TP8 Midterm Lecture 2

Tour Operations & Tour Packaging

Tour Operators assemble the various travel components into a tour

package, and sell the resulting package as one product. As an assembler
of services, a tour operator acts as a middleman. It contracts
transportation services, such as airlines, bus/car operators’, shipping
lines; hotels for lodging and meals; restaurants and nightclubs for
entertainment; and tour guides.

A Tour Operator’s three (3) main functions are:

1. Plans and develops tour packages that meet the needs of the markets.

2. Assembles the various travel components as an integral part or

component of a single tour package that is cheaper than when each
service is purchased individually.

3. Delivers the tour package by operating worry-free and secured programs

and/or itineraries.

The sources of income of a Tour Operator are:

1. Variable mark-up based on contracted rates from the suppliers. It is

able to negotiate for lower prices and its profits are adjustable. It
restrains profit levels below retailers’ prices. As such its income is
variable, but limited.

2. By seeking and negotiating for cost savers and concessions. Some

components are given by the suppliers on a complimentary basis, but
included as a cost in the package.

3. Through the sale of optional tours, excursions and extensions. This

source of revenue is generated after the sale of the basic package.

4. For tour group movements, souvenir shops grant the tour operator
shopping commission on sales generated. This commission is normally
shared with the tour guide.

Occasionally, a tour operator earns or loses money on foreign exchange

rate fluctuations.

Sometimes it makes use of advance deposits and cancellation fees.

The Characteristics of the Tour Operator are:

1. A wholesaler who transacts business with and protects the interest

of the retail travel agents.

2. Acts as a conduit to the suppliers.

3. Has variable but limited profit margin.

 4. Generates additional revenues by selling optional tours, excursions
and extensions.

Types of Tour Operators

There are four (4) types of tour operators:

The Local Tour Operator services Filipino and/or foreign traffic to

national destination by way of regular sightseeing tours or tour
packages, taking into consideration the popularity of the
destination, site or sight.

The Domestic Tour Operator services Filipino traffic to national

destinations, on an ad-hoc basis, as and when contracted, by
providing itineraries/programs tailor-made to the needs of the
client.

The Inbound Tour Operator services foreign traffic to national

destinations, on an ad-hoc and regular packages basis, taking into
consideration the specific requirements of the contracting party
abroad. Its source of traffic is mainly foreign tour operators.

An Outbound Tour Operator designs and assembles tour packages for

residents of the Philippines, either foreign or local, to foreign
destinations, such as Hong Kong, the U.S.A. or Europe.

The differentiation is based on the following:

1. Area of Operations. This refers to the geographical area visited

in the course of delivering the tour product. It is the physical
area, with all attractions (natural or man-made), all activities
whether spontaneous or planned, the experience of events, and in
some instances, where the tour operator is based, e.g.: Iligan
City, Province of Albay, Northern Luzon.

2. Nationality of Travelers. The nationality of the travelers is

either Filipinos or foreigners. Examples: Filipinos residing in
the Philippines or based overseas as immigrants (balikbayans),
or citizens of foreign countries residing in the Philippines as
expatriates, or just visiting.

3. Market or Source of Traffic. Refers to the place of residence

of those participating in or availing of a tour package. It does
not necessarily mean the nationality of the tourists or
excursionists. Example: expatriates living and working in Hong
Kong or in the Philippines.

4. Type of Tour Package Operated. Tour packages are generally

divided into two (2) types, namely: regular sightseeing or tour
package and packaged-to-specifications, also known as “ad hoc”,
sightseeing and tour package.

Regular Tour Packages are put together without consideration for

the specific and special interest or requirements of a certain
traveler or group of travelers. These are pre-packaged for the
general, run-of-the-mill traveler and always feature well-known
attractions or activities that have a high demand. Examples of

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 Regular Tour Packages are the standard two-night/three-day
Boracay package.

Ad Hoc Tour Packages are sightseeing tours and tour packages

that are tailor-made to the requirements and specifications of a
particular traveler or group of travelers.

