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Introduction and Background of the Research
The Travel Industry in Pakistan is undergoing a period of drastic changes. Customer demands and loyalty levels are changing every season with competitive packages being offered by the travel management companies to stay in the business. Also to compete with the International travel industry, local companies have to be at par and offer excellent services and rates. The industry is all about enabling customers to build mutual relationships with their clients and to give them the means with which they can maximize the benefit of every idea or initiative effortlessly across their clients.
The travel sector has been categorized as Inbound and Outbound Travel. Inbound travel refers to the people who wish to travel to Pakistan where as Outbound travel refers to the people wishing to travel abroad. If a person travels to some foreign land it is included in Outbound Travel and if the same person returns to Pakistan, it will be characterized as Inbound Travel. Considering the economic and political conditions of Pakistan, there has always been disparity between outbound and inbound travel. This is also because of the Non Returning Pakistanis who wish to pursue their careers outside Pakistan and after certain time, call their families abroad.
The Travel Sector has always been focusing on outbound travel because of the adequate infrastructure provided by other destinations such as Far East, Middle East and Europe. The sector in Pakistan has also been a victim of lack of support by the government despite the growing number of travel management companies in Pakistan. An independent report by World Economic forum’s Travel and Tourism Competitiveness Report 2008 (TTCR) suggested that tourism facilities remained unsatisfactory in Pakistan. Due to the absence of world class tourism facilities, Pakistan is constantly being put on the back foot when it comes to tourism promotion. In addition to a poor tourism infrastructure, the country also lacks standard and competitive hotel rooms at popular tourism sites. The TTCR ranked Pakistan at number 110 out of 124 countries, when it came to provision of standard and competitive hotel rooms. (Euro Monitor, 2009)
According to the Members List posted on the TAAP (Travel agents association of Pakistan) currently there are over 700 travel agents working across the country that have been categorized as:
Figure 1.1: Distribution of Travel Management Companies in Pakistan (TAAP, 2009)
Travel may be broadly classified in three different categories worldwide and the same classification applies to Pakistan as well. Travelling for business purposes, these include personnel from companies travelling for varying needs including training and development, Business development etc. Travelling for leisure activities, these would include either travelling to meet relatives aboard or travelling to different countries for the sake of entertainment. The third and the most popular segment in Pakistan at the moment is the religious segment, this would include people travelling for the purpose of religious pilgrimages (Hajj, Umrah, Ziarat etc)
There are several travel management companies working in Karachi and most of them provide services to all the three segments, but there are certain others who specialize in single segment only with their major focus being towards providing services to the corporate sector. In this era travel agencies are not only providing its customers with tickets for their travel, but they are working towards creating an overall experience for their clients and these include it from the other.
These leaders in the travel business have been serving customers with a variety of travel products and services and catering to their daily, seasonal and corporate needs. The industry has diversified from normal ticketing to packages (domestic and international), Visa facilitation, Cars and Campers vans, Cruise packages across Pacific and Atlantic oceans, Meetings-Incentives-Conventions and Exhibitions (MICE), Rail packages and even Call Centres. Because of their extensive approach to serve the travel industry, leaders or the so called travel-pundits have now been able to serve in multiple cities in Pakistan and even abroad. Some of them have also started 24 hours office with day and night shifts to cater to their customers 24/7. Travel market has expanded globally and even these travel pundits in Pakistan and specially Karachi are able to cater to corporate accounts globally with the ease of online ticketing and payment settlement done online. Another aspect which the local market is catering is handling accounts of international travel agencies through local call centers in Karachi due to availability of cheap labor and savings they can make. Travel industry in Pakistan still has a long way to grow which has been slow due to political and economic instability in the country, however, the travel gurus have been making day night efforts to explore more opportunities and line up a growing pace for the industry.
