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An Essay on Travel Industry

By Dottorkim Dec 08, 2013 10224 Words
Catolica Lisbon School of Business and Economics - International Industry Analysis TRAVEL INDUSTRY



UPS 55 MAERSK 55 MEDITERRANEAN SHIPPING COMPANY 55 FEDEX 56 HAPAG-LLOYD 56 6.2) AIRLINE COMPANIES 56 6.3) NAVAL COMPANIES 57 Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Travel is the movement of people between geographical locations. Travel can also include relatively short stays between successive movements. The travel industry is one of the largest and most expanding industries in the world. This is mainly caused by an increase in the interaction between different countries, and the development of commerce and investments across frontiers. The fact that we experience a larger degree of social and cultural bonding between people in different nations, a considerable increase in prosperity, and a growing financial freedom around the world, contribute to the development of the travel industry as well. The travellers demand composite products,

which are usually made up of various
products and services from different
enterprises. The components that constitute
the total products are, among other things,
determined by the purpose of the journey and
other requests and desires that travellers may
have. Food and beverages, overnight
accommodation and transport, are some of
the obvious ingredients that constitute a
journey. The travel industry is not a plain
concept in an economic and commercial context. It is rather used as a generic term that describes those industries where considerable parts of the production are intended for travellers.

It includes:
• Overnight accommodation: Hotel, camping, etc.
• Service: Restaurant, bar, canteen and catering.
• Transport: Buss, taxi, metro, airplane, domestic and international ferries, cruise. • Arrangement: Travel agency, tour operator, car rental agency. • Adventure: Amusement park, circus, sports, entertainment, leisure activities, etc. Worldwide, $3.6 trillion was spent on travel in 1996. By 2006, the WTTC (World Travel and Tourism Council) estimates that expenditure on travel will have risen to $7.1 trillion, nearly doubling within 10 years. In 1999, travel and tourism generated, directly and indirectly, across the global economy: 11% of GDP, 200 million jobs, and 8% of total employment. Further, WTTC expects 5.5 million new jobs per year until 2010. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

An increasing number of destinations have opened up and invested in tourism, turning tourism into a key driver of socio-economic progress through export revenues, the creation of jobs and enterprises, and infrastructure development. Over the past six decades, tourism experienced continued expansion and diversification, becoming one of the largest and fastest-growing economic sectors in the world. Many new destinations have emerged apart from the traditional favourites of Europe and North America. Despite occasional shocks, international tourist arrivals have shown virtually uninterrupted growth – from 25 million in 1950, to 278 million in 1980, 528 million in 1995, and 1,035 million in 2012. With an additional 39 million international tourists, up from 996 million in 2011, international tourist arrivals surpassed 1 billion (1.035 billion) for the first time in history in 2012. International tourist arrivals grew by 4% in 2012 to reach 1.035 billion, according to the latest UNWTO World Tourism Barometer. Emerging economies (+4.1%) regained the lead over advanced economies (+3.6%), with Asia and the Pacific showing the strongest results. Growth is expected to continue in 2013 only slightly below the 2012 level (+3% to +4%) and in line with UNWTO long term forecast. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

By region, Asia and the Pacific (+7%) was the best performer, while by sub-region South-East Asia, North Africa (both at +9%) and Central and Eastern Europe (+8%) topped the ranking. According to Tourism Towards 2030, the number of international tourist arrivals worldwide is expected to increase by an average 3.3% a year over the period 2010 to 2030. Over time, the rate of growth will gradually slow, from 3.8% in 2012 to 2.9% in 2030, but on top of growing base numbers. In absolute numbers, international tourist arrivals will increase by some 43 million a year, compared with an average increase of 28 million a year during the period 1995 to 2010. At the projected pace of growth, international tourist arrivals worldwide are expected to reach 1.4 billion by 2020 and 1.8 billion by the year 2030. International tourist arrivals in the emerging economy destinations of Asia, Latin America, Central and Eastern Europe, Eastern Mediterranean Europe, the Middle East and Africa will grow at double the pace (+4.4% a year) of that in advanced economy destinations (+2.2% a year). As a result, arrivals in emerging economies are expected to exceed those in advanced economies by 2015. In 2030, 57% of international arrivals will be in emerging economy destinations (versus 30% in 1980) and 43% in advanced economy destinations (versus 70% in 1980). Regionally, the strongest growth will be seen in Asia and the Pacific, where arrivals are forecast to increase by 331 million to reach 535 million in 2030 (+4.9% per year). The Middle East and Africa are also expected to more than double their arrivals in this period, from 61 million to 149 million and from 50 million to 134 million respectively. Europe (from 475 million to 744 million) and the Americas (from 150 million to 248 million) will grow comparatively more slowly. Thanks to their faster growth, the global market shares of Asia and the Pacific (to 30% in 2030, up from 22% in 2010), the Middle East (to 8%, from 6%) and Africa (to 7%, from 5%) will all increase. As a result, Europe (to 41%, from 51%) and the Americas (to 14%, from 16%) will experience a further decline in their share of international tourism, mostly because of the slower growth of comparatively mature destinations in North America, Northern Europe and Western Europe. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 
Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 
International tourist arrivals (overnight visitors) worldwide exceeded the 1 billion mark for the first time ever in 2012, with 1,035 million tourists crossing borders, up from 995 million in 2011. The global travel and tourism market was affected by a number of negative factors in 2005, including terrorism, natural disasters, health scares, oil price rise, exchange rate fluctuations, and economic and political uncertainty. Despite these influences, international tourist arrivals worldwide beat all expectations, exceeding 800 million for the first time and generating $681.5bn (£370bn) in international tourism receipts. The numbers suggest that global tourism is becoming increasingly resilient to turbulent, international conditions. Although the 5.5% growth in arrivals in 2005 was more moderate than in 2004, it was still 1.4 percentage points above the long-term average growth rate of 4.1%. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

