Confronting Competition In The Tourism Industry

Europe’s tourism industry is one of the biggest tourism industries in the world and therefore has all top tour operators based in Europe. Two of the biggest names are Thomas cook and TUI. They have the maximum market share in the Europe’s tourism industry. The tour operator’s business environment consists of competitors, macro environments and industry also. Various tools used for the analysis of the business environment are PESTLE analysis, porter’s five force analysis and industry life cycle. SWOT analysis will be done for industry’s analysis and also on how the tour operators in Europe are performing.

Environmental Analysis

PESTEL Analysis

PESTEL helps in understanding the important factors affecting the change. Below is the PESTEL analysis:

Political: After the tourist attacks, the government comes up with strict laws on immigration and also restrict the destinations after the attacks which affect the perception and also the perception of the tourist. Also, the taxation policy affects the tourism as they charge taxes on the food and lodging industry which contributes the maximum to the tourism industry. (Baum, T, 1999).

Economic: The exchange also affects the tourism in the country and plays the important role.( Davidson AP, Burgess S, 2006). The gap between the Euro and the Pound sterling is decreasing, therefore, there is a possibility that the outbound tourism is affected in Europe which in turn will affect the tour operators. The recession also affected the tourism industry not only in Europe but in other countries also.

Socio-Cultural: Tour operators have understood what the customers are looking for; they are looking for a brand, lifestyle and safety. Due to this the tour operator in Europe. The tour operators make customised tour packages to suit the need of the customers. The customers travelling to Europe are looking for the brand names that are doing good in the business and have a name, this is due to the demand of security when travelling to the other country.

Technological: The online and internet bookings are increasing day by day due to the easy access of the internet. The online booking company’s like expedia.com, hotels.com, etc are giving packages and also the customers can make their own packages. This has highly affected the tourist operators in Europe as they get the business from other countries as well. The internet booking companies are doing well in the business due to the cost saved and also less of manpower requirements. (Douglas, and Derrett 2001).

Environmental: The European governments are campaigning for green holidays like farm holidays. The carbon dioxide is the major source of the pollution and the aeroplanes contribute the maximum carbon dioxide to the environment. (Munoz, J. 2005). Apart from this, the health issues like swine flu or influenza cause tourists not to travel to the country. The governments also restrict these countries for travelling.

Legal: the European governments are proposing strict norms and laws for the aviation industry in terms of safety and regulations. The opening of new hotels in the country also requires legal permits for the company.

Porter’s Five Force Analysis

This identifies the competitors in the tourism industry and all these five forces are linked with each other.

The risk of Potential Entrants: The threat of new entrants in terms of tour operators is low because of the high capital investment, brands already existing and have created a niche in the market and people knows about the top players in the industry. It is difficult for the new entrants to establish themselves. (Alford, 2009)

The threat of Substitutes: The threat to substitute of tourism or travelling is less as people these days prefer to take a break and travel. They will not substitute travel to any other activities. Also, the European countries are full of greens and have both mountains and beaches which attract the tourists from around the world. (Alford, 2009)

Bargaining power of Suppliers: The supplier’s bargaining power is high only with the companies who are new to the business or holds small share in the market. However, the bargaining power is not the same with the companies who hold the maximum market share in the tourism industry. Also, the European markets have their own aviation industry which helps in bringing or supplying tourists to the country at the mitigated prices.

Bargaining power of Buyers: Since Europe is a big market in tourism industry it caters to both the individual travelling customers and travelling through agencies. In the latter case, the travel agents or tour operators make the packages in such a way that people buy them. The tour operators compose a major and a powerful group for the buyers.

Rivalry among the Competitors: The rivalry among the competitors is moderate as they contribute maximum to the market. TUI and Thomas cook are the two top travel operators who have a 21% and 13% market share respectively. The rivalry is only among these two as they both hold the important position in the European market. The other travel operators are not the part of the competition.

Appendix 1: Porter’s Five Force Model for the Tourism Industry in Europe

Industry Life Cycle

The Industry’s life cycle tells about the growth of the product that is tourism in the continent. The life cycle is well telling about the evolution of the tourism industry, its development, decline and the death. Stage one describes the early start of tourism in Europe centuries back when people started travelling from one place to another. The second stage describes the development of the tourism, which again took place centuries back as the need for the shelter and food was recognised by the people in Europe. They built small inns for the travellers and gave them basic meals. (Douglas and Derrett 2001).That’s how the food and lodging industry started in Europe and Europe was the first continent to do so. Slowly and gradually they built hotels and the tourism industry started booming and continuously doing the same with maximum people travel to the continent every year. The decline or downfall was observed during the terrorist attacks in United States of America and Bali. The second time downfall was observed during the recession period in 2008. ( Douglas and Derrett, 2001). However, the industry had seen the growth in last two years as people have started travelling again. The last stage is the death stage which the tourism industry has not yet faced as people are travelling and business is growing. (Sónames, 1998)

SWOT Analysis

The SWOT analysis of any industry will help it to grow better and maximise the business by identifying the new opportunities and also how to overcome the threats.

Strengths:

• The European people are very warm and have a good sense of hospitality. They are very friendly and helpful also.
• The countryside of the Europe is very beautiful and magnificent therefore it attracts a maximum number of tourists every year.
• The hotels and free standing restaurants in Europe offer the best cuisines and wines as compared to anywhere in the world.
• The tourism industry in Europe has undergone huge investments both in the public and private sectors. ( Porter, M,(1985). In last decade Europe has come up with large accommodation facilities, tourist attractions, and other activities for the tourists and also invested a lot in training.
• Access to the countries in the continent is easy as there are a number of airlines that offer their services to the tourists to come in the continent. The tourism industry in Europe is well supported by the airline as well as railway industry.

Weaknesses:

• Language plays a barrier in some of the European countries as people are not aware of any other language.
• The climatic conditions are generally cold and during winters it becomes difficult to access the countrysides and cities.

Opportunities:

• The access to the countries is easy due to the high competition and also the stay is competitively priced therefore there is a possibility that due to high competition people get better deals in European countries, therefore, this factor can force them to travel to the continent.
• The outbound travel will grow from Asia pacific and Middle Eastern countries as they are planning to have direct flights to the European countries where they do not operate. Also, the Chinese people are now more inclined towards travelling to different countries and continents.
• More business expansions in the continent as the tourism will grow. (Porter, M,(1985). It is very obvious that the industry will grow from all sides when more money will flow in.
• Increasing demand for nature tourism. Tourist these days prefer to travel to the countries which are rich in nature and are also eco-friendly. The economy of the countries will increase especially in the less visited countries.

Threats:

• People now prefer short vacations rather than long vacations.
• People travel only to those countries which are well established and doing good business, however, the countries under developed are left behind.
• Changing the attitude of the customers in the global recession.
• Terrorist attacks and health hazards will affect the tourism in the continent as people stop travelling.
• The economy downfall of other countries will slow the growth of tourism in the European countries.