Objectives and scope of the Research
The Corporate, Leisure and Religious travel segments are the three main areas of operations in the Travel segment. Since our Pakistani consumers are still not comfortable with the concept of e-ticketing and are still in the phase of adapting to paper less tickets, the operations of Travel Management Companies are still preferred by the masses. Our consumers still rely on Travel Management Companies to map out their itineraries and have loyalty levels associated with certain agencies. Several packages are offered by Travel Management Companies in Karachi for the corporate, leisure and religious travel segments. There are companies that specialize in a certain segment as well. The growing competition and influx of Travel Management Companies in Karachi necessitates their analysis in terms of their marketing mix and current practices in order to differentiate the services offered by them, retain old customers and attract new ones.
Travelers who prefer to leave the job of ticketing and travel mapping to the specialists in the field lay emphasis on the company that would give them the best possible rates with the most services. In order to decipher consumers’ preferences and criteria behind selecting a travel management company, we intend to incorporate this in our thesis as one of the areas of research and will try to gather reasons accruing to this selection. The success factors behind leading players in the industry will be sought and a comparative analysis of their practices and packages offered will also be conducted.
The scope of the research is specifically based in Karachi, Pakistan. Due to time constraints and traveling issues, all the interviews and surveys of consumers and the travel management companies will be conducted in Karachi only.
Problem Definition and Research Questions
Worldwide travel management companies have been doing well for over two decades. The growth of travel agency bookings has outperformed the growth in airline traffic in the first half of 2010. Although in 2009; there was a rise in internet bookings as cost savings topped the priority list for travelers. (Jones, 2010) In Pakistan, the prevailing trend depicts a rise in the advent of travel management companies. The reasons normally accrued to this rise is the preference of travelers to rely on travel management companies to set their itineraries in the most cost effective and convenient way.
In today’s environment, travel management companies need every advantage to compete with pressure from mega-agencies, online travel companies and regional players, especially as competition intensifies and economic conditions continue to falter. With the web breaking distance barriers between countries and making information available to all via just a click, travel services for business, leisure and religious travel have pressed travel management companies for the best possible options.
Overall business travel transactions processed by members of the UK’s Guild of Travel Management Companies grew by 12 percent year-over-year in the six months through June 2010. (GTMC, 2010) Leisure travel has also witnesses a rise following the post recession stage and leisure travel is expected to be more profitable than corporate travel. (World Travel Market, 2010)
Till date very little research has been done on the travel industry in Pakistan. In our thesis we would explore the various factors that have lead to the success of few out of the so many established in the country in the light of the different segments of travel services that are provided. We would also be examining the services offered by these companies in order to have a comprehensive picture of the industry’s success factor.
Hence our research problem is:
“To explore the success factors of leading travel management companies in Karachi.”
Some of the research questions that we would try to explore are:
What are the variables driving success for the travel industry?
What are the 7Ps of the travel management companies?
What attributes do consumers consider while opting for a travel management company?
Who are the major players in the leisure, religious and corporate travel categories?
What can travel management agencies do to further improve the travel management practices?
The research methodology that will be used is divided into two phases, primary and secondary.
The research would include both, Qualitative and Quantitative Research, based mostly on primary data collection. In the first phase we will determine the top travel management companies based on their number of customers and other International key success factors. Once the top 5 players are identified, the second phase will begin in which we will be finding out customer perception of travel agents and their packages through questionnaires.
Secondary Research will be conducted to find out the various packages and services being offered by the travel management agencies.
Comparative analysis will be done for various travel management companies on the basis of their offerings.
Sampling will be done on the basis of quota sampling. 20 travel agencies will be approached and the top 5 travel management agencies will be selected based on the number of customers they cater for.
Limitations of the Research
The limitation of the study can be firstly accrued to its scope being confined to Karachi and hence may not be reflective of the services being offered by travel management companies across the country. The scenarios witnessed by the 5 key travel agents from Karachi might not be reflective of the market. As travel sector is not a listed in any of the stock exchange, it will be difficult to extract authentic details from travel management companies and information given by the agencies will have to be relied upon.
In order to keep the research free from any sort of biasness, use of reliable research studies and data provided by the authorities with relevant facts and experts opinions will be provided to defend our reasoning.
