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2012 | OriginalPaper | Buchkapitel

8. The Production and the Sale of Holidays: Tour Operators and Travel Agencies

verfasst von : Guido Candela, Paolo Figini

Erschienen in: The Economics of Tourism Destinations

Verlag: Springer Berlin Heidelberg

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Abstract

After having analyzed in Chap. 7 why tourism firms arise and develop and how they are organized, and after having discussed some general topics affecting the supply side of the tourism sector (the seasonality of demand and the technology change), we now start to investigate the economic rationale of tourism firms. With the term “economic rationale” we mean the process, logically divisible into three stages, through which the tourism firm: (a) has to estimate the average costs of production; (b) in order to fix the price at which to sell its services; (c) with the aim of maximizing profits, the long-run goal of any privately owned firm.

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Fußnoten
1
Public bodies (like the agencies for tourism promotion and the public infrastructures) will receive special attention in Chap. 15, when dealing with the public intervention in the tourism sector.
 
2
For a deeper analysis of the management and marketing issues related to tour operators and travel agencies, see more specific textbooks such as Goeldner et al. (2005) and Holloway and Taylor (2006).
 
3
This observation provides a sufficient reason for the adoption of a price discrimination policy as a function of the time of departure. On one hand, this allows to impute to the tourists departing in the peak season some of the costs that are not paid by those who go on holiday off season (see Sect.​ 9.​5); on the other hand, this policy allows to use the price in order to smooth the seasonality of the tourism flows (see Sect.​ 7.​3).
 
4
The markup can be the same for all types of holidays produced by the tour operator or different depending on the type i of tourism for each destination r.
 
5
In perfect competition it is said that firms do not make any profit. This means that firms do not earn extra profits over the standard remuneration of capital which, in economic terms, is already computed in the costs. In other words, if the equilibrium interest rate on the financial market is 5 %, a tourism firm operating in a perfectly competitive market remunerates the capital invested with an interest rate of 5 %; since in the standard economic model the interests are computed as costs, no profit remains to the management after the interests have been paid back to the capital owners.
 
6
The business tourism can be classified as: (1) trips organized to meet customers or suppliers in order to sign contracts, to develop business plans, or for technical assistance; (2) trips organized to attend trade fairs; (3) trips organized to attend conferences, conventions, or business meetings. Incentive tours, instead, consist of trips purchased by a company to reward managers or promoters for their accomplishments or to strengthen their sense of belonging to the company.
 
7
Since the agent’s revenue is given by the commission, which usually remains unchanged for long periods of time, the policy of monitoring and controlling the variable costs is the best available tool for the agency to reach its own target in terms of profit.
 
8
In microeconomics the “short run” is defined as the period of time in which there are fixed costs, while the “long run” is the period of time that is long enough to not imply any fixed cost.
 
9
A market is contestable if firms can freely enter and exit the market without bearing any additional cost (Baumol et al. 1982).
 
10
It has to be added that for the tourist it is probably better to have all the relevant information (with the comparison of all the prices) summarized in one single page rather than bearing the higher costs of separate searches on the single airlines’ web sites.
 
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Metadaten
Titel
The Production and the Sale of Holidays: Tour Operators and Travel Agencies
verfasst von
Guido Candela
Paolo Figini
Copyright-Jahr
2012
Verlag
Springer Berlin Heidelberg
DOI
https://doi.org/10.1007/978-3-642-20874-4_8