When ranking the world’s top international tourism destinations, it is preferable to take more than a single indicator into account. Ranked according to the two key tourism indicators (international tourist arrivals and international tourism receipts) it is interesting to note that 7 of the top 10 destinations appear on both lists, despite showing marked differences in terms of the type of tourists they attract, as well as their average length of stay and their spending per trip and per night. In the case of international tourism receipts, changes not only reflect relative performance, but also (to a considerable extent) exchange rate fluctuations between national currencies and the US dollar. COUNTRIES

France continues to be the world's most visited destination. Of the ten leading countries by international tourist arrivals, Turkey reported the highest percentage increase in numbers, with a 20.8% rise, followed by China, where a 12% rise brought Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

the total number of visitors to 57.7 million. Also the number of tourists arriving in Italy had a good increase: after a period of continuous falling from 2003 until 2006 (down by 1.6% in the first year and 7.8% later) now its total number increased by 10% reaching 46.6 million. Russia and Malaysia make their first appearance in this top 10, showing the growing importance of the eastern part of the world in travelling. CITIES

Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 
Inland Transportation
Two major modes are composing the land transport system, roads and railways. Obviously, roads were established first, as rail technology only became available by the 18th century, in the midst on the industrial revolution. Historical considerations are important in assessing the structure of current land transportation networks. Modern roads tend to follow the structure established by previous roads, as it was the case for the modern European road network (especially in Italy, France and Britain) that follows the structure established by the Roman road network centuries before. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 
Road infrastructures are large consumers of space with the lowest level of physical constraints among transportation modes. However, physiographical constraints are significant in road construction with substantial additional costs to overcome features such as rivers or rugged terrain. While historically road transportation was developed to support non-motorized forms of transportation (walking, domestication of animals and cycling at the end of the 19th century), it is motorization that has shaped the most its development since the beginning of the 20th century. Road transportation has an average operational flexibility as vehicles can serve several purposes but are rarely able to move outside roads. Road transport systems have high maintenance costs, both for the vehicles and infrastructures. They are mainly linked to light industries where rapid movements of freight in small batches are the norm. Yet, with containerization, road transportation has become a crucial link in freight distribution. (Roman Road Network, 200 AD)

Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 
Railways are composed of a traced path on which vehicles are bound. They have an average level of physical constrains linked to the types of locomotives and a low gradient is required, particularly for freight. Heavy industries are traditionally linked with rail transport systems, although containerization has improved the flexibility of rail transportation by linking it with road and maritime modes. Rail is by far the land transportation mode offering the highest capacity with 23,000 tons fully loaded coal unit train being the heaviest load ever carried. Gauges, however, vary around the world, often challenging the integration of rail systems. (Share of inland transportation systems. This graph shows us how the world is bounded with the wheeled transport) Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Air routes are practically
unlimited, but they are denser over
the North Atlantic, inside North
America and Europe and over the
North Pacific. Air transport
constraints are multidimensional
and include the site (a commercial
plane needs about 3,300 meters of
runway for landing and take off),
the climate, fog and aerial currents. Air activities are linked to the tertiary and quaternary sectors, notably finance and tourism, which lean on the long distance mobility of people. More recently, air transportation has been accommodating growing quantities of high value freight and is playing a growing role in global logistics. Air transportation was slow to take off after the Wright Brothers breakthrough at Kitty Hawk in 1903. More than ten years passed before first faltering efforts to launch scheduled passenger services. On January 1, 1914, the world’s first scheduled flight with a paying passenger hopped across the bay separating Tampa and St. Petersburg, Florida for a fare that eventually stabilized at $10 per person, round-trip (about $200 in 2006 dollars). (Growth in air transportation demand from 2004).

Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 
The great majority (74.6%) of air traffic flows (1.4 billion passengers) occurs within three regions, North America (35.5%), Europe (23.2%) and Asia (15.9%). Air traffic thus dominantly takes place on east-west axis over the Northern Hemisphere with other continents, such as South America, Africa and the pacific Southwest accounting for a residual function of feeders. The most important intercontinental routes link the most economically active regions of the world and include Europe - North America (3.9%), Europe - Asia (1.9%) and Asia - North America (1.7%). All these routes have balanced passengers’ traffic as almost the same amount of passengers goes in one direction than the other. The main international routes are:

- North Atlantic route. Represents the most intensively used air route in the world. It accounts for 27% of the tons-km transported while the inside of the United States justifies 12% of the international traffic. - Intra-Europe. Handles 9% of the international traffic, but because of geographical considerations, most international movements in Europe have a regional scale. For instance, although a flight between Paris and London is considered as international, it is barely longer than a Boston-New York regional air shuttle service which is counted as a national flight. - Trans-Pacific route, very important with 14% of the global traffic. The strong growth rates of the regional economy have induced a strong growth of air traffic. It is notably the case for the traffic that origins from Japan, event linked with the relocation of the Japanese economy within the Pacific-Asian space. Although the 1997-98 financial and economic crisis in Pacific Asia involved a negative impact on regional air traffic, the region has since then recovered and expanded. - Intra-Asia. Accounts for 9% of the global traffic, a share which will grow during the next decades. For instance, domestic air services in China represent an enormous potential market with the emergence of regional airline companies. - The remaining international lines are Europe towards the Middle East (5%) and of Europe towards the Far East (10%). Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

