The recent economic crisis that hit the world had significant impact on various sectors across the world. Business environment has been affected politically, economically, socially, technically, environmentally and even legal wise. Together, these factors have affected and changed the environment, in which tourism operates. There is an increase in competition for market share; new legislations are increasingly being formulated by authorities managing tourist facilities like parks and hotels. Equally, people are increasingly becoming aware of the economic value of tourist attraction sites. There has been a readjustment in the operations of the activities of tour operators. In countering such challenges, the review of the existing business policies in the sector and emergence of new opportunities has become inevitable.
A report by The Croatian Tourism Cluster (2003, p. 14) indicates that tourism industry in Europe face no more competition among tour operators themselves than it faces from external competitors such as online channels and suppliers who provide services to tourists in a package. The report notes that there is a continued increase in external competition to operation in tour business than preceding years. For instance, more than 72% of the bookings in Europe were done through the internet in 2008. This, the report cites, was an increase from 66% in 2005 and 54% in 2002. According to this report, various factors have contributed to these shifts in competition. These factors include emergence of new entrants in the business, increased bargaining power from both the tourists and tour operators and availability of substitutes such as local sporting events. This paper is aimed at assessing tour operation model, used in Europe, and discusses key issues in business environment for tour operators.
Key Issues in the Business Environment for Tour Operation Industry
According to Viardot (2011, p.10) business environment for tour operators is a volatile one, as new issues keep emerging every day. He points out technological advancement, political realignment, social change and economic fluctuation as just but some of the challenging issues that tour operation have to deal with everyday. He further notes that a simple stride in technology could make a big difference between two operations in the same environment, all other factors held constant. Notably, this goes a long way in indicating how a simple factor affects the business environment vastly.
On their approach, Gerry, Whittington & Scholes (2011, p. 27) note that human capital, as a social factor, plays an important role in enhancing the business environment through innovative activities. They argue that returns on investment in tour operation and improved production is a factor of human capital input. In their subsequent contribution, they note that tour operators can only invest in human capital as all other factors depend on the quality of manpower that is within the industry. The Croatian Tourism Cluster (2003, p. 24) reports that supply of manpower in tourism industry has been steady as evidenced by the increased number of students who take up tour operation courses in institutions of learning. However, the report cites the need for harmonization of these courses to reflect global taste, as the world has become a global village.
According to Charles, Goeldner & Ritchie (2006, p. 34), political standings impacts on the kind of legislation, formulated to guide the tourism industry. They note that regulation is part of any sector, which cannot be avoided. Furthermore, regulation is a daily activity as laws are overtaken by time and event every day. Notably, Charles, Goeldner & Ritchie (2006, p. 34) say that regulation of tourism industry has the potential of increasing the operation costs for both small and large operators, which may impede growth in the sector. The trio suggests a formation of formalized tourism relationship through memorandum of understanding. This, they argue, will offer opportunities in addressing major regulatory constraints. According to them, regulation of tourism industry cannot be left in the hands of regulators and politicians but experts and tour operators who have first hand information in the sector. This can, thus, enable the operators to reduce on the cost of doing business besides having policies and regulations that favor the growth of the industry.
Coles & Colin (2008, p.31) cite the need to identify and diversify cultural ties in tourism sector to help in inculcating different social habits but at the same time building and retaining the cultural uniqueness in diversified tourist sites. Additionally, Coles & Colin (2008, p.33) underscore the need to build sustainable measures in preserving culture, cultural heritage and nature as a whole. Other areas to be sustained, they note, include the living communities and socioeconomic balance between the fauna and flora in tourist site. Furthermore, Coles & Colin (2008, p.33) note that integration of life qualities, quality of service offered and voluntary participation by every stakeholder has the effect of satisfying legitimate interest at both individual and group level. They add that such can be achieved if the public authorities and industry groups promise to champion the spirit of fair completion, thus, provide a level playing field toward realizing such interests.
Drivers for Change
From the above discussion, major drivers for change in this industry include technology, political stability, economic wellness and socially acquaintance. The Croatian Tourism Cluster (2003, p. 28) reports that the level of innovativeness and the equality services, provided by tour operators, depends on the above drivers. The report suggests that the drivers cannot be left as stand alone as their contribution to the sector is not mutually exclusive, i.e. each driver must be improved to achieve a collective effect across the sector. For instance, technological prowess would be null if there is no political stability within that environment
Opportunities and Threats in Tour Operation
One of the opportunities for tour operators is the availability of enhanced communication tools between the operators and the consumers. Charles, Goeldner & Ritchie (2006, p. 38) note that technology has helped in reducing the cost of operation in the industry. For instance, tour operators are now able to reach their customers through the internet by advertising their products and services. They note that tourism capitalization was close to 3 times bigger in United States than in Europe. They attribute this to a higher penetration of online marketing in the US compared to Europe.
