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Session 2. Transportation. Grading. SEMINARS: Case work ( 3 ) – 15 points ( 5 points for each case ) Presentation of a chosen company – 5 points Seminar work: tourism development in a selected country – 20 points (15 points written report, 5 points presentation). Introduction.

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Session 2

Transportation


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Grading

SEMINARS:

  • Case work (3) – 15 points (5 points for each case)

  • Presentation of a chosen company – 5 points

  • Seminar work: tourism development in a selected country – 20 points (15 points written report, 5 points presentation)


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Introduction

  • Without transportation, there is no tourism

  • Modes of transportation are many, but there are 2 broad categories:

  • Surface (both land & water)

  • Air

    Transportationcan be intermodal


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Introduction

  • Different modes of travel

    2. Air travel dominates:

  • Long-distance tourism

  • Medium-distance tourism

    3. Rail travel more limited than in past, but high-speed trains & in inter-city corridors increasing


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Introduction

4. Motorcoach travel:

  • Reaches many communities not served by other modes

  • Only accounts for small percentage of miles traveled

    5. Automobile travel dominates:

  • Shorter trips

  • Domestic journeys

    6. Inadequate transportation creates unfavorable image for destination & lost potential


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Transportation Problems

1. Congestion:

  • Especially roads & airports during peak travel

  • Delays cost time & money

    2. Security:

  • Basic requirement for tourism, especially after 9/11

  • Adds cost & consumes time

  • Deters some travelers

  • Hinders some destinations


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Transportation Problems

3. Environment:

  • Traffic causes harm when it exceeds carrying capacity

  • When it ignores principles of sustainability

  • When pollution controls are lacking

  • Seasonality:

  • High season creates overcrowding & congestion

  • Wastes profit potential of high demand

  • Creates over-capacity during low demand


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Cruises

  • Trans-Atlantic passage was mainly by ship until 1957

  • Some ships were converted to cruise ships

  • But ships specially-built for cruises are more efficient and profitable


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Cruise Line Consolidation

  • Carnival Corporation, world’s largest cruise company

  • Carnival recently acquired Princess Cruises & already owned:

  • Cunard, Costa, Holland America, Windstar, & Seabourn

  • Royal Caribbean is 2nd largest cruise line

  • Recently acquired Celebrity Cruises

    4. Disney now operates cruises also


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Passenger Ferries

  • An important link in transportation systems in many parts of the world

  • Some are over-crowded

  • High-speed ferries

  • Some ferries offer wide variety of services

  • For millions of people: commuting daily

  • For tourists: sightseeing or internal transport


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Other Ships

  • Ocean-going freighters, river cruises, yachts, ferry boats

  • River cruises popular in USA (paddlewheelers with gambling) & many other part of world


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Trains Regaining Importance

  • Many people don’t like hassles of flying or congestion of driving

  • Airports farther from city center, security waits, arrive 1-2 hours early to check-in, circle for landing, wait for bags upon arrival (hope they arrived too), then connect to city or home

  • Train stations often in city centers, so easier to reach when departing & easier to final destination when arriving


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Trains Regaining Importance

  • More high-speed trains being built

  • Trains go during bad weather that grounds flights & stop vehicular traffic

  • Train passes: convenient & save $$$

    EX: Multi-country: W. Europe & beyond

    EX: Single country: Swiss Pass, Britrail pass

    4. Many countries keep RRs under govt control


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Specialty Trains

  • Many trains are tourist attractions themselves

  • Orient Express: London to Istanbul

  • Blue Train: Cape Town to Johannesburg

  • Copper Canyon: Mexico

  • Palace on Wheels: India

  • Indian-Pacific: Australia

  • Rail travel helps boost tourism, especially in Europe with its extensive, easy to use system

  • World’s largest railways: Russia, India, China


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Road Travel: Highways

  • 1930s, first multilane highway, Autobahn, built in Germany

  • Cars became most popular form of transport:

  • Affordable cars available

  • More & better highways built


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Why Travelers Prefer Cars

  • Cars are relatively inexpensive to buy & use, especially for families

  • Convenience of having transportation at destination

  • Ability to alter route & pace of travel

  • Opportunity to explore new places close-up

  • Good roads & service/facilities along the way

  • Easier to carry lots of baggage & other stuff with you in your own car

  • You control what’s inside, unlike plane, bus, ship, etc. – it’s yours!


