Yield Management for UK based Tour Operators
Yield Management is a science that still needs discovering. The study of Yield Management has been mainly conducted with commercial purposes of integration in hotels and airlines. Not much has been written about the implementation of yield management on tour operators. This work discusses the application of yield management on touroperators and in particular, directly applied to the prices of packaged holidays.
The scientific method is the study of a solution to an encountered problem by conducting background research. The biggest issue that tour operators are facing is the drop in price competitiveness to airlines and hotels which have implemented Yield Management and are advertising on the internet, where independentbookings are now much easier, leading to a trend of tourists’ self-made packages, known as quasi-packages, which are purchased in advance and normally cheaper than tour operators can offer.
The literature review aims to recognize the materials that have been written about yield management for tour operators so far, the role of tour operators in the UK Economy, the importance of Yield Management on theAirline and Hotel Industry as well as all of the ingredients that Tour Operators require to Implement Yield Management. The methodology section explains why the interviews were the chosen method, how the sample was chosen and which obstacles were overcome in order to collect relevant qualitative data. Following are the results where the findings are stated, the discussion which compares theliterature with the interviews and the conclusion, which clarifies if the hypotheses is viable or not.
Eric Laws: An academic claiming yield management for tour operators.
The number of existent literature on yield management for tour operators is not vast and the few texts that are available are not up to date.
Eric Laws, who is an academic and a writer, has suggested theimplementation of yield Management on Tour Operators for the first time. The book ‘Managing Packaged Tourism’ (1997) criticizes the marketing led prices that tour operators use, stating that they are leading to financial failures, and that whether tour operators are obligated to cancel flights and rearrange bookings or open late discounts to avoid losses on unsold capacity, the image of tour operatorsis being affected anyway as:
a) Tourists that have to alter their route are likely to never book through the same operator again.
b) Tourists that are taken abroad on last minute deals are tourists on lower incomes who spend less and tend to behave on an impropriate manner at the destinations.
In the book ‘Yield Management, strategies for the service industries’ (2000), Lawsdiscusses the perspectives of late discounts on the tour operations industry, he recognizes that trends are changing, and tour operators are losing in delaying so much their discounts. Laws mentions the basis of yield management as creating different price thresholds and applying them according to assumptions based on the market buying behavior. He defends that bigger discounts should be given in theearly shoulder season and premium prices should be attributed to the peak season, which is the main principle of revenue management, trying to tackle seasonality with pricing.
Erik Laws also comments on the ability that major Tour Operators like Thomson and AirTours have to destabilize the market adjusting their capacity according to the demand that exists, while smaller tour operatorsoverestimate demand in their forecasts and make irrecoverable losses. That is an example of a frequent issue of capacity management. He does refer to some of the principles of revenue and capacity management but he does not attempt to explain in depth the process that tour operators have to undertake in order to implement yield management.
Yield Management, Revenue Management and Capacity Management....
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