Chapter II: UNDERSTANDING

THE TOURISM INDUSTRY

 Understanding and managing
tourism supply: an introductory
P frame work
• 1. What is supply?
A • 2. The determinants of tourism
R supply
• 3. The tourism supply chain
T • 4. The management of tourism
I supply
• 5. Tourism business strategies and
supply issues
 1. What is supply?
“Tourism supply is the result of those
productive activities that involve the provision
of goods and services required to meet tourism
demand and which are expressed in tourism
consumption” Seasa (1983)
 Categories of supply issues
1. Descriptions of the industry and its operation,
management and marketing.
2. The spatial development [the geographical
development] and interactions which
characterize the industry on a local, national and
international scale.
3. The effects which result from the development
of the industry.
Define the factors that impact the
tourism supply? What are their reverse
effects?
Factors affecting tourism supply:
•Infrastructure of roads, transportation,
electricity, water, airports, highways
• Policies to attract investment
• Tourism ecosystems (ie, many tourism
business units will create trade with wards, thus
promoting the attraction of manpower,
promotion, transportation, etc., making
operating costs less expensive than others. With
solo tourism development, everything is
expensive)
 Discussion
Why do organizations must study supply issues?
The importance of studying supply issues

a. Helps the tourism organizations understand

how the tourism industry is both organized
and distributed geographically.
b. Helps the tourism organizations understand
the environment in which policy, planning,
development issues and political factors affect
the business of the organizations.
Are these Tourism Services? Now look at Figure
2.1 (P. 10)
2. The determinants of tourism supply

The key aspects of tourism supply are:

• Tour operators and intermediaries (e.g. travel
agents or service providers like internet travel
agencies)
• Attractions and activities
• Accommodation
• Transportation
• Other tourist facilities and services (e.g.
hospitality, catering and entertainment)
2. The determinants of tourism supply

How many types of business form

exist in supply system?
There are three:
• The public sector
• The private sector
• The non-profit sector
3. The tourism supply chain

What is a supply chain?

 3. The tourism supply chain

all the goods and services that go into the delivery

of tourism products to consumers. It includes all
suppliers of goods and services whether or not they
are directly contracted by tour operators or by their
agents…or suppliers (including accommodation
providers: tourism supply chains involve many
components….bars and restaurants, handicraft,
food production, waste disposal, and the
infrastructure that support tourism in the
destination. (Tapper and Font, 2004)
 3. The tourism supply chain

What do you know about B2B, B2C…

 3. The tourism supply chain

There are four components in a typical tourism

supply chain:
A tourism supplier A Tour operator

A customer A travel agent

 3. The tourism supply chain

Question 2
How can the supply chain help operators to gain
cost saving, efficiency and effective investment?
 3. The tourism supply chain

There are four components in a typical tourism

supply chain:
A tourism supplier A Tour operator

A customer A travel agent

 3. The tourism supply chain

The supply chain may also help

operators to understand where
efficiency gains, cost saving, and
investment may be needed to add value
to the customer’s experience of tourism.
3. The tourism supply chain
• Design a two-day tour to Mui
Ne for 15-25 people at a cost
of VND 2,500,000 per
person.
 4. The management of tourism supply

What is Management?
 4. The management of tourism supply

Inkson and Kolb (1995: 6) defined management as

“getting things done in organizations
through other people’s”
 4. The management of tourism supply

In a business context, organizations exist

as a complex interaction of people, goals
and money to create and distribute the
goods and services which people and
other businesses consume or require.
 4. The management of tourism supply

Organizations in tourism are characterized by

their ability to work towards a set of common
objectives (e.g. the sale of holidays to tourist for
a profit). To achieve their objectives,
organizations are often organized into
specialized groupings or departments to achieve
particular functions (e.g. sales, human resources
management accountants and finance).
 4. The management of tourism supply