(Main international air routes)
Because of the physical properties of water conferring buoyancy and limited friction, maritime transportation is the most effective mode to move large quantities of cargo over long distances. Main maritime routes are composed of oceans, coasts, seas, lakes, rivers and channels. However, due to the location of economic activities maritime circulation takes place on specific parts of the maritime space, particularly over the North Atlantic and the North Pacific. The construction of channels, locks and dredging are attempts to facilitate maritime circulation by reducing discontinuity. Comprehensive inland waterway systems include Western Europe, the Volga / Don system, St. Lawrence / Great Lakes system, the Mississippi and its tributaries, the Amazon, the Panama / Paraguay and the interior of China. Maritime transportation has high terminal costs, since port infrastructures are among the most expensive to build, maintain and improve. High inventory costs also characterize maritime transportation. More than any other mode, maritime transportation is linked to heavy industries, such as steel and petrochemical facilities adjacent to port sites. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

There is potentially an infinite number of maritime shipping routes but the configuration of the global system is relatively simple. The main axis is a circum- equatorial corridor linking North America, Europe and Pacific Asia through the Suez Canal, the Strait of Malacca and the Panama Canal. Maritime routes are a function of obligatory points of passage, which are strategic places, of physical constraints (coasts, winds, marine currents, depth, reefs, ice) and of political borders. As a result, maritime routes draw arcs on the earth water surface as intercontinental maritime transportation tries to follow the great circle distance. Main shipping lanes are those supporting the most important commercial shipping flows servicing major markets. Secondary shipping lanes are mostly connectors between smaller markets. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

2,6 %
2,7 %
1,4 %
0,6 %
In 2012, travel for holidays, recreation and types of leisure accounted for just over half of all international tourist arrivals (52% or 536 million arrivals). Some 14% of international tourists reported travelling for business and professional purposes and another 27% travelled for other purposes, such as visiting friends and relatives (VFR), religious reasons and pilgrimages, health treatment, etc. The purpose of visit for the remaining 7% of arrivals was not specified. Medical tourism (MT) is patient movement from highly developed nations to other areas of the world for medical care, usually to find treatment at a lower cost. Medical tourism is different from the traditional model of international medical travel where patients generally journey from less developed nations to major medical centres in highly developed countries for medical treatment that is unavailable in their own communities. Services typically sought by travellers include elective procedures as well as complex specialized surgeries such as joint replacement (knee/hip), cardiac surgery, dental surgery, and cosmetic surgeries. Individuals with rare genetic disorders may travel to another country where treatment of these conditions is better understood. However, virtually every type of health care, including psychiatry, alternative treatments, convalescent care and even burial services are available. Over 50 countries have identified medical tourism as a national industry. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Business Travel (BT) is necessary for many different firms in a multitude of sectors. There are innumerable reasons that a company would need to send its employees to off- site locations. Traveling employees, in fact, contribute to a very significant part of the entire U.S. economy. American companies spent roughly $225 billion sending their employees on business trips during 2012, according to a report from Travel Effect and the U.S. Travel Association. These business trips have supported 3.7 million jobs and have generated approximately $35 billion in tax payments. As more businesses travel, the need for global expense management increases. Citing figures provided by the GBTA, Fox Business reported on the top five destinations, ranked by the total amount spent on travel-based business expenses. The United States

The USA still remains the world's largest market for business travel. Figures cited by Forbes and obtained by the GBTA state that more than $262 billion was recorded in business spending in 2012, up over $4 billion from the year before. China

China, however, is quickly catching up to America in terms of business travel expenditures. There was approximately $196 billion in travel expenses logged in China last year - illustrating a year-over-year improvement of over 13 percent. The news source suggests that China is expected to surpass the U.S. in business travel expenditures sometime in the next five years. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Japan ranks as the third largest business travel hub in the world, though it's recorded expenditures remain a mere fraction of those reported in China and the United States. The report found that roughly $65 billion was spent on business travel in Japan last year, which is down 1.2 percent year-over-year. Germany

The fourth most prominent destination for business travel is Germany, clocking in with $50.5 billion in travel expenditures during 2012. That's made for an increase of 1.1 percent. United Kingdom
The U.K. ranked fifth in the rankings, with just over $40 billion spent on travel during 2012. That figure is relatively unchanged when compared with statistics from the year prior. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

People aged 25 to 44 years represent a share of 35% of the total population, while the same group accounts for 38% of all tourists1 (see Figure 1). For the youngest age group (15 to 24 years), on the other hand, the percentages are identical. The oldest age group (65+ years) makes up the smallest proportion of both the population and the number of tourists. Figure 2 shows each age group as a share of the total number of tourists who went on holiday for four nights or more in 2006, both for the EU-27 and for each country individually. Again, people aged 25 to 44 years make up the largest share of tourists in nearly all Member States. To recap, they represent 38% of all tourists as an EU-average with the highest proportion in Lithuania (48%) and Italy (44%). The exceptions, however, are Belgium and Finland where people between the ages of 45 and 64 make up the largest proportion of tourists. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

This stage provides a description of the characteristics and dynamics of the value chain in the travel industry, with an insight on its different tiers. Relevant Actors
The value chain may varies, depending on the needs and wishes of the traveller, but there are five central components that are fundamental in any travel product: Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Our focus on the business sector of the travel industry, imply that we concentrate on the hotel part of the overnight accommodation service. The hotel business has experienced a considerably increase in overnight stops, but the growth of the lodging trade is weaker through the nineties than before. Integration and alliance building, particularly establishment of larger business chains, characterize the development of the hotel services in Norway. These chains gain competitive advantage by focusing on brand image building, and various efforts in order to increase customer loyalty. The size of the chains can enhance the possibilities for an increase in bargaining power relative to travel agencies and tour operators, and boost the chances for settlement of cooperation agreements with transport and arrangement companies in order to offer composite products. TRANSPORT

The focus of this analysis is on passengers transport, because passengers and freight are increasingly divergent activities as they reflect different transportation markets and so, since the industry analysed is the “Travel Industry”, this separation is more than needed to not lose the focal point of the discussion. In several modes and across many regions passenger and freight transport is being unbundled: - Shipping

