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The Retail Travel Environment
BTEC National Travel and Tourism
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IntroductionThis session covers the startof a new Unit of Study:
Unit 7: Retail Travel Operations
There are links and overlaps with earlier Units of Study, especially Units 1, 2, 3 and 5.
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The Retail Travel Environment
• A good starting point is ABTA (Association of British Travel Agents).
• ABTA members account for more than 80% of all holidays and travel tickets sold in the UK.
• ABTA’s data shows their members employ in excess of 120,000 people in the UK.
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The Retail Travel Environment
• The three largest firms employ more than 27,000 individuals.
• In the past 20 years, ABTA membership has fallen.
• There are now fewer small independent travel agents.
• The big firms have grown larger, ‘swallowing up’ many of the smaller agencies.
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Recent Industry Data
• As of February 2005, there were 1,787 ABTA members in total.
• Many members have more than one outlet (or office).
• In total, ABTA members have over 6,700 offices.
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Recent Industry Data
• More than 5,700 of these are travel agencies, over 450 are tour operators and almost 550 are dual members (acting as travel agents and tour operators).
• Source: ABTA Statistical Trends accessed from http://www.abtamembers.org/research/abtastatstrends2005.pdf.
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Types of Travel Retailer
There are three types of travel agent:
• multiples • miniples • and independents
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Multiples
• Multiple travel agencies have offices throughout the UK.
• These national, sometimes international travel agency groups include firms such as* TUI * First Choice * MyTravel * Thomas Cook
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Multiples
• Multiples dominate the industry, in terms of proportion of total turnover.
• They are usually dual ABTA members.
• They sell a wide range of holidays and other services such as flight tickets, car hire and hotel rooms.
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Multiples
• Sometimes the multiples actually own the firms which offer these different services.
• When this happens, it is called ‘integration’.
• We will cover this concept in depth later.
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Miniples
• Miniple travel agencies are usually based in regions of the UK.
• Their strengths are local knowledge of their markets and trusted local branding.
• Miniples often offer a simpler range of travel and tourism services than multiples.
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Independents
• Independent travel agencies are usually single travel agencies.
• They often offer a small range of services, which may be highly specialised.
• There is a trend for independents to become part of a consortium.
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Consortia
• ‘Consortia’ is the name for more than one consortium.
• A consortium can negotiate better prices from tour operators.
• It may also be able to share marketing costs.
• This helps independents compete with the multiples.
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Consortia
• Worldchoice is an example of a travel agency consortium.
• In this case, each consortium member is independently owned.
• In 2006, it was estimated that there were 700 independent agents in the Worldchoice consortium.
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Consortia
• In 2006, Worldchoice and two other groups, Global Travel and Advantage formed another consortium, called Triton Travel.
• This is the largest travel agency in the UK, with an estimated 15% share of the UK travel agency market.
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Integration in the Retail Travel Industry
• One of the main trends in the industry is the move towards greater integration.
• This is where firms join together, through takeovers and mergers, to form bigger operations.
• Larger firms can achieve economies of scale.
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Economies of Scale
• These happen where a firm cuts its unit costs by doing things on a larger scale.
• Larger firms sell more; their costs per unit are lower.
• It’s often in a firm’s interests to increase the scale of its operations
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Vertical Integration
• Integration can be either vertical or horizontal.
• Vertical integration is where firms integrate at different levels of the distribution chain.
• If a tour operator buys a travel agency, this is known as forward vertical integration
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Vertical Integration
• In the above case, the tour operator spreads its business towards the customer, down the distribution chain.
• Where a tour operator buys an airline, this is known as backward vertical integration – The tour operator buys its own
supplier, up the distribution chain.
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Horizontal Integration
• Where two travel firms which offer competing services join together, this is known as horizontal integration.
• The aim is still to make economies of scale.
• Advantage Travel is a form of horizontal integration.
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Future Trends
Current conditions in the retail travel industry may persist or change. Some of these trends can be summarised as follows:
• Travel agency business becoming dominated by the multiples.
• Greater concentration of retail outlets in the hands of consortia.
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Future Trends
• New services offered to counter the threat posed by the Internet
• Increased focus on business travel services
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What Next?
Now go to the Activity to take your understanding of the retail travel environment further.