Hierarchy of a business organziation

Chief executive officer (CEO) or general manager

Top managers

Middle managers

First line managers

………..
 4. The management of tourism supply
• Chief executive officer (CEO) or general manager at the
top who exercises responsibility over the entire
organization and is accountable to a board of directors or
other representatives for the ultimate performance of the
organization.
• First line managers are the lowest level of manager in an
organization, but arguably perform one of the most
critical roles- the supervision of other staff who have
none managerial roles and who affect the day-to-day
running of the organization.
 4. The management of tourism supply

Managers can also be classified according to the

function they perform
• Functional managers
• Business unit, divisional or area managers
• Project managers
 4. The management of tourism supply

The goals of managers:

Profitability
Efficiency
Effectiveness
Others…
 4. The management of tourism supply

Profitability, which can be achieved

through higher output, better service,
attracting new customers and by cost
minimization.
 4. The management of tourism supply

Efficiency, to reduce expenditure and

inputs to a minimum to achieve more
cost- effective outputs.
 4. The management of tourism supply

Effectiveness, achieving the desire

outcome; this is not necessarily a
profit- driven motivate.
 4. The management of tourism supply

The management process:

Planning
Organizing
Leading
Controlling
 The management process
Planning, so that goals are set out and
means of achieving the goals are
recognized.
Organizing, whereby the work functions
are broken down into a series of tasks and
linked to some form of structure. These
tasks then have to be assigned to
individuals.
 The management process
Leading, which is the method of
motivating and influencing staff so that
they perform their tasks effectively. This is
essential if organizational goals are to be
achieved.
Controlling, which is the method by which
information is gathered about what has to
be done.
Questions

I. Requirement of a
competent
manager?
II. Explain why it is
difficult for
managers to make
decisions?
 Discussion

A competent manager can satisfy the

requirements:
Understanding what needs to be done
Getting the job done
Taking people with him
Questions

II. Explain why it is

difficult for
managers to make
decisions?
 Discussion
To make decisions, managers often have to balance the ability to use
technical skills within their own particular area with the need to relate
to people and to use “human skills” to interact and manage people
within the organization an clients, suppliers and other people external
to the organization. Managers need these skills to communicate
effectively to motivate and lead others. They also need cognitive and
conceptual skills. Cognitive skills are those which enable manager to
formulate solutions to problems. In contrast, conceptual skills are
those which allow them to take a broader view, often characterized as
“being able to see the wood for the trees”: The manager can
understand the organization’s activities, the relationships and the
goals and can develop an appropriate strategic response (Inkson and
Kolb 1995).
 Discussion

Can a competent manager lead the

organization to success?
5. Tourism business strategies and supply issues

Strategy is one of the most important

factors which determines the success or
failure of tourism businesses.
5. Tourism business strategies and supply issues

Business strategies consist of:

• A plan
• A ploy
• A pattern of behavior
• A position in relation to someone else or a
perspective.
5. Tourism business strategies and supply issues

To maintain a competitive advantage, tourism

businesses must pursue strategies that could involve:
Differentiation
Cost leadership
The use of either approach to set out a
narrow focus on the market such as one segment.
5. Tourism business strategies and supply issues

Above all, “cost leadership” is considered one of

the most effective strategies to overwhelm
competitors.
This means the tour operators must takes a series
of actions to reduce costs (e.g. cost of production_
labor inputs, and developing alliances or
takeovers…).
5. Tourism business strategies and supply issues

The various growth strategies and competitive

models that tourism organizations use to gain
competitive advantage, as shown in Table 2.1.
These strategies are often combined in the most
successful companies by innovation to maintain a
competitive edge.
(Now, look at the table 2.1. P. 19)
5. Tourism business strategies and supply issues
5. Tourism business strategies and supply issues

Discussion:
Why strategies are important?
How can an organization maintain a competitive
advantage?
5. Tourism business strategies and supply issues

Why are alliances and Collaborations

important? And the adverse effect of these
strategies?
5. Tourism business strategies and supply issues

