Global Experience Industries. Jens Christensen

information and supplier links is directly challenging the online agencies.

      A different source of innovation and competition to online travel agencies springs from the rapid rise of virtual communities on the Internet. Since 2007, some few hundred million users have joined large communities such as YouTube, MySpace and Facebook.⁵⁰ The success of these communities quickly caught the interest of leading media and online companies. In 2006, the media conglomerate News Corp. acquired MySpace and Google bought YouTube. In 2007, Microsoft followed suit and invested in Facebook. These three broad community sites function as widely-used communication forums for the new Internet generation. By way of expensive advertisement deals, the leading search engines of Google, Yahoo and Microsoft make sure that they have access to a worldwide audience through three communities.

      Soon people with like interests began to divert into specialized sites. Some of these sites deal with traveling. Travelers meet on the Internet to share information on destinations, means of transportation, hotels, etc. in several sites. TripAdvisor is perhaps the largest travel community in the world, attracting more than 30 million monthly visitors.⁵¹ What TripAdvisor does is to provide travel information by creating a web service open for travelers, but does not take reservations. It is a free travel guide that offers reviews and information to help plan a vacation.

      TripAdvisor is an example of a new and growing trend of consumer generated media and recommendations that are shown to have a big impact on buyer choices. Just as the general communities of YouTube, MySpace and Facebook caught the interest of leading search engine providers and led to mergers, so the challenged group of online agencies has moved quickly to become part of these new developments. Accordingly Expedia has taken over the ownership of TripAdvisor.⁵² Travelocity and Orbitz are moving in the same direction, offering a new social networking component with realtime updates and tips from travelers. Professionals also offer reviewing of hotels and restaurants in a particular site.⁵³ Some sites combine user-generated reviews, meta-search capabilities and social networking (inter alia TripAdvisor, Kayak plus Facebook) for personalized hotel recommendations and booking at best prices, such as VibeAgent.com.

      Generally speaking there is on the one hand a trend towards one-stop shop for travel information of almost any kind and on the other hand, this is increasingly based on consumer input and dialog. Service upgrading by offering total travel plans in one itinerary is also seen. It is all a matter of making it easier for the consumer, informing the consumer better, and making the consumer wishes come true. Finally, new sites and online travel agencies including consumer recommendations seek to match different travel personalities with best destinations. Travelers take a test and are classified into one of six travel personalities, ranging from ‘ventures’ who take extreme risks to ‘authentics’ who want a relaxing vacation.⁵⁴

      Tour Operators

      Traditionally, and until the 1990s, the tour operator was a wholesaler that packaged travel products like flight seats and hotel rooms to be sold through the travel agency retailer. The tour operator was the intermediary between airlines, hotels and other producers and the travel agencies that sold the travel products to the consumers.⁵⁵ Being of less significance in the US, the tour operator was an important part of the West European tourism industry. As a result the global tour operator industry was concentrated in Western Europe. Radical changes in tourism since the 1990s have reduced the importance of tour operators, but still in the 2000s they operate one-third of all long European vacations. Since the 1990s, the tour-operating or package-tour industry is continuously being consolidated.⁵⁶

      The total European tour-operator market in 2005 amounted to some $80 billion, embracing at least half the world tour-operator market.⁵⁷ In Western Europe, there are about 150000 tour operators and travel agencies, probably one-third of world total. Most of the European travel market is consolidated in a few large tour operators that also control most travel agencies. The top 8 tour operators control two-thirds of the market (Figure 11). In 2007, TUI and Thomas Cook merged with First Choice and My Travel respectively, consolidating their position as the world’s two leading tour operators.

FIGURE 11 Europe’s Top Eight Tour Operators’ Revenues in $bn, 2007

      Source: Annual reports.

       TUI

      In 2005 and 2006, TUI (Touristik Union International) was the world’s largest tour operator with travel revenues of $22 billion, two-thirds of total group revenues.⁵⁸ The company used to be called Preussag and did not engage in tourism until 1998 when it acquired Hapag-Lloyd’s tourism company and started a comprehensive acquisition process of tourism companies while quitting most other fields of business. Under its new name TUI since 2002, it continues to consolidate the tour operator business by acquiring airlines, tour operators, travel agencies, hotels, etc. and establishing national subsidiaries in one European country after another. TUI has been expanding beyond Western Europe into Eastern Europe, North America and Asia. By 2006, TUI comprised about 4000 travel agencies, including incoming agencies, numerous national tour operators, a large fleet of airplanes, several brand hotel chains and other hotels and a few cruise lines. The reduced and changing tourism markets in the early 2000s made TUI carry out a radical reorganization process to reduce costs. They introduced the dynamic package business model to meet the demands of the modern tourist that often required individual vacation modules and discount flights.

      Since the early 2000s, TUI has established a leading position in the largest tour operator markets of Germany, UK, France, Benelux and Scandinavia. In 2005, TUI was much larger than number two, Thomas Cook, followed by MyTravel, REWE, First Choice and Kuoni. A new wave of mergers took place in 2007 when Thomas Cook merged with MyTravel and TUI with First Choice, both British tour operators.⁵⁹ By 2007, TUI and Thomas Cook controlled almost half the European and maybe one-third of the global tour operator market.

FIGURE 12 The TUI Tourism Value Chain

      Source: www.tui-group.com.

      TUI is a vertically integrated travel company dealing with almost all parts of the tourism value chain (Figure 12). It includes distribution through travel agencies or via its own direct sales channels through the Internet, call centers and travel television. TUI sells package tours and individually booked travel modules and transports travelers to and fro vacation destinations on its own fleet of airplanes with busses connecting airports to property hotels, adapting to peak seasons by way of third party airlines and hotels. Through third-party agreements, TUI provides additional travel services such as car rental and insurance. It is TUI’s strategy to continue its global expansion and determinedly gain all benefits of the Internet by more and more direct sales to consumers. TUI’s main market is Germany that has the largest number of package tour travelers of all nations, followed by UK, Scandinavia and the rest of Western Europe. By way of its merger with First Choice, TUI has extended its British market considerably.

      In 2007, the acquired First Choice was the fourth largest European tour operator with revenues of $5 billion.⁶⁰ Like TUI, First Choice comprises most of the tourist value chain, including package tours, individual travels with airplanes, cruise lines, and even camping and biking tours. First Choice has its own airline fleet, hotels, travel agencies and many subsidiaries. Through third parties, First Choice arranges car rental, insurance and other travel activities. The UK is its main market.

       Thomas Cook and MyTravel

      Thomas Cook originated back in the 19^th century when it pioneered mass tourism in the UK.⁶¹ Throughout the 20^th century, it remained a leading international tour operator. In the 1990s, Thomas Cook was taken over by a German capital group