An Introduction to Travel Management Companies
Heathrow International Travel defines a travel management, as means to meeting the demands and expectations of travelers, be it individuals or part of a group. Further elaboration by the travel industry dictionary states that travel agent is any person who sells travel products on a commission basis or who meets certain minimum qualifications, which can vary widely according to those who uses the term or sets the standards. (Travel Industry Glossary, 2007)
Laurie Lico Ablanese, teacher and author at Vagner College, U.S, defines the job of a travel agent as a person who can perform one or more of the following functions that can be characterized as that of a travel consultant, tour organizer, small business executive, or travel guide. (Albanese, 2010)
Travel agents may choose to become certified by the Institute of Certified Travel Agents (ICTA) for which they require a minimum of 18 months of experience as an agent, along with a complete 12 course program. There are various other certifications that travel agents acquire in order to gain more expertise, the most famous certification being that from IATA. These certifications are a key criteria for travel management companies operating worldwide as they assist travelers in selecting an authentic company for their travel requirements. For corporate, religious and leisure travel management agencies, certification from International Air Travel Association (IATA) is mandatory as it certifies your identity throughout the world. Each agent is given a distinguished code which enables the agent to be tracked anywhere in the world.
The various other certifications include the following:
United Federation of Travel Agents Association (UFTAA):
UFTAA represents national travel agents’ associations in a significant number of countries. It remains the most prominent body representing the interests of travel agents worldwide and enjoys consultative status with the United Nattions. Its membership also includes a large group of Travel Partners, including major airlines, hotels, tourism boards, shipping companies, car rental companies and many other operators allied to the tourist industry. UFTAA is essential for corporate travel segment.
World Tourism Organization (WTO ):
WTO, not to be confused with the World Trade Organization, serves as a global forum for tourism policy issues. Based in Madrid, WTO is entrusted by the United Nations to help countries maximize the positive impacts of tourism, such as job creation, infrastructure development and foreign exchange earnings, while at the same time minimizing negative environmental or social impacts. Representatives covering Africa, the Americas, East Asia and the Pacific, Europe, the Middle East and South Asia are responsible for overseeing specific projects and working. Their key emphasis is on leisure travel.
World Travel and Tourism Council (WTTC):
Founded in 1990 with support from American Express, WTTC is a high-level private sector-only lobbying group whose membership comprises Chief Executives of multinational accommodation, catering, cruises, entertainment, recreation, transportation, and other travel-related companies. WTTC’s mission is to raise the awareness of the full economic impact of the Travel and Tourism industry.
International Hotel and Restaurant Association (IH & RA):
Officially recognized by the United Nations, IH & RA represents the interests of the world’s hotels and restaurants. Members include hotel and restaurants operators, corporate hotel executive’s national hospitality association, hotel schools, and suppliers to the hospitality industry. The association is responsible for lobbying international policy, making bodies to resist regulations that could damage their business, estimated to comprise 300,000 hotels and 8 million restaurants.
Pacific Asia Travels Association (PATA):
Founded in 1951, PATA is the dominant industry association in one of the world’s most popular Travel and Tourism region. Based in Bangkok, its membership includes nearly 100 government, states, and city tourism bodies, 76 airlines and cruise lines, some 2000 companies and organization, and 17,000 individuals in 78 Chapters worldwide. Its programmers and designed to help members enhance their competitive edge through research and marketing services, product development and educational seminars and workshops.
International Airline Passenger Association (IAPA):
With over 400,000 members around the world, IAPA’s main goal is to represent the views of travelers who fly often, by speaking out on safety and health issues related to flying. One area in which IAPA has made efforts is the improvement of aircraft cabin air quality. It also offers members discounts on hotels worldwide, savings on car rental, comprehensive travel insurance, and other benefits. (Insight, 2009)
All travel agencies in Pakistan are subject to the local rules and regulations filed under the Ministry of Tourism and Culture at Federal Level and Department and Tourist Services at provincial level. A travel agency cannot operate without a valid license issued by the Department of Tourist Services (DTS). A license issued is subject to many requirements such as competent staff, financially sound management and location suitable for public dealing. A Bank guarantee is furnished to Department of Tourist Services after final inspection and then a license is issued to operate the travel agency. The license is valid for one year from the date of issue and has to be renewed after the expiry date. These are separate from the certifications they need to register for International traveling.
