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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
Session 2

Transportation

grading
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
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

introduction4
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

introduction5
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

transportation problems
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
transportation problems7
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
cruises
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
cruise line consolidation
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

passenger ferries
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
other ships
Other Ships
  • Ocean-going freighters, river cruises, yachts, ferry boats
  • River cruises popular in USA (paddlewheelers with gambling) & many other part of world
trains regaining importance
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
trains regaining importance13
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

specialty trains
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
road travel highways
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
why travelers prefer cars
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!
rental cars
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
rental cars18
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
buses
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
growth opportunities for buses
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
airline industry
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
airline problems
Airline Problems
  • Suffers financially from wars, epidemics, increases in oil (fuel) prices, terrorism, etc.
  • Tourism needs airlines; without them:
  • Low-cost carriers
  • Legacy airlines
sources of airline data
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
airline alliances
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
airline alliances25
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
two new aircraft s
Two New Aircrafts
  • World’s 2 largest aircrafts manufacturers are:
  • Boeing (USA)
  • Airbus (Europe)
  • Boeing 787 Dreamliner:
  • Airbus A380:
airlines organizations
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
airlines profit margins
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
airline hub spoke system
Airline Hub & Spoke System
  • Airlines select hubs in major cities
  • Pax from other cities it serves are funneled through hub to their final destination
hub cities of airlines
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
airline language codes
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
airline language flights
Airline Language Flights
  • Nonstop:
  • Direct (through):
  • Connecting:
airline language trips
Airline Language Trips

1. One-way:

2. Round-trip:

3. Circle trip:

4. Open-jaw:

yield management basics
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)
yield management conditions
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
yield management conditions36
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:
technology helps with ym
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
example of ym rm
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

example of ym rm39
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

example of ym rm40
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
statistics from our ym rm
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
internet s impact on distribution
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
online booking engines for air tix
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
other links
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
walking cycling
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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