An example of Ad Hoc Tour Packages is a combination of a

fly-cruise itinerary that connects schedules flights with
scheduled Super Ferry trips.

DOMESTIC LOCAL INBOUND OUTBOUND

Area of Anywhere Where the Anywhere in Anywhere in
Operations in the operator is the the world,
Philippines based and Philippines except the
the Philippines
immediate
vicinity
Nationality Filipinos Filipinos, Foreigners Filipinos and
of Travelers and foreigners and expatriates
expatriates and Balikbayans living and
living and expatriates working in
working in living and the
the working in Philippines
Philippines the
Philippines
Market or Philippines Philippines Abroad Philippines
Source of and abroad
Traffic
Type of Tour Ad Hoc and Regular Ad Hoc and Ad Hoc and
Packages Regular Package Regular Regular
Package Package Package
Types of Tour Operators

These classifications are not strictly structured. Tour operators more

often than not combine two or three types. The function is determined by
the main activity in any of the four classifications.

Tour Operations

Tour operations refer to the preparation and implementation of all

activities within an itinerary, within a given time frame, and within the
estimated costs, in order to meet the expectations of the paying client.

Meeting the expectations of the clients is also termed as customer

satisfaction. Customer satisfaction requires the delivery of what the
traveler has requested and what the supplier sells through the middlemen
travel agent and tour operator.

What is requested, reserved and confirmed varies - it may simply be a

one-way transfer from the airport to the hotel, or a complex itinerary to
seven different destinations involving hotels, resorts, airplane
charters, rental of motorized outriggers, cars and tour guide services.

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Tour operations may be divided into two: Quotations & Reservations and
Field Operations

Quotations & Reservations

The activities involved in Quotations & Reservations are mainly within

the physical confines of the office and take place prior to the actual
arrival or handling of the travelers and immediately after their
departure.

Contracting is the process of negotiating for rates below those published

from the suppliers. These suppliers are hotels, restaurants, tourist
sights and sites, and transportation companies, and then collating these.
These rates are known as contracted rates. Published rates less
commission due travel agents are not contracted rates. Contracted rates
are discounted by 30% to 50% off the published rates. The suppliers on
the basis of the tour operator’s potential to produce business, proven
track record and/or its reputation and credibility commit these rates.

Costing is putting together the costs of the various components,

activities or services included in the itinerary, depending on the number
of travelers availing of the package.

After calculating the approximate desirable profit from each component

and adding this to the cost, the result is a Quotation which is cost +
profit. It includes concession.

Once the quotation is accepted, Reservations are placed according to the

proposal.

Field Operations

Field Operations involves delivering the services agreed upon. These are
always conducted outside the office in the field and take place
immediately upon arrival and up to the travelers’ departure from the area
of operations.

Transfers refers to the meeting and assistging the clients upon arrival
and/or sending them off on departure. Tranfers are also provided when
short-distance movement of the clients from one place (hotel) to another
(restaurant) and vice-versa.

Tours Sightseeing is a mini-package involving local transportation,

visits to sites or sights of interestm tour guide services and snacks or
meals outside the hotel.

Accommodations and Meals are part of the package when so requested.

Passage, refers to air, sea, or land transportation from one destination

to another and back.

Ancillary Services are extra-ordinary services that may be requested

(foreign-language speaking guide)

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QUOTATIONS & RESERVATIONS FIELD OPERATIONS
(1) Contracting. Negotiating
contracted rates and
concessions from the
suppliers.

(2) Costing. Putting together

the costs of the activities
included in the itinerary of
the tour package. Also a
Confidential Tariff
construction.

(3) Quotation. Cost plus profit

plus and pro-rated
concessions. Listing of prices
in the Confidential Tariff.
(cost + profit = quotation).
(5) Transfers Arrival or
(4) Reservations. Processing Departure
the advance requests for space Tours Sightseeing or
or services with the Packaged
suppliers. Accommodations and Meals
Passage, air, sea, land
Ancillary Services

(6) Accounting. Collection of

payments and paying the
suppliers.