Deep sea passenger travel is now dominated by cruise shipping which has no freight- handling capabilities, and bulk and general cargo ships rarely have an interest or the ability to transport passengers. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

- Rail
Most rail systems improved passenger and freight services. Where both segments are maintained the railways give priority to passengers, since rail persists as the dominant mode for inter-city transport in India, China and much of the developing world. In Europe the national rail systems and various levels of government have prioritized passenger service as a means of checking the growth of the automobile, with its resultant problems of congestion and environmental degradation. Significant investments have occurred in improving the comfort of trains and in passenger rail stations, but most notable have been the upgrading of track and equipment in order to achieve higher operational speeds. Freight transport has tended to lose out because of the emphasis on passengers. It is in North America where the separation between freight and passenger rail business is the most extensive. The private railway companies could not compete against the automobile and airline industry for passenger traffic, and consequently withdrew from the passenger business in the 1970s. They were left to operate a freight only system, which has generally been successful, especially with the introduction of intermodality. The passenger business has been taken over by public agencies, AMTRAK in the US, and VIA Rail in Canada. Both are struggling to survive. A major problem is that they have to lease trackage from the freight railways, and thus slower freight trains have priority. - Roads

Freight and passenger vehicles still share the roads. The growth of freight traffic is increasing road congestion and in many cities concerns are being raised about the presence of trucks. Already, restrictions are in place on truck dimensions and weights in certain parts of cities, and there are growing pressures to limiting truck access to non- daylight hours. Certain highways exclude truck traffic – the parkways in the US for example. These are examples of what is likely to become a growing trend; the need to separate truck from passenger vehicle traffic. Facing chronic congestion around the access points to the port of Rotterdam and at the freight terminals at Schiphol airport, Dutch engineers have worked on feasibility studies of developing separate underground road networks for freight vehicles. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

- Air transport
Air transport is the mode where freight and passengers are most integrated. Yet even here a divergence is being noted. The growth of all-freight airlines and the freight-only planes operated by some of the major carriers, such as Singapore Airlines, are heralding a trend. The interests of the shippers, including the timing of the shipments and the destinations, are sometimes better served than in passenger aircraft. The divergence between passengers and freight is also being accentuated by the growing importance of charter and "low-cost" carriers. Their interest in freight is very limited, especially when their business is oriented towards tourism, since tourist destinations tend to be lean freight generating locations. ARRANGEMENT

Refinement and distribution in the travel industry are taken care of by companies and participants within procurement, information, marketing, product development and sales. The industry consists of a commercial part and a group of companies that don’t have profit as their main target. The travel agencies and the tour operators have a dominating position in the former part of the industry. Because of our focus on business travels, we will concentrate on the travel agencies, and by that omit the tour operators that are mainly involved in leisure travels. There has been an extensive structural change among Norwegian travel agencies, which is mainly caused by merging and acquisition. A few enterprises have a dominating marked share, and the numbers of agencies that operate only in Norway are decreasing. Some of the major participants are associated with large international enterprises. Even though the travel agencies have maintained their importance as a sales channel, they are under considerable strain. The travel agencies’ position in proportion to large suppliers, e.g. hotel chains and large airlines, are weakened. Traditionally, the suppliers have had a weak negotiating position, but the situation is now reversing because of owner concentration and chain building. We are also experiencing a shift in power, from distributors to customers. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Mode of transport is a term used to distinguish substantially different ways to perform transport. The most dominant modes of transport are aviation, land transport, which includes rail, road and off-road transport, and ship transport. Other modes also exist, including pipelines, cable transport, and space transport. Human-powered transport and animal-powered transport are sometimes regarded as their own mode, but these normally also fall into the other categories. Each mode of transport has a fundamentally different technological solution, and some require a separate environment. Each mode has its own infrastructure, vehicles, and operations, and often has unique regulations. Each mode also has separate subsystems. A subsystem is a group of many parts that make up one part. All modes of transportation have 6 subsystems. They are: Propulsion, Suspension, Control, Guidance, Structural, and Support. Transport using more than one mode is described as intermodal. Transportation that carries around many people and can be used by the public is known as Mass Transportation. 1-Aviation is the design, development, production, operation, and use of aircraft, especially heavier-than-air aircraft. Domestic and international air transport mainly consists of regular services and charter traffic; the former is of primary interest in this report. SAS, Widerøe’s Flyveselskap and Braathens are the leading airlines in Norway, but more than 40 airlines operate between Norway and foreign countries. Today the business travellers are the most important customers to the airlines, but the introduction of more and larger discounts on airline tickets has resulted in an increase in leisure traffic. 2-Rail transport is a means of conveyance of passengers and goods, by way of wheeled vehicles running on rails. It is also commonly referred to as train transport. Track usually consists of steel rails installed on sleepers/ties and ballast, on which the rolling stock, usually fitted with metal wheels, moves. However, other variations are also Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

possible, such as slab track where the rails are fastened to a concrete foundation resting on a prepared subsurface. 3-Road transport (British English) or road transportation (American English) is the transport of passengers or goods on roads. The first methods of road transport were horses, oxen or even humans carrying goods over dirt tracks that often followed game trails. As commerce increased, the tracks were often flattened or widened to accommodate the activities. Later, the travois, a frame used to drag loads, was developed. The wheel came still later, probably preceded by the use of logs as rollers. Early stone-paved roads were built in Mesopotamia and the Indus Valley Civilization. The Persians later built a network of Royal Roads across their empire. With the advent of the Roman Empire, there was a need for armies to be able to travel quickly from one area to another, and the roads that existed were often muddy, which greatly delayed the movement of large masses of troops. To resolve this issue, the Romans built great roads. The Roman roads used deep roadbeds of crushed stone as an underlying layer to ensure that they kept dry, as the water would flow out from the crushed stone, instead of becoming mud in clay soils. The Islamic Caliphate later built tar-paved roads in Baghdad. During the Industrial Revolution, and because of the increased commerce that came with it, improved roadways became imperative. The problem was rain combined with dirt roads created commerce-miring mud. John Loudon McAdam (1756–1836) designed the first modern highways. He developed an inexpensive paving material of soil and stone aggregate (known as macadam), and he embanked roads a few feet higher than the surrounding terrain to cause water to drain away from the surface. At the same time, Thomas Telford, made substantial advances in the engineering of new roads and the construction of bridges, particularly, the London to Holyhead road. Various systems had been developed over centuries to reduce bogging and dust in cities, including cobblestones and wooden paving. Tar-bound macadam (tarmac) was applied Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

