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Travel and Tourism Industry Overview

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It took Marco Polo 12 years to journey from Italy to China, at great peril all along the way. People take for granted the size, scope, and complexity of the international network of facilities and services that make it possible to retrace Marco Polo's trek today in a matter of weeks.

It is extremely difficult to define precisely what the "travel and tourism" industry is. " It has been described, half facetiously, as a collection of diverse products sold by a fragmented industry to segmented markets through a complex distribution chain," noted the U.S. Travel Data Center (USTDC), the Washington, D.C. based travel research affiliate of the Travel Industry Association of America, in its Economic Review of Travel 1989 90.

'It comprises the airline terminal in the suburbs, the restaurant in town, the highway motel, the travel agency down the block, and a host of other businesses that do not even recognize their dependence on tourism, since visitors are [often] indistinguishable from local customers."

The late futurist Herman Kahn projected that tourism would be the world's largest industry by the year 2000, and his forecast is being realized. Despite advancements in telecommunications and sometimes because of them physically traveling has become more important than ever. Indeed, Americans took a total of 1.3 billion person trips {one person on a trip 100 miles or more from home) in 1990, according to the USTDC.

The travel and tourism industry is the third largest retail industry in business receipts after automotive dealers and food stores, according to the USTDC, which measures the economic impact of travel and tourism in the United States. Spending on travel services in the United States totaled about $350 billion and generated more than $42.8 billion in tax revenue.

To put these extraordinary figures into perspective, Americans spent more on travel than on clothing, accessories, jewelry, and personal care combined or on household utilities, including telephone service, the USTDC noted. Travel spending in this country averaged $959 million each day, $40 million each hour, $660,000 each minute, $11,000 each second.

Most of the money goes to airlines, car rentals, bus companies, cruise lines, the railroad, lodgings, restaurants, tour companies, travel agents, attractions and theme parks, sightseeing companies, and convention centers.

The travel and tourism industry is the country's second largest employer. With each $60,000 spent by traveler's directly sup porting one job, the $350 billion spent on travel in the United States generated 5.8 million jobs totaling $73.5 billion in payroll income.

In 48 of the 50 states and in thousands of localities, tourism has become the leading employer. In many areas, tourism has brought renewed vitality to communities once dependent on smokestack industries.

Over the past decade, travel industry employment has grown 43 percent, more than twice the growth rate for all industries, the USTDC noted. And, since 1972, payroll jobs in travel related businesses have more than doubled, while total U.S. payroll employment increased by less than 50 percent.

Few travel companies appeal to the entire spectrum of travelers; instead they gear their products or services to distinct markets. This is called market segmentation. For example, many marketers are looking at the fantastic growth among women business travelers. Many hotel companies have gone so far as to create "women only" floors to cater to this market. The family market is another growth area, as the Baby Boomers (the huge population born between 1946 and 1960) become parents themselves. Club Med has responded by opening up "mini clubs" and "baby clubs" at some of its resorts; the cruise industry has provided child care centers on board ships. Some companies are targeting the 18 to 25 year old group because they tend to be single and have a lot of discretionary money; others eye the 25 to 34 year old group of dual income, childless couples, who have money, if not much time, to travel; still others target senior citizens, who control the biggest chunk of discretionary income and have the time and inclination to travel.

The phenomenon of market segmentation is most apparent in the hotel industry, where hotels are being divided by floors according to the services and pricing that would appeal to a particular market. Airlines, of course, have been offering first, business, and tourist classes for years.

Deregulation, Automation, and Professionalism

The 500,000 different businesses involved in travel have their special interests and concerns. But virtually every travel entity and everyone working in travel is affected by three key interrelated developments: (1) deregulation, (2) automation, and (3) increased professionalism. These are essential to understanding the dynamics of the travel industry.

Deregulation of the airline, motor coach, and travel agency industries changed the whole economics and structure of the industry, the relationships of companies to one another. Though hotels, tour companies, car rental agencies, cruise lines, and others had always been deregulated, the deregulation of these key industry segments had enormous impact on their own businesses.

By replacing what had essentially been a franchise with free market competition, companies had to revamp their products, their pricing, and the manner in which they distributed to their customers. The path was open for innovation, new companies, new services, and new ways of doing business. Travel was always an industry of low profit margin, and deregulation put additional pressure on cost controls and maximizing productivity.

The plethora of products and services has made computerized information and reservations systems essential. Consider that there are some five million airfares, changing at the rate of 120,000 a week.

Though travel is not generally considered "high tech," the industry is, in fact, on the leading edge of consumer applications of sophisticated computers, communications, and transportation modes, in distribution, marketing, and product services.

With the greater premium placed on productivity, as well as on the need for capital intensive technology and expensive marketing, a third trend has developed consolidation. Consolidation is most visible among airlines where mergers, acquisitions, and bankruptcies have whittled down the number to a few major carriers. Consolidation has brought retrenchment by companies in which whole tiers of middle and upper management have been eliminated.

Yet another trend has come about globalization, the multi national ownership or alliances of airlines, hotels, travel management companies, and the like, in response to falling barriers and borders and a greater appreciation of the world as a global marketplace.

These trends deregulation, consolidation, automation, and globalization are revolutionizing how the travel business is con ducted and changing the professional makeup of the industry.

New opportunities are opening up all the time. There is enormous demand for marketers, quality control coordinators, computer specialists, yield management experts, researchers, trainers, and people with international business and language skills. On the other hand, many entry level jobs have been eliminated.

Regardless of the kind of travel entity, there are categories of activities that are common to almost every one:
  • Product Development
  • Operations
  • Sales and Marketing
  • Public Relations
  • Administration
  • Automation/Management Information Systems (MIS)
In the past, success was almost universally of the bottoms up variety rising up through the ranks. Now, a second career path is emerging, with a new breed of travel professionals coming out of colleges, universities, and vocational schools, as well as from other industries.

This year's hot spot may be next year's trouble spot. Changes in airfares, currency values, and political situation all affect interest in and access to destinations; weather, natural disasters, or strikes can also destroy a destination or a company.

We will look at the various entities that collectively make up the travel and tourism industry. Since this article looks at the people that make travel and tourism activity possible, we will not just look at the conventional categories. We will look instead at the entire system, including, for example, destination promotion, aviation management, and sup port services. For this article is aimed at helping you share in the incomparable experience that working in the travel and tourism industry affords.
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