(7) Evaluation. Assessment of

the clients’ satisfaction in
the package or product.
Tour Operations Cycle

Accounting & Evaluation

Accounting and evaluation are post-tour operations activities. The one

involves the processing of payments due and the other is the assessment
of performance or product delivery.

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Tour Planning & Packaging

The product of Tour Operators is the Tour Package. A Tour Package is a

combination of two or more travel components.

Components of the Tour Package

The basic components of a tour package are:

Transportation refers to the movement of people to and from a point of

origin to a destination, or destinations and back to the point of
origin by air, sea or land.

Transfers transportation to and from a destination’s gateway such as

an airport, pier or bus station to the place of lodging, and
vice-versa.

Tours or sightseeing tours are a combination of transportation within

the destination to sights and sites of interest, tour guide’s
services, entrance fees, entertainment or activities and sometimes,
snacks and meals.

Hotel or resort accommodations refer to lodging and meals within the

lodging establishment.

Tour Escort is an individual who travels with the clients from the
point of origin and back, and acts as the manager of the tour group.
Also known as Tour Leader.

A combination of two or more of these components is a tour package.

Tour guide’s services are provided in connection with sightseeing in a

locality, and sometimes during transfer services. Tour Escorts are
individuals who travel with the clients from the point of origin and
back. They normally manage all activities of the tour’s itinerary and
insure the visitor’s well being.

Classification of Tour Packages

Depending on the number of components tour packages have different

labels:

If only tours and transfers are included, it is called ground

arrangements package.

If tours, transfers and hotel accommodations with some meals are

included, this is called land arrangements package.

If tours, transfers, hotel accommodations and some meals, plus

transportation to and from the destination(s) are included, this is
called an inclusive tour package.

If all components are included, including a tour escort, this is called

an inclusive escorted tour package.

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Variations of Tour Packages

Tour packages vary according to any of the following:

1. Duration - Refers to the number of days and nights included in the

package. Normally three days would mean two nights.

However, when a package crosses the international dateline or

spends an overnight inside an aircraft, the number of nights in the
package is the same as the number of days.

2. Destination/s - A package may be for a single destination, or for

multiple destinations, i.e. two or more.

3. Category of Accommodations - The category of the accommodation

establishment may vary, from De Luxe (DLX), to First Class (FST),
to Standard (STD), to Economy (ECO), to Budget Hotel (BUD).

Pension Houses and Inns are normally not categorized.

4. Meal Plan - Refers to the number of meals per day included in the
package, whether served in the place of lodging or outside in a
restaurant.

If all meals are included, this is a Full-Board Basis, Full Pension

or American Plan.

If only Breakfast and Lunch or Dinner are included this is a

Half-Board Basis, Demi-Pension or Modified American Plan.

If only Full Breakfast is included, this is a Bed-and-Breakfast

Basis. If the breakfast is Continental Breakfast this is a
Continental Plan. If no meals are included in the package, this is
a European Plan tour package.

Breakfast contents vary. Coffee or tea with rolls, jam and butter
is a Continental Breakfast. If eggs and bacon or ham plus toast are
added, it is an American Breakfast. If the toast is changed to
fried or plain rice and the ham or bacon changed to “tapa” or
“daing”, it is a Filipino Breakfast. Any breakfast with rice
porridge (“lugaw”) and a number of side condiments is an Oriental
Breakfast. A table laden with breakfast food and self-service is a
Buffet Breakfast.

5. Mode and Class of Transportation - Mode of transportation refers

to air, sea or land travel and type of equipment.

Class is the quality of the transportation equipment, facility and

amenities offered the passengers. In air travel, the class
divisions are First, Business and Economy. In sea travel, they are
Suite, Stateroom, Cabin, First Class, Business Class, Tourist and
Economy. In land travel, it is Air-Conditioned or Ordinary service.