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Rental Cars

  • Growth in rental car industry parallels growth in airline industry

  • Largest fleet: Enterprise

  • Largest tourism market share: Hertz

  • Fleet utilization: managers must anticipate demand for rental periods, car types, pickup & return locations, insurance, and fuel options


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Rental Cars

  • Charges added to basic costs can include:

  • Mileage &/or topping off gas tank

  • Insurance (liability & collision)

  • Drop-off (at different location)

  • Airport fees

  • Taxes

  • If you rent car abroad, you may need an International Driver’s Permit

  • May be minimum age limits: (25) in USA


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Buses

  • Most pervasive form of intercity transportation in the world

  • Buses also used heavily for multiple-country tours of Europe and throughout USA

  • Buses are key inter-modal link for pax between home, work, tourism destinations and airports, seaports, and train stations

  • Intercity bus travel has much better image in Europe & Asia than USA

  • Customer profile: under age 24, over age 65


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Growth Opportunities for Buses

  • Bus usage is increasing due to popularity with charter & tour operators

  • Buses are flexible & economic to operate for group travel

  • As baby boomers age, they become prime targets


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Airline Industry

Negative aspects of flying:

  • Airline travel is extremely safe, but accidents are catastrophic

  • Time is lost going to and from airports, weather delays/ cancellations, circling airports

  • Flying can be expensive, especially for family

  • Security hassles

  • Loss of control of space and routine


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Airline Problems

  • Suffers financially from wars, epidemics, increases in oil (fuel) prices, terrorism, etc.

  • Tourism needs airlines; without them:

  • Low-cost carriers

  • Legacy airlines


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Sources of Airline Data

1. ATA Annual Report

  • Published by Air Transport Association

  • One of best sources of data on airline industry

    2. World Transport Statistics

  • Published by IATA

  • Forecasts & financial/traffic statistics

    3. World Airline Report

  • Published by Air Transport World

  • Covers world’s top 25 airlines & financial data


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Airline Alliances

  • Airlines need strategic partners

  • Alliances are not M&A, but enhance routes, service, & revenue

  • 1992: Air France & KLM (first alliance)

  • 1997: Star Alliance

  • Originally: Lufthansa, Air Canada, Thai, SAS

  • Added: United, Varig, Air New Zealand, ANA, Austrian Airways, BMI, Asiana, LOT, Spanair, U.S. Airways, Lauda, Singapore, Austrian Arrows


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Airline Alliances

5. SkyTeam:

  • Aeromexico, Air France, Alitalia, CSA, Delta, Korean Air, Continental, KLM, Northwest

    6. Oneworld:

  • American, British Airways, QANTAS, Cathay Pacific, AerLingus, Iberia, LAN, Finnair


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Two New Aircrafts

  • World’s 2 largest aircrafts manufacturers are:

  • Boeing (USA)

  • Airbus (Europe)

  • Boeing 787 Dreamliner:

  • Airbus A380:


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Airlines Organizations

  • IATA: International Air Transport Association

  • Composed of almost all international airlines

  • Founded in 1919, reorganized in 1945

  • Purpose: Facilitate pax & cargo across route structures and foreign borders (one system)

  • Pax buy 1 tix, fly multiple carriers & countries


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Airlines’ Profit Margins

  • Airlines operate on very thin profit margins

  • For survival & profitability, concerns are:

  • Controlling costs & maximizing revenue

  • Airlines’ biggest expenses are:

  • Operating costs, i.e. labor & fuel

  • Equipment, especially aircraft: right size plane for routes & uniformity; regional jets

  • Costs, except labor, difficult to control

  • Need high load factor (% of available seats sold) per revenue pax mile on each flight


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Airline Hub & Spoke System

  • Airlines select hubs in major cities

  • Pax from other cities it serves are funneled through hub to their final destination


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Hub Cities of Airlines

  • Continental Airlines: Houston, Newark, Guam

  • KLM Royal Dutch Airlines: Amsterdam

  • Delta Air Lines: Atlanta

  • Lufthansa German Airlines: Frankfurt

  • SAS: Copenhagen

  • Northwest: Detroit, Minneapolis, Memphis

  • United Airlines: Chicago

  • British Airways: London Heathrow

  • Varig: Sao Paulo & Rio de Janeiro


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Airline Language Codes

  • Every airline has a code of 2 letters

  • American Airlines = AA, Lufthansa = LH

  • Every city with scheduled pax service has an airport code of 3 letters

  • Narita International Airport: Tokyo (NRT)

