European Tour Operators: confronting competition in the tourism industry Eric Viardot
European tour operators have managed to achieve a strong position in the tourism industry. Most notably the two biggest ones, TUI Travel and Thomas Cook have a large market share. However, in the latter part of the decade (2007–10) the industry has experienced a downturn because of the turbulent environment which has created new threats and modified the competitive forces. ● ● ●
The tourism industry since 2000
At the end of 2008, the tourism industry was a major industry. Worldwide it generated US$5474 billion (x4023bn or £3665bn) of economic activity, represented 9.4 per cent of total world GDP and provided 219.8 million jobs (7.6 per cent) of total employment.i The second half of the twentieth century had seen a constant growth of the tourism industry. If the business had slowed in 2001– 03 following terrorist attacks in New York, Djerba and Bali, it had bounced back. In 2007, for the ﬁrst time ever, the number of international tourist arrivals recorded worldwide exceeded 900 million, according to the World Tourism Organisation (UNWTO), a specialised agency of the United Nations (UN) for tourism policy, as illustrated in Figure 1. However, the global economic crisis starting in September 2008 and getting worse throughout 2009 had brought the business to a halt, with a general slowdown of activities, massive unemployment, and a major credit crunch for consumers.
Competition: a continuing consolidation in the European tourism industry Over the 10 years from 1998 to 2008, the competitive landscape of the tour operator industry changed dramatically as the market experienced a continuing concentration of the players. The trend had been accelerated in 2007 with the acquisition of MyTravel, the number 3 European Tour Operator by Thomas Cook, the number 2, on February 2007. One month later TUI announced its acquisition and merger with First Choice, the ﬁfth biggest tour operator and number 2 in the UK. Those two moves radically decreased the number of players and in 2008 the combined revenues of the two biggest tour operators were three times higher than the three following competitors, while in 2005 it was less than twice as high (see Table 1).
TUI Travel Plc
In 2009, TUI Travel Plc was the biggest tour operator in Europe. A tour operator (also named tour wholesaler) offered packaged or ‘all inclusive’ prepaid and preplanned holidays to its customers, usually through travel agents. It was a pre-assembly of basic travel components sold for a ﬁxed price. A standard package was composed of air transportation (outbound and return), hotel accommodation, transfers from the airport to the hotel and back, as well as optional items such as insurance, meals, excursions, etc. The ﬂights (usually charters) left and returned on given dates; the duration of the stay was ﬁxed. This type of
Figure 1 International tourist arrivals
Source: UNWTO, June 2009.
This case was prepared by Eric Viardot, Professor of Strategy at the EADA Business School in Barcelona. It is intended as a basis for class discussion and not as an illustration of good or bad practice. © Eric Viardot 2010. Not to be reproduced or quoted without permission.
EUROPEAN TOUR OPERATORS
Table 1 Tour operators market share (MS) and revenues in Europe in 2005 and 2008 MS Revenues 2008 2008 (%) (ebn) TUI Thomas Cook REWE Kuoni Club Med Total market 18.6 13.9 5.1 3.4 2.1 15.6 11.7 4.3 2.8 1.7 84.0 TUI Thomas Cook MyTravel REWE First Choice Kuoni Club Med Iberostar Altour Hotelplan Total market MS 2005 (%) 21 13 8 8 6 4 4 4 2 2 Revenues 2005 (ebn) 16.0 7.8 4.8 4.8 3.6 2.4 2.4 2.4 1.2 1.2 60.0
Sources: TUI LTC Annual Reports.
vacation offered security and good value for the vacationer as tour operators were able to get very good prices compared to a Do-It-Yourself holiday. Indeed, tour operators had managed to industrialise and standardise the...
References: i WTTC, www.wttc.org/eng/Tourism_Research/Tourism_Economic_ Research Tourism. ii Hotels Magazine, 25 June 2009, www.hotelsmag.com/article/CA6667503.html.
Please join StudyMode to read the full document