TP8 Midterm Lecture 3

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Types of Sightseeing Tours

Tours or sightseeing tours, are a combination of transportation within

the destination to sights and sites of interest, tour guide’s services,
entrance fees, entertainment or activities and sometimes, snacks and
meals.

These are classified as follows:

Half-day Sightseeing Operated mornings or afternoons. Normally

includes a snack.

Full-day Sightseeing Eight to ten hours with lunch.

Evening Tours Operated after six in the evening. Normally

includes dinner and a drink.

Optional Tours Tours that are not included in the Tour Package,
for which the client pays extra.

Planning a Tour Package

When planning a tour package the following information will help meet
the clients’ expectations:

1. Client profile. The market variables come into play here. The more
information you have on the clients the better.

2. Destinations requested or proposed. The market variable is matched

with the destination characteristics in order to suit the product
to the market.

3. Duration. Again the market variable plays an important role here,

as it has to suit the client’s profile.

4. Category of accommodations. Like the duration, the type of

accommodations depends on the client’s profile.

5. Meal plan. This is usually based on what is convenient at the

destination, and in line with the sightseeing tour and activities
included in the package.

6. Sightseeing or activities requested or suggested. This will depend

on the destination characteristics, sites and sights, and
activities.

7. Mode and class of transportation. This will depend on the

destination’s accessibility and client’s convenience.

8. Ancillary services. Refers to extra ordinary service or items that

will have to be included in the costs when needed.

9. Guide and/or tour escort services. Always pro rated when included,
it will depend of the client’s needs. Example: Japanese-speaking
tour guide.

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10.Number of Free Of Charge (FOC) allowed or required. Subject to
availability from suppliers and entitlement based on number of
participants.

The present industry practice is one FOC for every fifteen (15)
full-paying participants.

When the answers to most of the questions above are on hand, the
costing process can begin.

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 TP8 Midterm Lecture 3

Tour Costing
Costing a Tour Package

Costing refers to the process of determining the actual cost of a tour

package by detailing the various components of the package, and attaching
a specific cost represented by the contracted rate to each, according to
the costing methods detailed in this section.

Before costing a tour package, an itinerary must be developed.

An itinerary is a schedule of activities and destinations arranged in a

chronological order.

There are three (3) types of itineraries, namely:

SKELETAL. An itinerary that is proposed and preliminary.

TECHNICAL. An itinerary that specifies the details like scheduled

transportation, arrival/departure times, duration of sightseeing,
travel time, type of accommodation and the like.

DESCRIPTIVE. Includes a description of the planned activities and

destinations visited.

Day 01 Hong Kong/Manila

Day 02 in Manila
Day 03 Manila/Cebu
Day 04 in Cebu
Day 05 Cebu/Manila/Hong Kong

Sample of a Skeletal Itinerary

The following sample technical itinerary is for an Ad Hoc Inbound group

tour from Hong Kong.

This 5-day/4-night Manila/Cebu Package is on full-board basis, inclusive

of round trip transfers, and sightseeing tours of Manila and environs,
Pagsanjan Falls and Rapids Excursion with Lunch and boat ride, and Mactan
Island Tour with Lunch.

The domestic airfare Manila/Cebu/Manila can be priced/quoted separately,

as this component could be made part of the international airfare, and
included in the passengers’ air ticket, Hong Kong/Manila/Cebu/Manila/Hong
Kong. If the domestic airfare is combined with the international airfare,
then the package would be an Inclusive Tour Package, sold by the Hong
Kong travel agency.

If quoted separately, this package would be a Land Arrangements Tour

Package only.

The costs of the components of a tour package can be fixed or variable.

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Fixed costs do not change and remain constant regardless of the number of
participants.

Variable costs depend on the number of projected or proposed

participants.

