• Late 2010: Forecasting of passenger numbers and decisions on destinations and suppliers to include, based on customer feedback and sales data, consumer trends and political, economic, social and technological influences. Foreign currency requirements and purchases are planned.
• January/February 2011: Contractors negotiate allocations with destination and transit route suppliers. Auditing of properties for health and safety compliance.
• May/April 2011: Preparation of promotional material – brochures and website for consumers and reservations and sales material for travel agencies. Commission rates negotiated with travel agencies. Calculation of final selling prices. Development of sales promotions to encourage early bookings.
• May–September 2011: Programme launch to travel agencies and/or the public using advertising in selected print media, television, radio and online. Promotional materials and product information supplied to travel agencies.
• May 2011–October 2012: Bookings and deposits received from agencies and direct customers. Sales forecasts are reviewed and adjustments made, e.g. increasing or reducing allocations and reducing prices if necessary.
• Autumn 2011 and Spring 2012: Recruitment and training of staff for each destination – team leaders, resort representatives, childcare providers, entertainers, and office staff.
• March–August 2012: Issuing of final invoices to travel agencies or direct customers, receiving payments and issuing travel documents.
• May–October 2012: Operations department finalises arrangements for each customer; destination staff arrange transfers and excursions. Customers are welcomed on arrival by overseas staff and given information about the destination and excursions.
• May–October 2012: Collection and analysis of customers’ quality control questionnaires.
• May–October 2012: Finance department pays suppliers.

XL Leisure Group was the UK’s third largest travel organiser, carrying 2.3 million passengers in 2007 and employing 1,700 staff with subsidiaries in France and Germany.

The UK company consisted of:

• Supplier: XL Airways – flying to 50 destinations from three UK Airports and with a fleet of 21 planes.
• Wholesalers: Freedom Flights and Medlife Hotels – seat-only to trade; bed bank to trade and public.
• Tour operators: Aspire Holidays, Travel City Direct, Kosmar Holidays, Really Great Holiday Company, XL Holidays, Travel City International.
• Retail: XL.com.

The company was affected badly in 2007 by oil price inflation, the credit crunch and an unsuccessful attempt to refinance, and in September 2008 it ceased trading. Flights were cancelled and planes grounded, leaving 90,000 customers overseas and 240,000 unfulfilled advance bookings.

The majority of customers were repatriated or refunded by the CAA, but customers who had booked seats on XL Airways direct through the website or hotels through Medlife were not protected and could only claim refunds if they had paid using a credit card.

The high-profile collapse has prompted the EC to review travel consumer protection. XL France and XL Germany were sold and are still operating.

Sources: Travel Trade Gazette (2008), Travel Weekly (2008), CAA (2009)

Uniglobe Travel International is a global travel management company (TMC) franchisor specialising in travel services for small to mid-sized businesses and vacation travellers. Its first location opened in 1981 in Canada and by 2011 it had locations in more than 50 countries across North and South America, Europe, Asia, Australia, the Middle East and Africa, with an annual sales volume of $4 billion.

Uniglobe operates on a franchise model whereby each agency is individually owned and operated. The locations have an agreement with Uniglobe head office that permits them to operate under the Uniglobe brand name and take advantage of the various programmes that the franchisor offers. Such programmes include support in corporate sales, marketing, and technology, along with access to negotiated supplier rates.

Through local ownership, Uniglobe locations provide their clients with better service and accountability, while having access to the tools, programmes and volume benefits of a larger organisation. The franchisees are encouraged to network with other Uniglobe locations to provide global coverage for their accounts and to learn best practices from their colleagues elsewhere in the world.

Source: Uniglobe (2011)

Thomas Cook is a good example of a horizontally and vertically integrated intermediary. As a tour operator it originally forward integrated by establishing a travel agency brand and backward integrated by establishing an airline. Within each individual sector, Thomas Cook is horizontally integrated and owns several companies that offer the same type of product to distinct market segments.

The figure shows that rival companies may also work with companies within the Thomas Cook Group to secure airline seats, accommodation or sales outlets. Competitors targeting the same markets as Thomas Cook are considerably disadvantaged if they are not also vertically integrated as they lack its buying and marketing power.

Horizontal and vertical integration in Thomas Cook UK

Source: Thomas Cook (2009)

Since the 1980s the UK travel organiser sector has been increasingly dominated by fewer and fewer companies. Throughout the 1990s and until 2007, Thomas Cook was one of four travel organisers dominating the UK market. In 2007 this reduced to two as Thomas Cook merged with one of its competitors, MyTravel, and TUI Travel merged with First Choice.

Thomas Cook’s main competitor is now TUI Travel which is also similarly vertically and horizontally integrated. Together they dominate the European outbound leisure travel market with expansion ambitions into emerging generating regions.

In 1993 new EU legislation came into force that had serious implications for the operator sector.

The purpose of the legislation was to create consistency of regulation regarding operators across all EU member states. At the time leisure package travel was notorious for its high levels of complaints from consumers about the quality of the components of holidays; often the accommodation did not meet the standards that customers had expected. In addition, a number of high profile tour operator insolvencies left customers stranded in destinations or having lost the money they had paid in advance. The sector had been subject to national laws concerning accuracy of descriptions and consumer protection and in many countries the sector was self-regulated through a trade association that prescribed codes of conduct and financial protection for its members. However, this was inconsistent across the EU.

The new EU legislation ensured that all EU consumers of package travel would benefit from the same standard of legislation.

The legislation required improved levels of regulation concerning a number of operator practices and financial protection for consumers and, crucially, held the directors of operator companies criminally liable for any breaches.

The Directive specified operators as ‘tour organisers’ and this definition was to include leisure operators selling domestic or international travel that lasted for more than 24 hours, and those who sold any two of transport, accommodation and other services, at an inclusive price.

Some regulations became subject to criminal law:

• The accuracy of information provided to the consumer about the product and requirements for travel such as passports, visas, health protection and travel insurance.
• Financial protection for consumers’ payments in case of insolvency.

In addition, the Directive formalised the liability of the tour organiser who became liable for all formal aspects of the trip, regardless of whether these were carried out by the operator’s employees or a third party. A breach of the regulations could incur a financial penalty and serious breaches, that led to the death or injury of consumers during the trip, could result in the imprisonment of directors of the operator.

The formalisation of liability has been very important in refining operator practices in terms of compliance procedures and information control:

• Operators check suppliers’ documents during contracting to confirm the validity of licenses, fire and hygiene certificates and public liability insurance.
• Operators contractually require suppliers to provide accommodation, food and services that comply with the operator’s description of them to the consumer.
• Information control systems to ensure information about suppliers gathered in one department are shared with other relevant departments and staff must clearly understand the operators’ obligations.
• Complaints are monitored to identify information that may have implications for safety standards.
• Large operators conduct rigorous health and safety audits of suppliers to ensure compliance with local laws and their own minimum standards.

Sources: Gale (2006), Yale (1995)

Reflective Questions

1. What are the cost implications for operators of the EU legislation?
2. How are small operators likely to be disadvantaged by the legislation?