Travel and Tourism (9395) | The changing structure of the travel and tourism industry

The Changing Structure of the Travel and Tourism Industry (1.3)

Hello future tourism experts! This chapter is crucial for understanding how the travel industry actually works and, more importantly, how fast it is changing. Think of the industry as a giant LEGO structure. We need to identify all the different blocks (components) and see how they are sticking together or breaking apart (changes and integration).

Understanding this structure (Topic 1.3) is key to analysing market trends and destination success in later topics. Let's dive in!

1. Defining the Components of the Industry (1.3a)

The travel and tourism industry is made up of many different businesses that work together to provide a complete customer experience. We call these the industry's components.

Accommodation and Catering

These components provide places for tourists to sleep and eat. They are fundamental to any trip.
Examples: Hotels (from budget to 5-star), resorts, hostels, guesthouses, restaurants, cafés, and event catering services.

Travel Agents and Tour Operators

These are the intermediaries (the middle people) who connect the components to the customer.

• Travel Agents: Sell packages and services (like flights or insurance) directly to the public on behalf of the providers.
• Tour Operators: Create and sell the travel products (the package tours). They combine different components (like a flight, a hotel, and an excursion) into one single price.

Transport Providers

Businesses that move tourists from their source market (home) to their destination, and also around the destination.
Examples: Airlines, rail companies (e.g., high-speed trains), coach/bus companies, cruise lines, ferry operators, and car rental services.

Visitor Attractions

These are the places that draw tourists in—the reasons people travel in the first place.
Examples: Theme parks (Disneyland), museums (The Louvre), historical sites (Pyramids of Giza), natural parks, and zoos.

Ancillary Services

The "extra" services that support the core travel product. The word ancillary just means 'providing necessary support to the primary activities'.
Examples: Travel insurance, currency exchange services, guiding services, visa processing, and baggage handling.

2. Key Changes in the Industry Structure (1.3b)

The way these components interact has changed dramatically due to technology, economics, and consumer demand.

2.1 Integration: Joining Forces

Integration is when different companies within the travel industry join together, either by merger (combining) or acquisition (one buying the other). This changes the competitive structure of the industry.

A. Vertical Integration (V-Shape Strategy)

This is when a single company controls different stages of the supply chain. They own businesses that are involved in the entire journey, from production to sale.

• Concept: A company owning its suppliers or its distributors.
• Why? To maximise profits, control quality, and reduce risks in the supply chain.
• Real-World Example: A major Tour Operator (like TUI) might own the Airlines (transport) that fly the tourists, the Hotels (accommodation) they stay in, and the Travel Agencies (retail) that sell the package.

Memory Aid: Think of the letter 'V'. The different companies are stacked vertically, controlling the whole visitor experience from top to bottom!

B. Horizontal Integration (H-Shape Strategy)

This is when a company acquires or merges with a competitor that operates at the same stage of the supply chain.

• Concept: Combining with rivals doing the same job.
• Why? To increase market share, benefit from economies of scale (buying in bulk is cheaper), and reduce competition.
• Real-World Example: One Airline buys another Airline, or a large Hotel Chain buys a smaller Hotel Chain.

Memory Aid: Think of the letter 'H'. The different companies are side-by-side, operating horizontally at the same level.

2.2 The Rise of Independent Travel and Dynamic Packaging

The Internet and technology have shifted power from the tour operator to the individual traveller.

Independent Travel

This refers to travellers who plan and book their own trips, often referred to as "DIY" (Do-It-Yourself) tourism.

• Key Feature: The traveller selects and purchases each component (flight, hotel, rental car) separately.
• Impact: It bypasses the traditional travel agent/tour operator entirely, giving the consumer more choice and control.
• Did you know? Many people now use review sites (like TripAdvisor) to research, further reducing their reliance on agents.

Dynamic Packaging

This is the process where a customer uses an online system to build a customised package holiday in real-time, choosing separate elements (flight, hotel, transfer) at the point of sale.

• How it works: Unlike traditional pre-packaged holidays (where components are fixed), dynamic packaging uses vast online databases to combine elements instantly based on customer preference and availability.
• Provider Example: Online Travel Agents (OTAs) like Expedia or Booking.com excel at dynamic packaging.
• Benefit: Offers the flexibility of independent travel but often with the convenience and protection of a packaged tour.

2.3 Increasing Sustainability Awareness

The structure of the industry is changing because consumers and governments are increasingly demanding environmentally and socially conscious travel options.

• Consumer Demand: Customers are choosing providers who demonstrate strong sustainability practices (e.g., hotels that reduce water usage or airlines investing in carbon offset schemes).
• Product Shift: There is a growth in specialised components like eco-resorts, ecotourism activities, and transport providers offering low-carbon options.
• Regulation: Governments and tourism authorities now often mandate sustainable development policies, forcing components like hotels and attractions to change their operating structure.

2.4 Online Travel and Tourism Booking (ICT Revolution)

Information and Communications Technology (ICT) has fundamentally reshaped the structure of the industry.

• Direct Sales: Airlines, hotels, and attractions can now sell directly to consumers via their websites, reducing the role of the traditional travel agent.
• Real-Time Reservations: Customers can check availability, compare prices, and confirm bookings instantly, 24/7.
• Mobile Technology: Apps and mobile sites allow travellers to manage their entire journey (check-in, boarding passes, hotel key access) using their phones (ticketless travel).
• New Intermediaries: The rise of OTAs (Online Travel Agents) and P2P (Peer-to-Peer) platforms (like Airbnb) creates new structural layers, challenging established hotel chains.

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Key Takeaway Summary

The travel industry structure is defined by five core components (Accommodation, Catering, Transport, Attractions, Agents/Operators, and Ancillary Services). The main structural changes are driven by companies merging (Vertical and Horizontal Integration) and technology empowering consumers (leading to Independent Travel, Dynamic Packaging, and massive growth in Online Booking). Alongside this, sustainability is forcing all components to restructure their operations to be greener.