to macadam roads towards the end of the 19th century in cities such as Paris. In the early 20th century tarmac and concrete paving were extended into the countryside. 4-Maritime
Ship transport is watercraft carrying people (passengers) or goods (cargo). Sea transport has been the largest carrier of freight throughout recorded history. Although the importance of sea travel for passengers has decreased due to aviation, it is effective for short trips and pleasure cruises. Transport by water is cheaper than transport by air, despite fluctuating exchange rates and CAF charges to account for such. Ship transport can be over any distance by boat, ship, sailboat or barge, over oceans and lakes, through canals or along rivers. Shipping may be for commerce, recreation or the military purpose. Virtually any material that can be moved can be moved by water; however, water transport becomes impractical when material delivery is highly time- critical. Containerization revolutionized ship transport starting in the 1970s. "General cargo" includes goods packaged in boxes, cases, pallets, and barrels. When a cargo is carried in more than one mode, it is intermodal or co-modal. (Map of the World maritime transportation)

Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 
As we can see, the biggest part of maritime transportation is in the northern hemisphere. If you look on data up to 60°N, you can see the global change impact particularly near US and Canadian coasts. You can also see the “Somalian piracy” impact. A new sea route was created to avoid the Somali coast. The situation in the Mediterranean Sea is a concern. We all know that pollution degassing is difficult to control in this area. It would be interesting to identify risk areas. (Maritime Traffic per Continent and Ocean, 1990)

Fluvial transportation, even if slow and inflexible, offers a high capacity and a continuous flow. The fluvial / land interface often relies less on transhipment infrastructures and is thus more permissive for the location of dependent activities. Ports are less relevant to fluvial transportation but fluvial hub centres experiences a growing integration with maritime and land transportation, notably with containerization. The degree of integration for fluvial transportation varies from totally isolated distribution systems to well integrated ones. In regions well supplied by hydrographic networks, fluvial transportation can be a privileged mode of shipment between economic activities. In fact, several industrial regions have emerged in along major fluvial axis. More recently, river-sea navigation is also providing a new dimension to fluvial transportation by establishing a direct interface between fluvial and maritime systems. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

The figure above represents basic supply variables for major modes categorized by routes, terminals and vehicles. Atmospheric conditions influence transport supply for all modes to various degrees (especially air transportation). -Road Supply

It depends on road conditions, traffic (congestion) and its level of control (such as speed limits) and is generally measured in terms of numbers of vehicles per lane per hour. The main supply variables are road width, number of lanes, capacity of the vehicle (average number of people per vehicle in several North American cities: 1.2), speed, inventory and frequency of service (for mass transit). -Rail

The main supply variables are the number of tracks, capacity of stations and railyards, capacity of the vehicle, and speed of the vehicle. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

The main supply variables are capacity of airports, capacity of aircrafts, frequency of services and speed of the vehicle. The capacity of an airline corridor is enormous. -Maritime
The main supply variables are port capacity, capacity of ships, frequency of services and speed of the ship. The capacity of a maritime route is enormous. 3.2) TRAVEL AGENCY
It is the most central intermediary in the industry, offering travel services on behalf of the suppliers and it can also offer travel-related services, such as insurance. The profits of travel agencies are mostly charges, both on suppliers (commission are typically 10% of the selling price) and customers (transaction). One of the main view of the role of the travel agent, see it as an impartial travel counsellor giving impartial information and advice to the public; while the opposite view indicates the travel agent as a “filling station” for travel, to ensure ready availability of the suppliers’ products by accessing the suppliers’ stock by the reservation system. As the intermediary closest to the customer, they are in the best position to build relationships with customers. This is particularly true in the business travel market. 3.3) GDS (GLOBAL DISTRIBUTION SYSTEM)

The creation of the GDS changed the way journeys are bought and sold around the world and this is due to the enormous growth in air travel in the seventies, which created the need of directly booking flights in the airline computer reservation systems. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

The main definition of the GDS can be “a computer distribution system for displaying available services, affecting booking and ticketing on an international scale”. There are four main GDSs: Amadeus (121 countries, 30% of market share), Galileo, Sabre and Worldspan. All of those were created for offering an efficient, effective and neutral distribution channel to the market. 3.4) SWITCH

Following the great success of the GDS, new challenges showed up such as the reservation of other services inside the travel industry. During the eighties it was impossible, or at least really complicated, to create a strong link between the custom- made model of airline ticketing with the hotel reservation system, the cause of that was the lack of direct access to hotel’s systems, the different communication standards and the lack of uniformity. However in recent years the GDSs are extended to give the possibility to including hotel booking, car rentals and other related services just because of the introduction of the “switch” systems that connects all the reservation systems inside the GDSs. The first common user interface was the “UltraSwitch” (today called Pegasus), created in 1998 by the 15 major hotel companies. The most common switch systems today are: Pegasus, WizCom, Worldsres and HotelBank. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