Specialization of Travel Management Companies
Travel agencies have been regarded as critical information, planning and booking providers for a large number of travelers (Duke & Persia 1993; Mihalik, Uysal & Pan 1995).
Travel products provided by travel management companies include air ticketing, visa facilitation, worldwide hotel reservations, worldwide car rental reservations, travel insurance, airport meet and assist service, rail, bus tickets and MICE (Meeting, incentives, conventions, and exhibitions). (Oasis Travels, 2010) These products vary from one travel Management Company to another depending on their expertise and the market they operate in; these are further classified according to the sectors in which they specialize. Travel management agencies have opted for specialization in various fields including corporate, personal, event, leisure or school travel.
Business travel is a highly valuable part of the travel and tourism industry. Not only does it continue to grow, but also average spending by business travel customers is higher than in the retail sector. Travel agencies are inclined towards the corporate sector because of various reasons, major ones being the following
High quality, high yield (earns more revenue) part of travel and tourism
Year-round sector means more full-time jobs
More ‘shock-proofed’ against downturns or disasters
Investment can regenerate urban areas. (Business Travel Operation, 2008)
Companies usually arrange the corporate travel on various occasions major ones being conferences and meeting, exhibition, and trade fairs, incentive travel, corporate events and outdoor events. The revenue from each of these occasions is different but according to a tourism department of UK the major contributor of revenue in the corporate sector is when company personnel travel for meetings and conferences and as per an estimate for the year 2003 meeting and conference, related travel has amounted for around £7 billion. (Weaver, Han, 2008)
Conferences and meetings are worth over £7 billion in 2003. This part of the sector includes sales conferences, management meetings, annual general meetings, training courses, business presentations and product launches. The market for exhibitions and trade fairs is worth over £2 billion per year, trade exhibitions are for buyers and sellers in specific trade sectors. Incentive travel is used by organisations to motivate their staff. They are usually offered in industries with high profit margins such as cars and financial services. Incentive travel is used by organisations to motivate their staff. Corporate events include staff and client entertainment. Sporting occasions are the most popular for corporate events. Close links exist between corporate events segment and the contract catering industry. Its market worth between £700 million and £1 billion per year. (Bized, 2008)
Religious travel now a day is a very comprehensive and expansive terms, previously it was only used to account for the travel that is done for the purpose of religious pilgrimages but today the concept of religious travel has primarily centered on the notion of pilgrimage. Although this type of journey remains at the heart of religious travel in many ways, it is no longer the sole form or reference point
The growing religious tourism sector is currently valued at US$18 billion per year with Hajj pilgrimage, Palestine, Jordan, Iran and other Middle Eastern destinations identified as top draws for religious travel. With more than 300 million global travelers annually, the faith-based travel and hospitality market provides destination management organizations, wholesalers, suppliers, and travel agents unprecedented opportunities for new business avenues and clientele.
Today, religious travel and hospitality is defined by, Travel to a religious destination, (Travelling to a religious destination is the most common and traditional meaning of the phrase “religious travel.” It may be right to attribute the success of this form of travel to all the major religions of the world. The word that has been associated with religious travel is pilgrimage.) Travel to a religious gathering (. People of various faith and disciplines have been travelling and gathering for religious purpose and celebrations.), Travel with a missionary and/or humanitarian intent and Travel with a fellowship intent. (Most short-term mission trips typically last from seven to 14 days. Volunteer vacations are a related form of missionary travel) (World Religious Travel Association, 2010)
According toaccording to
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2. In keeping with: according to instructions.
