A tour operator typically combines tour and travel components to create a package holiday. They advertise and produce brochures to promote their products, holidays and itineraries.

The most common example of a tour operator's product would be a flight on a charter airline plus a transfer from the airport to a hotel and the services of a local representative, all for one price. Niche tour operators may specialise in destinations, e.g. Italy, activities and experiences, e.g. skiing, or a combination thereof.

Stages of Developing and Planning a Tour Package

1. Research – Destination and Market:

The main object of tour packaging research is to analyse and understand the key elements associated with a particular tourist market and destination. Generally, many tour operators find that it is very difficult to arrange all things for all people.

Suppose, there is a person desiring to enter the tour field and accordingly will concentrate on identifying his areas of interest and specialization, therefore, the tour operator will research not only on the tours that seem to fit those areas of interest and specialization but, also on the potential market relating to those areas.

Some tour operators start with a tour product and then seek a market for it. Their tour product is the destination area consisting of tourist potential, touristic appeal, accommodation, and other services. Conceptually, a tour operator undertakes the following steps before entering the tourism market as such:

i. Identification of economic, political, social and climatic factors that influence the future development of package tours;

ii. The target market, when the target market is small the tour operator must obtain a large percentage to make a tour successful, but if the market is large he tries to capture smaller percentage;

iii. Making the tour to meet the exact needs of the target market;

iv. Identification of key destinations and a comparative study of alternative destinations;

v. Approaching the suppliers;

vi. Making the policy decisions.

Basically, the positive progressive approach to be adopted by tour operators is based upon researching both tour ingredients and the market i.e. the clientele, competition and tourist resources at the destination area.

Therefore, it is certainly not to suggest that one should not enter the tour market but rather to stress the importance of undertaking marketing research prior to investing amount and time on a tour that the study would have shown to be unprofitable or unpromising.

2. Tour Itinerary Development:

Once the study as regards the destination and the target market has been conducted, the second phase in the developmental process involves working out an effective tour itinerary.

It is based on two things – for new tour operators to research on both destination and tour ingredients and for established ones to review the questionnaires completed by previous tour participants.

Generally, the new tour operators undertake ‘familiarization tour’ and after successful operation, they develop an itinerary. The itinerary is a summarized tour programme, which is designed to identify the origin points, destinations, en route points, accommodation, transportation, sightseeing activities and other services.

Moreover, an itinerary shows the sequence of various tour ingredients and provides essential information such as assembling point, departure point, date of departure and duration of tour, legal requirements, features of destinations, optional activities, meal and perhaps more than these. Thus, itinerary development has become the crux and /or central point for the success a tour company.

Theoretically, there are two basic approaches for itinerary development. The first deals with approaching vendors without identifying himself. The reasons supporting this approach being that the tour planner makes reservations independently from the vendor companies as tourist or as tour planner to discover how the “average tourist” is treated by them.

It helps him to classify vendors into categories ranging from extremely good to extremely bad. That is, under this approach tour planner starts the ‘tour’ as a tourist who is not distinguished from the other tourists.

It provides a major advantage to the tour planner in the form of an opportunity to evaluate vendors and their services from the standpoint of general public (tourists). However, the approach has pitfalls of being both expensive and time consuming.

The second approach means a tour planner makes contract with all potential vendors in advance to put together all ingredients. When the ‘fam tour’ is conducted in this manner, the tour planner puts all possible components of tour together and develops final tour itinerary.

Obviously, tour planner receives much more than the average tourist would have received. Mostly vendors provide the tour planner more convenient and comfortable facilities during his visit.

However, this approach is not free from disadvantage of giving the planner a skewed viewpoint in respect of all ingredients of the tour. The tour operator industry practices show that the combined approach is most often used by tour planners to develop an itinerary.

The tour planner undertakes all possible attributes of the tour first as an unidentified individual traveller and repeats each tour ingredient as an identified tour planner. Thus, a tour planner will have a much more realistic view at the time of itinerary preparation.

More significantly, before designing and planning an itinerary, the tour planner must try to find the answer to three key questions – ‘How much customer demand is in the market?’; ‘How practical is the tour?’ and ‘How profitable is the tour?’.

3. Negotiations with Tourism Suppliers/Vendors:

Once the itinerary is finalized, the next step is to negotiate with prospective vendors. The tour planner works with many vendors depending upon the nature and size of the tour. The major ones are airlines, lodging companies, transport operators, car rentals, ground operators, sightseeing vendors and so forth.

A tour planner has an option to negotiate with air carrier directly or through a travel agency. If the tour company has a long history of operating large number of inclusive air tours, the tour planner will usually be better placed to negotiate a better price and better terms/conditions than the tour planner/company could obtain through travel agency.

On the other hand, if the company is new and normally operates railroad tours, the company will obtain a better price and margin, working through a travel agency than directly, because air carrier vendors generally provide/offer price reductions only to their best clients.

Travel agencies buy considerably more airline seats from airlines than tour operators especially, small scale. Practically, a tour company works on several air tours and purchases a substantial number of air carrier seats, the tour planner is in a position to meet with airline’s marketing executives and negotiate future tour group fares and ticketing.

But if he has to negotiate for reduced rate air tickets, the tour planner will be referred to the airline group desk. However, most airlines do not provide this type of negotiation.

Therefore, any tour company wishing to obtain ‘group’ rates must abide by all rules and conditions (formal) in order to qualify for such rates. Further, the negotiations concerning various services and concessions from carriers will depend upon how badly the airline needs to have the seats filled.

Hotel negotiations are generally more informal than in case of air carriers. Negotiations with lodging properties should be initiated on an appointment basis, meeting with top executives in each property if at all possible.

It is suggested that the negotiated arrangements agreed upon through discussions with property executives be detailed immediately after each meeting and the tour planner must strike a balance in obtaining quality accommodation at a price that is affordable for the target market being solicited for participation in the tour.

It is always better if the executive with whom the negotiation is undertaken agrees to sign a binding contract with a penalty clause included in case the hotel fails to provide stated services and facilities.

Further, a tour operator also negotiates with other vendors such as ground operators, restaurants, transport operators, sightseeing vendors, insurance companies, banking companies, cruise organizations and even others who are indirectly dealing with tourist services, which are the part of a tour package.

The ground operators tend to be umbrella companies that provide a variety of tourism services under one roof. Each of the vendors range in its degree of sophistication based primarily on factors relating to their