Benefits:
- Reduce costs and shift the risk elsewhere
- Improve competitive advantage
- Improve chance of entering a new market
Adverse effects:
- Instability partnership
- Difference in strategies of growth
- Lose control over the partner
 II. Travel Intermediaries:
P Tour Operators and Agents
A • 1. The tour operator
R • 2. The business of tour operation
• 3. Travel agents and retailing
T
II
 II. Travel Intermediaries: Tour
Operators and Agents
1. Advantages of changes in ICTs
2.The impact of ICTs on the Travel
agents? Is it negative or positive?
II. Travel Intermediaries: Tour
Operators and Agents
 1. The tour operator

What is tour operator?

The business of tour operation.
 2. The business of tour operation

Summarize the business of a tour operator

Buying in bulk and negotiating prices
Connection between tour operators
Planning holidays
 3. Travel agents and retailing

Attributions of Tourism:
+ Intangible

+ Perishable
+ Dynamic
+ Heterogeneous
+ Inseparable
 3. Travel agents and retailing

Questions:
- The role of the travel agent?
- How does the rise of the new trend
impact the role of the travel agent?
 3. The tourism supply chain

There are four components in a typical tourism

supply chain:
A tourism supplier A Tour operator

A customer A travel agent

3. Travel agents and retailing
 • Transporting the tourist
P • 1. Conceptualizing transport
A and tourism
• 2. Tourist travel modes: a
R global overview
T • Land based transport
III • Water-based transport
• Air transport
1. Conceptualizing transport and tourism

The classification of transport in tourism:

a. Transport for tourism
International air travel
Road transport
Rail travel
Sea transport
b. Transport as tourism
 2. Tourist travel modes: a global
overview

a. Land based transport

b. Water-based transport

c. Air transport
 Visitor Attraction
P • 1. Defining attractions
• 2. Classifications of attractions
A Type
R Physical environment
• 3. Themes and issues in the
T management of visitor attractions
IV • 4. Management planning
• 5. The future of visitor attractions
 Tourism accommodation and
hospitality services
P • 1. Accommodation
A • 2. Hotel management
• 3. Operational performance of hotels
R • 4. Classifying the accommodation sector

T a. Services accommodation
b. Non-serviced accommodation sector
V c. Non-accommodation hospitality
services
• 5. Contemporary issues in hospitality
management
Tourism accommodation and hospitality
services
Three domains of hospitality
The private domain
The social domain
The commercial domain
 1. Accommodation

Definition of accommodation
The accommodation products:
-The location of establishment
-Its facilities
-Its services
-Its images
-Its price
 2. Hotel management

A hotel

Tangible elements Intangible elements

(i.e. room) (i.e. room ambience)

Staff
?
Functional areas for hotel management

Front-of-house
• Reception
• Reservations
• Conference facilities/ telephone-fax-internet services
Food and beverage
• Restaurant
• Bars
• Room service
• Banqueting facilities (big party facilities)
Functional areas for hotel management

Back-of-house
• Food production
• Cleaning
• Laundry
Leisure facilities
 2. Hotel management

A hotel

Tangible elements Intangible elements

(i.e. room) (i.e. room ambience)

Staff Technology
 2. Hotel management

How does good hotel management contribute to

the success of Accommodation and hospitality
business?
 3. Operational performance of hotels

Useful indicators to analyze hotel performance

Occupancy rates
Average room rate (ARR)
Revenue per available room (Rev Par)
4. Classifying the accommodation sector

a. Services accommodation
b. Non-serviced accommodation sector
c. Non-accommodation hospitality services
5. Contemporary issues in hospitality
management
Analyze contemporary issues in hospitality
management
 Midterm Test

I. Why are alliances and Collaborations

important? And adverse effect(s) of these
strategies?
II. The importance of Human Resource
Management in tourism.
What are “soft and hard” approaches?