….. Click the link for more information. Kevin J Wright, president of the World Religious Travel Association (WRTA WRTA Worcester Regional Transit Authority (Massachusetts)
WRTA World Religious Travel Association
WRTA Western Regional Transmission Association
WRTA Western Reserve Transit Authority (Northeast Ohio) ), specialist travel providers need to develop the best possible travel experiences to leverage income from the three billion people around the world who trace their religious roots and faiths to the Middle East. “Religious tourism is recognized as one of the most resilient markets in the travel industry,” said Wright, who will be conducting a seminar entitled `The New Era of Religious Tourism` at Arabian Travel Market – the Middle East`s premier travel and tourism event to be held in May in Dubai. Saudi ArabiaSaudi Arabia (sä`dÄ“ É™rÄ`bÄ“É™, sou`-, sô-), officially Kingdom of Saudi Arabia, kingdom (2005 est. pop.
….. Click the link for more information. is the market`s primary driver, with the Islamic Hajj hajj (häj), the pilgrimage to Mecca, Saudi Arabia, one of the five basic requirements (arkan or “pillars”) of Islam. Its annual observance corresponds to the major holy day id al-adha, and Umrah The Umrah or (Arabic: Ø¹Ù…Ø±Ø© ) is a pilgrimage to Mecca performed by Muslims that can be undertaken at any time of the year. pilgrimages seeing the Kingdom receive over six million worshipers annually. The religious tourism industry in Saudi Arabia alone generates an estimated $7 billion annually and with the market expecting 20 percent growth in the coming years, tour operators, hotels and airlines are already tailoring products to tap into the religious market. “Pilgrimages are not the sole driver of the religious market anymore and people of faith are increasingly seeking greater quality travel experiences across the full spectrum of sub-sectors which drive the industry,” Wright said. Mark Walsh
”For details of the dart player, Mark Walsh, please see Mark Walsh (Dart player)
Mark Walsh is an entrepreneur, venture capitalist, and political activist.
….. Click the link for more information., Group Exhibition Director, Reed Travel Exhibitions – organizer of Arabian Travel Market, which takes place from May 5 – 8, 2009, at the Dubai International Convention & Exhibition Centre – said the need to examine robust tourism revenue streams would be critical in ensuring the industry weathers the current economic downturn. “Our industry is changing and tour operators and travel companies need to examine alternative business avenues to increase profits during these challenging times. The religious tourism market is one such possibility and remains extremely relevant to Middle East based operations.
Through these informed discussion sessions, exhibitors and visitors alike can better understand the business potential available to them.” According to Wright, Jordan and Palestine are huge growth markets. “Ninety-five percent of tourism in Palestine is religion-based, while Jordan is targeting tourism revenues of up to $2.4 billion, per year, by 2010 — over 60 percent higher than income generated in 2007,” he said. Iraq is also emerging as a serious player in the sector. Areas of religious significance, such as Najaf – home of the sacred shrine of the son-in-law of Prophet Mohammad — already welcomes eight million pilgrims a year, but a new airport will increase inbound in·bound 1
Bound inward; incoming: inbound commuter traffic.
Adj. 1. inbound capacity to over 20 million. Citing Abu Dhabi Abu Dhabi (ä`b thä`bÄ“, zä-, dä-), Arab. Abu Zabi, sheikhdom (1995 pop. 928,360), c. as an example of how feeder destinations can benefit from mass pilgrimages to Saudi, Iraq and other holy sites, Wright added: “Abu Dhabi International AirportAbu Dhabi International Airport (Arabic: Ù…Ø·ØØ± Ø£Ø¨Ùˆ Ø¸Ø¨ÙŠ ØÙ„Ø¯ÙˆÙ„ÙŠ) (IATA: AUH, ICAO: OMAA
….. Click the link for more information. handled nearly 15,000 Hajjes last year, which increased its passenger traffic rates to Saudi Arabia by 34.5 percent — the potential for everyone in the region to benefit is astoundinga·stound
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To astonish and bewilder. See Synonyms at surprise.
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….. Click the link for more information..” (Mojnews Agency, 2009)
Leisure travel may be defined as travel that is undertaken for pleasure and personal purposes. The World Tourism Organization reports top ten countries as the most visited from 2006 to 2009 by the number of international travelers. When compared to 2006, Ukraine entered the top ten lists, surpassing Russia, Austria and Mexico, and in 2008, surpassed Germany. In 2008, the U.S. displaced Spain from the second place. Most of the top visited countries continue to be on the European continent, followed by a growing number of Asian countries.
