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Tourism Economics

Tourism Economics. Chapter 6: Economics of Other Tourism Sectors. TRM 490 Dr. Zongqing Zhou. Chapter 6: Economics of Other Tourism Sectors (1). Overview A multibillion dollar business Controlled by Major Rental Companies: Hertz, Avis, Budget, and National

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Tourism Economics

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  1. Tourism Economics Chapter 6: Economics of Other Tourism Sectors TRM 490 Dr. Zongqing Zhou

  2. Chapter 6: Economics of Other Tourism Sectors(1) • Overview • A multibillion dollar business • Controlled by Major Rental Companies: Hertz, Avis, Budget, and National • Has financial or ownership relationship with all three major US auto companies • Hertz, Avis, Budget, and National control about 80% of the US market in terms of number of locations (see figure 6-1 for rankings)

  3. Chapter 6: Economics of Other Tourism Sectors(2) • Revenue and profit sources • Difference between prices (30% or more discount) paid for cars and prices the cars are sold for after being used by customers • Some auto manufacturers own parts of rental car company (Ford-Budget rental car; GM-National rental car and Avis; Chrysler-Thrifty, Dollar) • A chance to showcase new cars • Car typically sold at under 20,000 miles to ensure maximum profits • Factors affecting car rental economics • General economy (rising and falling as economy moves up or down • Major costs • Purchase or lease of automobiles • Cost of borrowing money • Labor costs • Measurement of a company’s perfermance • Fleet utilization (see Fig 6-2, p. 115)

  4. Chapter 6: Economics of Other Tourism Sectors(3) • Cruise Line Economics • Rapid growth since the fly/cruise introduced in 1971 • The fastest growing business in the travel industry • Carnival cruise lines is the biggest and most profitable • See the latest development in the industry here • Costs • Once the breakeven point is reached, marginal cost of an additional passenger is low • Food cost does increase as number of passenger increases, but labor costs for service personnel increases very little • Wages and salaries remain fixed, tipped employees’ income increases at no cost to the ship.

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