In addition to the five traditional actors, there are new ones created by the technological development, such as “The Information Portal”: an internet-based intermediary that Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013

owns the customers connection to the world, its description requires a classification in horizontal portal (used as a platform to several companies in the same economic sector or to the same type of manufacturers or distributors) and vertical portal (also known as a "vortal", is a specialized entry point to a specific market or industry niche, subject area, or interest providing news, editorial content, digital publications, and e-commerce capabilities). The on-line lack of entrance barriers is the main cause of the spread of those portals, which are focused on the global market. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

The major advances in electronic travel distribution are the deskilling of the reservation process and increased reach to consumers. As a result of this extensive technological development, we are witnessing a change in distribution channels from the physical marketplace – distribution via traditional channels – to the electronic marketplace (e.g. Internet). Internet is well suited for direct distribution from content suppliers (e.g. airlines, hotels, car rental agencies) to consumers, which implies comprehensive structural changes in distribution of travel services. The growing number of consumers that connect directly to content suppliers will result in travel companies adopting the strategies of one-to-one relationship marketing. The advance in distribution technology just described will cause the marketplace to polarize. The losers will be intermediaries that don’t grow to become global players or are not small enough to adopt strategies of niche marketing. Of those intermediaries that are currently in the middle ground, there will be few survivors. The suppliers in the industry are already placing intermediaries under pressure. Airlines have adopted commission capping, which illustrate that the content suppliers are clear winners; not only can they reap the benefits of worldwide distribution via the global players, they can now cost-effectively sell their products and services directly to the consumers. Among on-line actors in the travel market, we also see a development towards a more realistic and moderate view with regards to negotiating contracts, developing Internet strategies and building relations using Internet as medium. Through interviews with some of the leading on-line travel agencies in Norway, it has become clear that thoughts on how to succeed in the virtual marketplace have changed within the last 12 – 18 months. The “new economy” is no longer seen as something that will totally change the way of doing business, thus leading to a development where these on-line companies go “back to basic”. Recognizing the fact that in order to survive, it is still as important to negotiate critical contracts with suppliers and customers, actually being able to add some value in the market value chain, and having a fundamentally solid economic foundation. The Internet is thus seen more as an efficient tool of communication and interface towards consumers, rather than a fundamentally new way of doing business. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

The segmentation of the transport systems can be a good indicator for revealing the attractiveness of the industry. The margins of the different sectors are highly affected by the increasing costs of their carburant (the naval and space sectors are investing in the research of different solution to this problem), moreover the competition is strongly affecting the road and air sector because of the privatization of the industry, while the railways are more helped by the governmental control of a big part of the companies. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Before analysing in detail the different life cycle of the main transportation systems, there is the need to underline the particular cycle that characterize this industry: with a growing international impact due to globalization and decreasing of international barriers, the human need to travel for different purposes is generally growing and it is difficult to foresee a point in mankind history when the travel will face its decline phase. Looking at its “components” it’s easy to see how there are different trends inside the industry and the more interesting are two: -The space industry is just born and in any case, it is going to have an enormous impact on the way people perceive the travel experience, but while waiting for its concrete apparition it is positioned between the development phase and the introduction; -The naval industry suffered a recession during the last years, mostly due to its long time of shipping. There might be the possibility of a new take-off tanks to its investments in renewable energies, reducing its transportation costs significantly. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Delta Airlines is attempting to do something that no other airline has done before: vertically integrating the jet fuel industry with its airline company. Delta recently bought an idled oil refinery in Philadelphia for $150 million in early 2012 and has since spent $100 million in improvements necessary to make the jet fuel to fly its airplanes. This move is the first of its kind and is expected to save the company $300 million a year (2013) in fuel costs while supplying 80% of the company's jet fuel requirement. Delta has also played with the idea of buying crude oil in North and South Dakota that is almost $20 cheaper per barrel than the current crude oil being shipped over from the North Sea and Northern Africa. There is a lot of controversy with this strategy considering it is so new and unconventional for the airline industry. A lot of pundits are skeptical because Delta specializes in flight, not crude oil refining. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Here's more from the airline:
"Acquiring the Trainer refinery is an innovative approach to managing our largest expense," said Richard Anderson, Delta's chief executive officer. "This modest investment, the equivalent of the list price of a new wide body aircraft, will allow Delta to reduce its fuel expense by $300 million annually and ensure jet fuel availability in the Northeast. This strategy is aligned with the moves we have made to build a stronger airline for our shareholders, employees and customers." Questions are of course arising:

What on earth makes Delta think that it can run a refinery more efficiently than someone who's fighting tooth and nail for business in the free market? Virginia Postrel, a libertarian-ish columnist for Bloomberg, agrees. "Vertical integration fools a lot of people," she says: You might think that owning a refinery would at least protect the airline from price fluctuations. But, crude oil prices affect the profits of airlines and oil refineries exactly the same way. When oil prices go up, their profits go down. Owning a refinery would simply magnify the effect. "If anything," he says, "it increases the risk exposure that has bedevilled the airline industry for years." Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Spaceflight (also written space flight) is ballistic flight into or through outer space. Spaceflight can occur with spacecraft with or without humans on board. Examples of human spaceflight include the Russian Soyuz program, the U.S. Space shuttle program, as well as the on-going International Space Station. Examples of unmanned spaceflight include space probes, which leave Earth's orbit, as well as satellites in orbit around Earth, such as communication satellites. These operate either by telerobotic control or are fully autonomous. The Virgin Group is a corporate empire consisting of about 400 companies around the world. But there’s one Virgin venture that is of particular interest and has the potential to be truly groundbreaking: Virgin Galactic - offering commercial seats for space travel. In December 2009, Virgin Galactic unveiled its first commercial spaceship - the VSS Enterprise – based on the SpaceShipTwo spacecraft model (discussed below). The VSS Enterprise is 18 metres long and capable of taking six passengers and two pilots to space. The Virgin spacecraft base model (SpaceShipTwo) does not launch vertically from the ground but horizontally from an aircraft (the WhiteKnightTwo) that takes it to around 50,000ft (about 15km) altitude. By launching at such high altitude, Virgin claims any engine issues that may arise on the way would simply lead to a return journey “gliding” to the ground, adding a layer of safety in case of emergency. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Virgin Galactic is a unique, clean-tech project that has as its mission the transformation in safety, cost and environmental impact of access to space for people, scientific research and small satellites. Its willingness to invest and to take risk is already pushing the pace of change where government agencies and traditional industry have stalled. In achieving its mission, Virgin Galactic will also act as a test-bed for new and clean technologies, such as the use of carbon composites in large aircraft, which have applications across a range of industrial sectors. This is why Professor James Lovelock, renowned environmentalist and author of The Gaia Theory, describes Virgin Galactic as one of the most important industrial projects of the 21st century. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Analysis of the business plan and of its internal cost structure (by area of expenditure). Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 
Virgin Galactic isn’t the only company looking at ways to offer space travel to the masses. Insiders forecast that, once fully operational, commercial space aviation could be a US$1 billion industry. Space Exploration Technologies Corporation

