to vertical and horizontal integration, have considerable market power and they are capable of exacting influence on supply and demand of goods and services in the market4 (Doganis 2002). Due to the market power, they are expected to be at the forefront of the fight against climate change. The control of the environments and social impacts of the goods and services is not within the scope of tour operators’ activities. However, the customers of these products still anticipate that the companies from which they purchase the products guarantee the sustainability of social surroundings and the environment; even so, by virtue of the requirements of any company, the tour operators still have the responsibility of meeting these expectations. To achieve such a responsibility, the tour operators have a policy of working in collaboration with their suppliers to ensure the environmental and social sustainability demands of the consumers are met. This collaboration has many benefits to the tour operators; it helps them to reduce financial costs in terms of operations through increased efficiency and reduction in the generation of waste. This can also bring in more revenue due to sustained social and environmental factors; the sustainability practices attract new customers and repeat business transactions. The result is increased revenues and the value of shares of the tour operator companies (Peeters, 2007).
Due to sustainability of environment and social issues, which are made possible through collaboration with suppliers of goods and services, the tour operators are able to satisfy their customers hence able to reinforce its brand value, increase customer loyalty, increase the opportunity to market and publicize its products and also protect the social, economic, and environmental welfare of the local communities. Through partnership with their suppliers the tour operators are able to enhance their performance, increase the quality of their products, earn the respect and loyalty of the customers and the local communities, and also evade conflicts with the government agencies. There is a methodology used in integrating the sustainability issues into the chains of suppliers (Tour Operators Initiatives, 2010). This methodology5 is anchored on the experience the members have in working in collaboration with their suppliers to enhance the sustainability routines of the supply chains. In the process the tour operators seek to integrate social, economic, and environmental sustainability measures in the selection of suppliers and the contracts they have with the chosen suppliers6. There are crucial components of the methodology used:
- The tour operators put in place the policy systems of sustainable supply chain and administration. These systems lay down clear targets and interventions for social, economic, and environmental performance. When the systems are anchored on already existing processes running internally the cost of execution reduces and makes it easy for the integration of the operations within the company. The policy of the supply chain is sustained through action plan to improve the social, economic and environmental concerns and assimilate the policy into the management system of the company. The tour operators also ensure the sustainability by establishing a basis on which suppliers of tour services are assessed to determine their current strengths and weaknesses.
- The tour operators also assist the suppliers to attain the sustainability objectives. Since the tour operators need the services of suppliers to achieve the social and environmental sustainability, they are forced to help the suppliers to achieve the objectives of ensuring favorable environments to the consumers of their products. By helping the suppliers, the tour operator companies are able to access and avail the information and other technologies which cannot be accessed by small scale suppliers. Tour operators deal with numerous suppliers; this enables them to gauge the best practices and make it possible and easy the sharing of such practices to other suppliers.
- The tour operators integrate the criteria used in establishing sustainability into the suppliers’ contracts. The integration of sustainability criteria into suppliers’ contracts helps the tour operator to put certain minimum standards required for the performance of all the suppliers in the chain (Tour Operators Initiatives, 2010).
The tour operator companies always provide a lot of services to their clients. These services may include hotel accommodation, security, and transport to various sites. They may also come up with other packages to offer to their clients. The companies in most cases are not able to individually provide all these services; they outsource or subcontract the product provisions from other companies. For instance, for security matters the tour operators may subcontract7 certain security firms, and whenever necessary they may contract transport companies to meet the high demand of their clients. In other words, tour operators provide certain products through well established links with particularly selected suppliers. The operators may therefore include as part of their products the goods and services they source from other existing firms. The engagement of tour operators with their suppliers varies according to the level of demand of given products by the consumers. This means the tour operators may deal more with suppliers dealing in products highly demanded than the rest. Other suppliers whose products are in low demand may not get much of the tour operators’ attention.