Interestingly, majority of online bookings were done by bigger online travel agencies. Notably, Charles, Goeldner & Ritchie (2006, p. 38) indicate that technology use has led to uptake of a good percentage of market share by online operators. For instance, online operators took 50% of compound annual growth rate, while traditional tour operators recorded a downhill with a compound annual growth rate of -5.3%. Evidently, the power of technology as a tool in enhancing tour operation cannot be overemphasized (The Croatian Tourism Cluster 2003, p. 35)
Similarly, Viardot (2011, p.21) cites the use of technology in beating the challenge of political stability in many areas of operation. For instance, the rapid flow of information through the internet and other communication media helps both the tour operators and their customers to avoid dangerous sites, where there is uprising. He notes that technology also helps in ensuring that both players in the industry are well versed with the new development in regulations and policies to avoid confrontations with public authorities. Furthermore, Viardot (2011, p.21) argues that technology helps in reducing cultural shock to tourists as they already about the culture of the areas they are visiting through the internet.
On their part Gerry, Whittington & Scholes (2011, p. 50) note that a well regulated industry emanating from the partnership between stakeholders and public authorities as an opportunity for tour operators to increase on return for their investment. They argue that this regulation has the impact of ensuring that only qualified people are allowed to offer services, thus, locking out on quirk operators. Furthermore, they note that regulation helps in building the confidence and trust of consumers, thus, increasing the turnover. The trio argues that industry regulation provides an opportunity for industry players to harmonize their services and give value to their customers.
On the other hand, Gerry, Whittington & Scholes (2011, p. 35) cite difficulties in sustainability of both human capital and natural resources as a treat to the industry. They argue that due to climatic changes and global warming, many attraction sites are diminishing very fast. Increase in human population poses a danger of encroaching on resources that support this industry. They further argue that there is insufficient supply of manpower and expertise to match the demand for services. Charles, Goeldner & Ritchie (2006, p. 38) indicate that faster changes in technology increase the cost of investment besides the need for regular training of the available manpower to handle this change.
The Croatian Tourism Cluster (2003, p.12) report cites political instability as a threat as it disrupts the flow of tourists, thus, causing heavy loses to investors in the sector. Political instability impacts on the industry in a negative manner. Coles & Colin (2008, p.38) state that political instability has the effect of reducing the economic powers of countries and individuals, thus, reducing their consumption power. They note that this is a threat to sector growth that need to be addressed exhaustively by stakeholders.
Environmental Competitiveness for the Industry
According to Gerry, Whittington & Scholes (2011, p. 50), the environment competitiveness of tour operator industry is determined by forces within the industry. They identify entrant of new players, changing bargaining powers of both the operators and consumers of services and the availability of substitute services as key determinant of the competitiveness of tour industry. New players in the sector include people who invest in the sector and new public authorities who come up to regulate the industry. The list also includes new mergers and disintegration between the operators themselves, forming new association. Gerry, Whittington & Scholes (2011, p. 50) argue that bargaining powers of both the consumers and tour operators is dependent on economic forces such as the recent economic crisis, which results in the reduction of purchasing powers of individuals. Additionally, the presence of substitutes such as sporting events reduces the number of consumers who may be recorded in this sector.
Similarly, Viardot (2011, p.12) notes that industry growth also depends on the environmental condition. For instance, cost implications, opinion of public, concerning the sector, and the locations of sites for tour. Viardot argues that the sector is very sensitive to small detail in the environment, which makes a slight change to have a significant change in the way consumers view the industry.
Consequently, the above forces make this sector to have a greater chance of making profits. On the other hand, the presence of substitutes, such as sporting activities, tightens up the competition for consumers. However, Coles & Colin (2008, p.39) state that the profitability of tourism industry depends on availability of better services, rather than the absence of substitutes.
From this discussion, it is evident that tour operation all over the world over has great opportunities and challenges that if well addressed could lead to increased revenue to both the government and tour operators. In the modern technological world, for instance, proper use of technology tools can culminate into huge profits in the industry. It is also clear that when tourism sector makes money, the government also stands to benefit. However, this can only be achieved if better business policy and detailed analysis of the industry is done by both players and the government. Such analysis should focus on the pillars that form the backbone of the industry. Finally, the paper has stressed the need for collaborative efforts in stimulating growth in tour operation sector by focusing on opportunities available, which helps to improve the sector.