  • Orlando International Airport = MCO

  • Airline service has codes of 1 or more letters

  • First class = F, coach & economy = Y

  • Advanced purchase exchange = APEX


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Airline Language Flights

  • Nonstop:

  • Direct (through):

  • Connecting:


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Airline Language Trips

1. One-way:

2. Round-trip:

3. Circle trip:

4. Open-jaw:


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Yield Management Basics

  • YM (RM) requires:

  • Allocating capacity (seats, rooms, etc.) to customers

  • At right price

  • Accomplishing business goals

  • YM (RM) goals are to:

  • Maximize revenue (yield)

  • Enhance customer service (& increase loyalty)

  • Increase profitability

  • Improve operating efficiency (lower cost)


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Yield Management Conditions

  • Capacity is relatively fixed or finite:

  • Demand increases, but airline cannot add more seats (hotels cannot add more rooms)

  • Demand can be divided into market segments:

  • Based on customer profiles (needs/demos)

  • Inventory is perishable:

  • After plane leaves gate, no more seats can be filled with revenue-generating pax


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Yield Management Conditions

4. Services can be sold well in advance (APEX):

  • Demand fluctuates substantially

  • Marginal sales costs are low & marginal capacity costs are high:


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Technology Helps with YM

  • Modern technology allows airlines to sell empty seats close to departure date/time

  • This is done via the airline’s website

  • Also done via tourism intermediary websites:

  • This allows airlines to move its “distressed inventory” without advertising price reductions


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Example of YM (RM)

  • 37-seat aircraft (same model for larger planes)

  • 150-miles flight

  • From past reservations, we know we can probably sell:

  • All 37 seats to pleasure travelers who buy APEX fares (37 x $39 = $1,443)

  • 17 seats to business travelers who buy full-fare coach tix (15 x $98 = $1,666)

    4. But – neither of these 2 markets enables us to maximize our revenue for this flight


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Example of YM (RM)

  • But – a combination of both markets would

  • Plus, in addition to 30-day APEX fares ($37), and the last minute full-fares ($98), we can also offer 14-day APEX fares ($59)

  • This gives us more flexibility to reach markets

  • Provides pax better opportunities:

  • To secure reservations

  • Or save money

    5. Data tells us some pax with reservations will be “no shows”, so we overbook flight


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Example of YM (RM)

  • YM strategy based on computer software analysis of past reservations data is to sell:

  • 8 of the 30-day APEX fares; 8 x $39 = $312

  • 12 of the 14-day APEX fares: 12 x $59 = $708

  • 17 of the full fare tix: 17x $98 = $1,666

  • If this strategy works, our total revenue for this flight would be: $2,686

  • This is almost double what either of the other options would earn on their own

  • Our target markets also remain diversified


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Statistics from Our YM (RM)

  • ASM (available seat miles):

  • 150 miles x 37 seats = 5,550

  • RPM (revenue passenger miles):

  • 150 miles x 37 pax = 5,500

  • Load factor (RPM divided by ASM):

  • 5,500 divided by 5,550 = 1 or 100%

  • 100% load factor is ideal; 60-70% is normal

  • To be profitable, airlines must know price sensitivity (elasticity) of their target markets


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Internet’s Impact on Distribution

  • All travel distribution channels & sectors have been changed by use of Internet websites

  • Airlines have been impacted most of all

  • For airlines, Internet usage has resulted in:

  • Transparency in inventory

  • Transparency in pricing

  • Prior to Internet, travelers bought air tix via:

  • Airline office

  • Travel agencies


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Online Booking Engines for Air Tix

  • Marketers created online booking engines allowing travelers to compare airline seat inventories by:

  • Price (based on class of service, day of week, time of day, time between connections, # of connections, etc.)

  • Schedule (departure, arrival, routing, duration)

  • Best prices or best schedule can be listed first

  • Result: Internet expanded point-of-purchase competition & demand for lowest prices


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Other Links

  • Transportation is also divided into:

  • External: home-destination (gateway-gateway)

  • Internal: local transport within destination

  • Important modes of internal transport are:

  • Subways & light-rail systems

  • Trolleys, trams, streetcars

  • Taxis, limos, rental cars, shuttle buses


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Walking & Cycling

  • Most tourists enjoy walking & do much of it

  • Go sightseeing, explore the city, pub crawl

  • Walking paths are part of destination planning

  • Bicycle tours are also very popular

  • Many cities throughout the world have both walking & cycling paths


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