The chain of suppliers contains many different groups. These groups includes but not limited to hotels and restaurants, transport, and security firms. These groups have their own individual goals and business objectives which may not be consistent with those of the tour operators. Each member of the supply chain has its own business strategies, interest, and operation procedures8. This scenario has the effect of creating conflict in the whole process of providing goods and services to the customers. The channel suppliers also compete amongst themselves. The competition is strengthened by the fact that consumers pay their total holiday budget to the tour operators; the tour operators therefore deal individually with the suppliers. The suppliers will compete to get more attention from the operators so as to get as big profit margins as possible from the consumer budget. Other sources of conflicts between the tour operators and suppliers include operational issues where different individual suppliers within the supply chain may fail to meet their business obligations, especially as regards the sustainability of social and environmental issues and with the supply chains some members may run bankrupt, be taken over or some may get into a merger. This type of conflict is said to emerge due to partners’ financial security. But then, since the suppliers get their revenues from the tour operators, they may be worried about the liquidity of tour operator firms in the event they go bankrupt.
In some countries the tour operators get paid even before the arrival of their clients, but their policies require that the suppliers be paid some days after the customers have gone back to their homelands, coupled with this, is the claim by some suppliers that the tour operators demand they provide high quality goods and services which to them is outrageous given that their pays are delayed for long by the operators. Generally, the challenges that arise between the tour operators and their suppliers may also arise from demographic changes, unpredictable economic factors and swing in patterns of travels. Solving these challenges entails high levels of adroitness and support to collect resources more effectually. This requires new partnerships and innovations in order to respond to tightening competition in the industry in order to grasp at the global prospects9. The tourist operators and their suppliers may need to negotiate with the governments about the regulation policies. Due to different and varied operational strategies of the suppliers and the tour operators, a policy by the government to regulate either of the two may affect the legal or efficient operations of the other. For instance, increased taxes on suppliers may make the suppliers’ products relatively expensive to the tour operators. This may force the operators to seek alternatively cheaper means. In the case there are no available alternatives, they may also be forced to increase prices of their products and pass to the customers.
With the advent of information and internet technologies, the operations between the tour operators and their suppliers have changed variedly. According to Richer (2010) the technology of travel consultancy has witnessed an extensive increase in the number of suppliers who engage in providing their services through e-commerce. There are many technology suppliers with the aim of getting operators to sell their products cheaply through online strategies. The suppliers use most modern development languages in constructing clear-cut and reasonable inclusive systems reservation which are tailor made for online sales by the tour operators (Zhou, 2004). Selling products online is no longer expensive; this is coupled with the fact that some suppliers offer the tour operators the use of their systems totally free for a given number of reservations. The online system has enabled the possibility of electronic connections to third party suppliers and bed banks in various locations within a major destination. This has the advantage of real time accessibility and reservation. The tour operators are also offered with the opportunity to sell to customers more than they have in stock. Despite all the advantages that come with this new system, it is a challenge for small scale tour operators to compete favorably with the large scale operators. Unlike small scale operators, the large scale tour operators are able to invest in new technologies hence enabling them to operate at low cost (Zhou, 2004).
The number of suppliers in the tourism industry is greatly determined by the number of tour operators. This is due to the fact that it is the tour operators that deal directly with the tourists10. They receive payments, arrange for their travels and accommodations the whole periods of their holidays. The number of clients they get determines the number of suppliers they bring into their supplier chains. When they receive high number of customers with demands higher than their suppliers can provide they may decide to bring in more suppliers to meet the customer needs while when the numbers go down then they may reduce the number of suppliers or just reduce the amount of products provided by the suppliers already in their chains. It is also highly likely that the entry of new tour operators with lead to entry of new suppliers in the supply chain of tourism industry. It can be argued that the balance between the tour operators is influenced by the market forces, where the incentives exist; new tour operators will join the tourism industry and therefore attract more suppliers. The incentives11 may be due to increased number of tourists and customers seeking holidays. Besides, a well developed tourism sector will attract more tourists thereby giving a boom to tour operators and their suppliers. On the other hand, disincentives may lead the tour operators in moving out of the market or relocating to other favorable markets. This also has a corresponding effect on the number of suppliers in the industry (Littlefield, 1988).