In 2009, Malaysia made it into the top 10 most visited countries list. Malaysia secured the ninth position, just below Turkey and Germany. In 2008, Malaysia was in the eleventh position. Both Turkey and Germany climbed one rank in arrivals, occupying seventh and eighth positions respectively, while France continued to lead the ranks in terms of tourist arrivals. (UNWTO, 2009).
USA earns the most revenue from leisure travel amounting to around $ 94.2 billion in the year 2009, followed by Spain with $53.2 billion, France and Italy with annual revenue of around $48.2 billion and $40.1 billion respectively. The other destinations that made it to the top ten lists include Chine, Germany UK, Australia, Turkey and Austria. It may be noticed in that the major income to the travel management companies in the leisure sector is through travelers traveling to the European Continent, as out of the 10 most visited countries seven are from the European Continent (WTO, 2009)
Key Performance Indicators for the Travel Industry
Key Performance Indicators an Overview
According to the KPI Library, Key Performance Indicators are measures of business performance; also known as business or performance metrics, measures, ratios or simply performance indicators. These performance indicators can vary from company to company and from industry to industry. The key performance indicators for the Travel Management Companies can be ascertained by exploring the issues like price wars, safety and security issues, passenger demands and availability of information. These may also include supply chain information, inventory information, package tracking, flight/travel activities, and passenger details with preferences. Integration of key information and emphasis on customer loyalty also plays an important role in the success of transportation and travel industry. (Gala, 2009)
Given the high number of variables in the travel booking process, each travel agent has their own preferred way of doing things. A few KPIs, which you can be useful as a starting point and to trigger further thought as per MAIA Intelligence India, are:
Specifications for service delivery requirements:
Response times to enquiries
Ticket delivery arrangements
Hours of service and out of hours arrangements
Variety of packages provided
Financial Perspective: Quantification of Financial aspect can be measured using the parameters like ‘operating profit’, ‘% increase in planned sales’, ‘actual sales step-up ratio’ and ‘% increase in travel and entertainment cost’.
Customer Services and Satisfaction Perspective: Customer Services and satisfaction can be taken care of by employing metrics ‘number of ancillary facilities’, ‘favorable review index’, ‘% increase in customer base’ and ‘look/book index’.
Internal Operations Perspective: Internal Operations can be known with number of booking channels, abroad to local bookings ratio and packaged to independent bookings ratio.
Business Planning and Growth Perspective: Business planning and growth perspective can be gathered by assigning values to ticked delivery standards, disaster recovery planning effectiveness, % increase in number of tour packages sold and number of staff retention initiatives taken. (MAIA,2009)
Based on the key performance indicators and analysis of success accruing to travel management companies worldwide, the success factors for the travel management companies in Karachi can be evaluated.
Consumer Preference of Travel Management Companies Abroad
According to a report by the Hong Kong Consumer Council (1998), Travel agents in Hong Kong have faced difficult times because of increasing customer demands and internal competition in the industry. Complaints against travel agencies had increased by 12.4% for the year 1996/97, as compared with the previous year. The purpose of the study was to assess customers’ expectations and perceptions of service provided by travel agents, and to explore how the service factors derived from the factor analysis were related to overall customer satisfaction.
The results of the study as verified by an article published by Vincent C.S. Heung, Department of Hotel and Tourism Management at the Hong Kong Polytechnic University, showed that customers’ perceptions of service quality revolved around the availability of All Inclusive Package Tours. Out of a total of 183 Hong Kong consumers who were surveyed and asked to rate 29 attributes that might affect their choice of travel agency for all-inclusive package tours, the results showed that of the 29 attributes, “agency reputation” was rated as the most important attribute in travel agency selection, followed by “word-of-mouth communication” and “staff attitude.” (Heung, 2000). In Karachi, since the total number of travel management companies operating are 245, heavy competition exists and agency reputation might b
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