DATE TIME/S ACTIVITIES/TRIP HOTEL

Day 1050H Arrive Manila on board CX901
01
Upon arrival, meet & assist and
transfer to La Corona
Check-in
Hotel Lunch
1400H/1700H Sightseeing Tour of Manila City
1900H Hotel Dinner
Overnight La Corona

Day Hotel Breakfast

02
0800H/1600H Whole-day Pagsanjan Falls &
Rapids
Excursion with Lunch & Boat-ride
1900H Hotel Dinner
Overnight La Corona

Day Hotel Breakfast

03
Morning at leisure
1200H Hotel Lunch
1300H Departure Transfer
1500H/1600H Manila/Cebu via PR861
Transfer to Waterfront Lahug
Hotel
Check-in
1900H Hotel Dinner
Overnight Waterfront

Day Hotel Breakfast

04
0800H/1100H Mactan Island Tour
1200H Lunch at Restaurant
Afternoon free
1900H Hotel Dinner
Overnight Waterfront

Day Hotel Breakfast

05
0900H Departure transfer
1000H/1210H Cebu/Manila via PR848
1445H/1620H Manila/Hong Kong vis CX902
Sample of a Technical Itinerary

The cost of all tour packages is on a per-person basis.

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 ● Transportation is the cost by air, sea or land, to and from a
point of origin to a destination, or destinations and back to
the point of origin.

Transportation costs by scheduled air, sea or land transportation

companies are always based on a per-person fare therefore they remain
constant, regardless of number. Sometimes suppliers of transportation
services grant “special” discounted fares for group tours; they also
grant one Free-of-Charge (FOC) concession for a minimum number of full
fares.

If however, a group tour charters a transportation equipment, be it an

aircraft, sea craft or land vehicle, the total cost of the craft/vehicle
is divided by a pre-determined number of passengers, not exceeding its
allowed capacity and within its break-even load factor - 50% to 60% -
that will use such craft/vehicle. This formula is termed “pro rated
cost”.

● Transfers refer to the cost of transportation to and from a

destination’s gateway such airport, pier or bus station to the
place of lodging, and vice versa.

Transfers costs are almost always prorated. However, if the transfer is

by a regular airport shuttle service the cost is fixed per-person.

The porter fee paid to porters at the pier or airport is a cost item.
These are fixed per piece of luggage. In certain locations in the
Philippines transfer by motorized tricycles or bancas are used. In these
instances, the costs of the tricycle or banca are prorated by
predetermined number of passengers, not exceeding its allowed capacity.

● Tours or sightseeing tours, are the total costs of

transportation within the destination to sights and sites of
interest, tour guide’s services, entrance fees, cost of
entertainment or activities and, sometimes, the cost of snacks
and meals.

Sightseeing Tours are mini packages that include transportation within

the destination, tour guide services, entrance fees, entertainment
activities, and sometimes snacks and meals.

Transportation costs within a destination to sites and sights of interest

are normally prorated by a predetermined number of participants not
exceeding its allowed capacity and within its break-even load factor of
at least 50% to 60%.

Sightseeing by scheduled transportation service is not advisable.

Scheduled sightseeing tour packages are called “Seat-in-Coach”

sightseeing tour packages.

The tour guide cost is calculated by adding up the sum total of the tour
guide’s fees plus the cost of transportation, board and lodging on a
single room basis. The sum total is prorated by a predetermined number of

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participants. The rule of thumb when calculating the cost of the tour
guide is one guide per vehicle.

Entrance fees are always fixed. As a rule of thumb, no FOC concessions

are given for entrance fees.

Cost for entertainment activities may be fixed or variable. For example,

rental fees for a picnic hut will normally be prorated, while the
entrance fee to the picnic site is fixed.

The boat rides fares are normally fixed per person.

Meals and snacks included in the package are always fixed and always
include the FOC and the tour guide.

● Hotel or resort accommodations refer to the cost of the

lodging, depending on the number of persons occupying a room,
and the costs of meals served within the lodging establishment.

When hotel accommodations are included in the tour package, the rule is
that two persons share a room. Hotel costs are always fixed. For room
costs, the rule of thumb is to prorate the cost of the room, by the
number of persons occupying it.

The room being shared may either be a twin room with two beds, or a
double room with one matrimonial bed.

If the Twin/Double room rate at La Corona Hotel is US$ 48.00, the

per-person rate for a share-twin or half-twin is US$ 24.00.