The tour operators are the business entities who offer tour packages to their customers. The components of the travel packages include accommodation, travel, security, and site seeing. In meeting the demands of their customers, the tour operators work closely with suppliers. The operators may include amongst their services the products they do not actually have; they therefore subcontract the production of those services to other firms, organizations, and institutions. Examples of suppliers to tour operators include but not limited to hotels, security firms and/or transport firms.
It is important to note that the tour operators in collaboration with their suppliers are not only focused on satisfaction of customers and increasing their profit margins, they are also responsible in implementing strategies which reduce climate change (Peeters, 2007). The tour operators come with clear set policies to be followed by their suppliers so as to ensure sustainability of social and environmental issues. The involvement of tour operators in combating climate change is due to the fact that they also contribute to it through disposal of solid and liquid waste, pollution, and exclusion of native communities in areas of tourism interests.
The tour operators and their suppliers face both internal and external challenges. Some of the internal challenges arise due to the fact that their operations and strategies of maximizing their profit margins differ. The external challenges are due to government regulations, change in demographics and travels in the tourism industry, and the economic factors.
Beaver, A, ‘A dictionary of travel and tourism terminology’, Edition 2, revised, 2005, PP45-107.
Doganis, R, ‘Flying off course: the economics of international airlines’, Edition 3, illustrated, Routledge, 2002, PP159-257.
Littlefield, E,J, ‘Marketing and economic development: issues and opinions : proceedings of the Second International Conference on Marketing and Development, Karl Marx University of Economic Sciences, Budapest, Hungary, 1988’, Dept. of Marketing, Virginia Tech, 1988, PP 89-117.
Peeters, P, ‘Tourism and climate change mitigation: methods, greenhouse gas reductions and policies’, NHTV Breda, 2007, PP 1-198.
Tour Operators Initiatives, ‘Integrating sustainability into the tour operators’ supply chain’, Sustainable Tourism Development, 2010. Web.
Wohlforth, A, ‘Frommer’s Alaska 2010’, Frommer’s Complete Series, 2010, PP88-347.
Zhou, Z, ‘E-commerce and information technology in hospitality and tourism’, Cengage Learning, 2004, PP 26-78.
1 – There are tour operators who exclusively outsource or subcontract transport firms to provide travel services to their clients.
2 – The requirements of a paid holiday are provided to the consumers in the form of tour packages. They mostly include accommodation, travel, and excursions.
3 – Climate change is a phenomenon that arises from human activities which inject greenhouse gases into the atmosphere thereby coursing global warming. tour operators are considered to contribute through emission from their transport activities.
4 – The market power and influence of tour operators are restricted to the tourism industry and note the whole market of goods and services as described by the total market forces.
5 – Methodology comprises methods used by the tour operators to ensure environmental and social sustainability.
6 – Sustainability measures are strategies put in place to prevent excessive degradation of environment and interference with the social lifestyles in the areas of operations.
7 – Subcontracting by the tour operators is a situation in which the demand of certain goods and services overwhelms what the operators already have hence they invite other firms to provide to the customers indirectly through the tour operators. The customers always know the services are integrated within the products of the tour operators and therefore offered wholesomely.
8 – Due to the fact that the members of the supply chain compete to maximize their profit margins, they employ different strategies which will give them an edge over the other. These strategies are never the same yet they serve and deal exactly with one client-the tour operator.
9 – The global competitions are due to increased tourism activities which have led to increase in high quality goods and services providing tour operators. This has tightened the competition amongst the players in the industry worldwide.
10 – Tour operators are ones that mostly deal directly with the tourists due to their abilities to combine all the requirements of holidays and present them wholesomely to their clients at consolidated prices.
11 – Incentives are the beneficial factors that attract new entrants into the tourism industry or any other sector of the economy.