(also known as SpaceX) was founded in 2002 by former PayPal entrepreneur Elon Musk. In December 2010, SpaceX became the first privately funded company to successfully launch, orbit and recover a spacecraft. Mostly known for its rocket and launch system, SpaceX recently landed a contract from NASA to transport crew to the ISS. Blue Origin

was founded in 2000 by Amazon’s Jeff Bezos. In 2009, the company was awarded US$3.7 million in funding by NASA. Blue Origin is focusing on developing a commercial system for sub-orbital space travel. Stratolaunch Systems

co-founded in 2011 by Microsoft co-founder Paul Allen, focuses on developing a cheap way of getting medium-sized payloads into orbit (e.g. mid-size communication Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

satellites). Stratolaunch is currently working on a huge spacecraft with a wingspan of 117m and six 747 engines. Commercial space aviation is part of their plans. Space Adventures
was founded in 1998 by Eric Anderson (an aerospace engineer and entrepreneur who made a fortune during the dot-com bubble). Space Adventures offers zero-gravity atmospheric flights and orbital spaceflights. The list goes on. There are dozens of private space companies: some specialise in military applications, others focus on satellite launches, while a segment of the industry has started to shift its focus to commercial space travel. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Globalization, in its most literal sense, is the process of making, transformation of things or phenomena into global ones. It can be described abstractly as a process by which the people of the world are unified into a single society and function together. This process is a combination of economic, technological, socio-cultural, and political forces. The idea of globalization is, however, also often used to refer in the narrower sense of economic globalization involving integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology.1 Here much, but not all, of the focus is on the narrower perspective, although clearly the increase in mobility and personal interchanges that air transport facilitates has broader socio-cultural and political implications. Globalization is motivated by the recognition that resources and goods are not always collocated with the populations that desire them, and so global transportation services are needed (and economically justified if consumer demand is great enough). Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Globalization trends are heralded or disclaimed, respectively, as beneficial or detrimental to global stability, the environment, peace, and sustainable development. While judgment of these claims is beyond this chapter’s scope, this chapter discusses maritime transportation, an enabler of globalization. We demonstrate that transportation (in general) and shipping (in particular) have been and remain key ingredients in fostering globalization. In fact, the maritime industry has transformed its technologies, national registries, and labour resources over the past decades to serve the demands of globalization. Moreover, for many commodities and trade routes, there is no direct substitute for waterborne commerce. 5.3.2) AIRLINE INDUSTRY

The implications of globalization in its many manifestations have been profound for the international air transport industry, not just on the demand side, where the scale, nature, and geography of demand in global markets has led to significant shifts, but also on the supply side, where implicit and explicit international coordination of policies by governments (e.g. regarding safety, security, and the environment) and the private sector (e.g. the internationalization of airframe and aero-engine production) have affected the institutional and technological environment in which air transport services are delivered. From the politic point of view the greatest impact is the growing of “Open skies” policies: an international policy concept that calls for the liberalization of the rules and regulations of the international aviation industry—especially commercial aviation—in order to create a free-market environment for the airline industry. Its primary objectives are:

- To liberalize the rules for international aviation markets and minimize government intervention as it applies to passenger, all-cargo, and combination air transportation as well as scheduled and charter services; and - To adjust the regime under which military and other state-based flights may be permitted. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013

In the past year several peer-reviewed academic studies have been published that provide well-founded assessments of the impact of the September 11th terrorist attacks on air travel demand. Not surprisingly they find large transitory reductions in travel. Of more concern is their conclusion that there has been a significant permanent reduction in the volume of air travel as a result of the terrorist attacks (and subsequent increased security measures). If true, this reduction will result in a permanent loss of consumer welfare. There will also be a loss to airline revenues, accentuated by evidence that the level of airfares has also been permanently reduced. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

There has been a surge in travel demand over the past two years and, in some markets, airfares have risen. However, this has been the result of the cyclical strength of economic growth, which has been the strongest in the past two years since the 1970s, in spite of high oil prices. The conclusion of the studies reported here is that there has been a permanent reduction in air travel from the level it would have reached, notwithstanding the current cyclical recovery. In addition to the temporary but complete shut-down of the US commercial aviation system, following the terrorist attacks of September 11, 2001, many travellers reduced or avoided air travel in the face of a newly- perceived risk associated with flying. In addition many businesses put temporary freezes on all but essential air travel. The initial panic driven fear of flying has largely dissipated but travelling by air has become more time-consuming and hassled at airports, as a result of the stringent new security requirements put in place. This has raised the cost of flying in a very real sense for passengers. In the 4-5 months following 9/11 there was a large temporary impact which reduced travel demand by over 31%. But once this transitory impact had dissipated travel demand (US domestic RPMs) remained 7.4% lower than the level expected given factors such as economic growth and airfares. The study concludes that factors such as the increased ‘hassle’ of travel due to new security requirements has permanently reduced the level of travel demand by over 7%. A recent published study (Ito and Lee