US$ 48.00 divided by two guests = US$ 24.00

If a guest does not wish to share the room with anybody, there is a
single supplement charge representing the difference between a half-twin
and a single room. The single-room rate, i.e. only one person occupying a
room, at La Corona Hotel is US$ 42.00 the single room supplement is US$
18.00.

US$ 42.00 minus US$ 24.00 = US$ 18.00

If three guests wish to share one room, there is a triple reduction

representing the cost of a double or twin room plus an extra bed, divided
by three (3) guests. If the extra bed cost at La Corona Hotel is
US$12.00, the triple reduction rate is US$ 4.00.

Twin rate US$ 48.00 plus extra bed US$ 12.00 = US$ 60.00 divided by
three guests = US$20.00 minus half-twin rate of US$ 24.00 = US$ 4.00.

Some tour operators quote a 1/3 triple rate instead of a triple

reduction. In this case the 1/3 triple rate is US$ 20.00.

Twin rate US$ 48.00 plus extra bed US$ 12.00 = US$ 60.00 divided by
three guests = US$20.00.

If four guests wish to share one room, the one/fourth quad rate would be
the cost of a double or twin room plus two extra beds, divided by four

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(4) guests, If the extra-bed cost at La Corona Hotel is US$12.00, the per
person quad rate is US$ 18.00.

Twin rate US$ 48.00 plus two extra bed US$ 24.00 = US$ 72.00 divided
by four guests = US$18.00.

Meals in accommodation establishments are always based on fixed costs.

As a rule of thumb, meals taken outside the place of lodging are normally
less expensive.

However the transportation cost to and from the restaurant must also be
taken into consideration, as the resulting cost might be higher than the
same meal served at the place of lodging.

● Tour Escort refers to the costs incurred in the accommodations,

meals and some transportation components of the individual who
travels with the clients from the point of origin and back.
This cost does not normally include the per diem or salary.

All of the Tour Escort’s costs - transportation, accommodations and meals

- are pro rated by the pre-determined number of participants. However,
suppliers’ concessions are always applied to the Tour Escort.

Please note that while the tour guide costs are calculated by adding up
the sum total of the tour guide’s fees plus the cost of transportation,
board and lodging on a single-room basis, the tour escort’s costs are
reduced by applying all possible concessions.

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Tour Costing Application

Inbound

Name: ____________________________________ Score:_________________

The University of Hong Kong will organize a 4-day/3night full-board land

arrangements tour package to the Philippines.

The group is made up of twenty-five students and two teachers.

They will stay two nights at The Manila Corporate Inn and one night at
the Century Resort Hotel in Angeles City.

They arrive on day one in the afternoon and will proceed to the hotel for
check-in.

The following day they drive to Angeles after breakfast. In the afternoon
they will visit Systems Plus College Foundation- Balibago main campus. On
the third day they have a tour of Clark Economic Zone with Lunch at a
local restaurant, Golden Blossoms, then drive back to Manila in the
afternoon.

On day four they depart for Hong Kong in the very early morning.

In brackets of 20 + 1, 25 + 1 and 30 + 2 cost the package with the

following applicable cost components.

Include FOCs, SWB Supplement and Triple Reduction.

The one-way bus transfer rate in Manila is PhP 3,000.00. The

Manila/Angeles/Manila bus hire for 36-hours is PhP17,000.00

They need a tour guide only during the Clark Economic Zone Tour at
PhP1,000.00, while the Lunch at the local restaurant is PhP350.00

Use PhP50.00 as the rate of exchange. The applicable hotel rates are as
follows in US Dollars.

Hotel TWB SWB XBED ABF LNC DNR

Manila Corporate Inn 38 30 10 5 8 10
Century Resort Hotel 25 20 7 5 6 8

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TECHNICAL ITINERARY

Name ______________________________________ Date _______________

Name of Group _______________________x ______

DAY TIME/s ACTIVITY/TRIP HOTEL/RESORT

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