(2005) Comparing the Impact of the
September 11th Terrorist Attacks on
International Airline Demand, Int. J. of
the Economics of Business, Vol. 12, No.
2, July 2005, pp225- 249) also finds
significant and long-lasting reductions to
international passenger traffic on markets connected to and outside the US. Further Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 
research though is necessary to throw more light on the impact of this event internationally. It is clear that 9/11 led to a large transitory reduction in US passenger travel for the 4-5 months following the terrorist attack. The findings of a smaller but long-lasting adverse impact on travel may be associated with an increase in the perceived risk of air travel, but are also likely to be a measure of the increased time and inconvenience cost or hassle due to the subsequent introduction of more rigorous passenger screening and security measures. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Recession is now forecast for North America, Europe and Japan late this year and into 2009. The last major downturn in air traffic, driven by recession rather than terrorist attack, was in 1991 when global passenger traffic (RPKs) fell 2.6%. We now forecast that global passenger traffic will fall by 3% in 2009. Moreover, the historical experience has been that travel volumes rarely return to the previous trend or peak-to-peak growth. The post-2000 recovery was the exception but a credit boom that is unlikely to be repeated drove that. Average growth from 2008 to the next peak is forecast to slow to an annual rate of 4.5%. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

UPS delivers more than 15 million packages a day to 6.1 million customers in more than 220 countries and territories around the world. Maersk
Is a Danish shipping company and is considered by Freight Forward Associates to be the best shipping company in the world. With FFA saying, that the Danish company is the world’s top carrier with a market share of 15% and has a presence in all of the world’s ports. Their ships are regularly seen entering and exiting the top ports in the world. Maersk operates and has subsidiaries/offices in more than 135 countries worldwide. Involved in global liner shipping services, Maersk Line operates over 550 vessels and has a capacity of 2.2 million. Mediterranean Shipping Company

MSC is the world’s largest shipping line in terms of container vessel capacity. MSC serves 270 ports worldwide on the six continents. 350 local offices, employing a total of 29,000 people, providing a large agency network representation. The line was named shipping line of the year in 2007 for the sixth time in eleven years by Lloyds Loading List, which is an achievement not matched by any other shipping line. The Geneva- based company operates in all major ports of the world. MSC’s most important port is Antwerp in Belgium. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

It is one of the most widely known and widely used shipping companies on the planet. Fedex is a leader in logistics and has a strong reputation for providing on time service without damage. As FFA put it, they ship hundreds of tons of cargo all around the world regularly and are a pioneer in this field. Fedex also uses air freight and FedEx Express operates one of the largest civil aircraft fleet in the world with the largest fleet of wide bodied civil aircraft; it also carries more freight than any other airline. Hapag-Lloyd

Hapag is one of the largest logistics companies on the planet, and they have been in the business for quite a while now, since they began operating in 1970. Thus, giving them a deep background of experience in shipping and freight management. They are one of the leading players of the shipping line industry, and are a go-to group for all cargo shipping needs. 6.2) AIRLINE COMPANIES

Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 
This List of passenger ship companies is specialized as the list of companies that own and operate the passenger ships (Cruise Ships, Cargo-Passenger Ships, and Ferries (for Passengers and Automobiles)). Seven cruise lines dominate the industry: Carnival Cruise Lines, Celebrity Cruises, Costa Cruises, Holland America Line, Norwegian Cruise Line, Princess Cruises, Royal Caribbean International. But the consolidation is even more dramatic than it seems because these Big 7 lines are actually owned by just three corporations: -G Carnival Corporation (base: Miami, Florida) owns Carnival Cruise Lines, Costa Cruises, Holland Amer- ica, and Princess Cruises. -G Royal Caribbean Cruises (base: Miami, Florida) owns Celebrity Cruises, and Royal Caribbean Inter- national. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

-G Star Cruises Group (base: Kuala Lumpur, Malaysia) owns NCL America, Norwegian Cruise Line, Ori- ent Lines, and Star Cruises. -Carnival Cruise Lines is known for all-round fun, activities and casinos for the lively youth market (although many passengers are over 45). -G Celebrity Cruises has the best food, the most elegant ships and spas, and its cruises are really under- priced. -G Costa Cruises has the edge on European style and lively ambiance, with multi- nationality passengers, but the swimming pools are full of noisy children in peak holiday periods. -G Holland America Line has all the right touches for seniors and retirees: smiling service staff, lots of flowers, traditions of the past, good cooking demonstrations and alternative grill rooms. -G Norwegian Cruise Line is good for a first cruise for families with children, great choice of restaurants and eateries, and good entertainment. -G Princess Cruises has consistent product delivery, although the ships have decor that is rather bland, and passengers tend to be older. -G Royal Caribbean International is good for the Caribbean (naturally), for first-time cruisers and families, with a good variety of entertainment, and interesting programs to engage families with children. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

Here is an overview of the biggest railways companies, segmented by their country of origin, owning the largest share of the market. Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 

7) BIBLIOGRAPHY AND SITOGRAPHY 1518:xzeadub0b0a&cof=FORID:11&ie=UTF-8 dtablesbypartnercountry2004-20072009edition.htm termhardshipfortouristindustryafterseptember11thattacks.htm analysis.aspx Analysis.aspx
Catolica Lisbon School of Business and Economics - International Industry Analysis November 2013 Uo0ehpFMgy4

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