Salzburg University of Applied Sciences, Bachelor Programme IMT-E 2018 | Marijana Mitic

The Future of Tour Operator Industry and COVID-19 Impact

Contents
1 Introduction .................................................................................................................... 1
2 Tour Operators .............................................................................................................. 1
2.1 Principles of Tour Operator Business ...................................................................... 2
3 The role of modern trends in the development of tour operator business ....................... 3
4 Impact of COVID 19 to tour operator business ............................................................... 6
5 Conclusion ..................................................................................................................... 8
6 References .................................................................................................................... 8

1 Introduction

This paper discusses contemporary trends in tourism, and how they affect the changing
perspective of tourism and tour operator business. The tour operator business, its conceptual
definition, and the principles and functions of this type of business are explained in detail. The
paper connects the role and importance of information and communication technology with
modern trends in tour operator business, and how this new technology has affected the
business of leading tour operators in the tourism market, based on which a conclusion was
reached. Also, in this paper, we talk about how the covid virus pandemic affected the work of
tour operators. As well as new opportunities and threats to the tour operator business.

2 Tour Operators

To date, it has not been determined exactly who used the term tour operator for the first time
and when. In the theoretical tourist literature, it is most often only stated that this term probably
originated in the period between 1950 and 1960. (Čavlek, 1998).
The compound tour operator comes from the English word tour which means round trip, tour,
travel, travel, and the word operator which means one who acts, employee, entrepreneur.
Therefore, translated, "tour operator" means a natural or legal person who "creates",
"produces or creates a tour". This is the starting point that most tourism theorists take as a
basis in trying to define the term tour operator (Čavlek, 1998). Tour operators are mentioned
in world literature as "wholesalers" and organizers of mass tourist trips. When it came to the
fact that flat-rate air travel began to be organized, there was a need to somehow mark in the

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Salzburg University of Applied Sciences, Bachelor Programme IMT-E 2018 | Marijana Mitic

market this new type of travel agency that organizes mass tourist travel. A tour operator is by
nature an economic entity that, by combining the services of various providers, creates and
organizes lump sum trips in its name and for its account (for as yet unknown customers), and
thus continuously generates the main source of its income (Čavlek, 1998).
The first tour operator is considered to be "Horizon Holidays", a British travel organizer who in
1950 organized the first tourist package trip with a package deal based on air transport. In
such a package deal, travelers from Great Britain traveled to Corsica, to Calva. From this, it
can be said that the term "tour operator" appeared in Great Britain, and later it was used in
practice by many other countries. Tour operators have made travel widespread. Furthermore,
they have enabled a wide range of people to travel, especially those who would not otherwise
be able to do so due to their financial situation (Čavlek, 1998).
Tour operators operate in bulk, on the principle of large numbers. This means the mass sale
of such package deals because they are created based on better prices. This implies the lease
of a large number of different capacities, in the case of wholesale business, the price is lower
because tour operators can lease a large number of capacities. (Čavlek, 1998).
Precisely because of this wholesale business and lower prices, the services of tour operators
are available to a wider mass of people, as mentioned earlier. The tour operator does not
come into direct contact with the end consumer, for them, this is done by travel agencies
(unless it has its network through which it operates and connects with the customers) (Čavlek,
1998). Without pretending to create a universal and most complete definition of the term tour
operator, and taking into account the above facts. Tour operator can be defined as an
economic entity that combines the services of different providers to create and organize
wholesale packages in its name and for its account for unknown customers and on that basis,
it continuously realizes the main source of its income” (Čavlek, 1998).
The most important feature in the business of a tour operator is that it creates and organizes
lump sum wholesale trips for as yet unknown customers.

2.1 Principles of Tour Operator Business

The tour operator strives to organize a trip that would be available to as many users as
possible, and therefore must take into account a price that would be acceptable to the masses.
The tour operator is primarily guided by the idea of initiating and organizing travel at a price
that is available to as many users as possible. For the tour operator to be able to include as
many services as possible in the tourist arrangement, it leases transport, accommodation,
catering, and other types of capacities that will fill that tourist arrangement and be an integral
part of that product (Vukonić,2003).
Leasing a tour operator works wholesale, it achieves a lower purchase price per unit by renting
a larger number of capacities so that the final price of a package deal is lower than it would
be if a tourist consumer organizes such a trip himself (Tomić, 2004). The market philosophy
of tour operators is based on the following principles:
1.) The principle of large numbers.
2.) The principle of mass production.
3.) The principle of constant expansion of market demand.
4.) The principle of reducing own operating costs, but also lowering the prices of services of
the tourist offer holder.

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Salzburg University of Applied Sciences, Bachelor Programme IMT-E 2018 | Marijana Mitic

5.) The principle of constantly finding new elements that will make the tour operator's
arrangement more attractive to consumers (Čavlek, 2011).
Plans for travel arrangements are based on the principle of flat-rate pricing. Lower prices of
travel arrangements lead to more users and higher profits. Tour operators sell through an
extensive network of detailed travel agencies. However, the product is serially produced,
leaving room for further savings due to the serial use of some items of the arrangement.
Nowadays, users are very informed and looking for "value for money", and if they do not
achieve this, their level of satisfaction is lower and they can turn to another tourist offer. This
is due to the market expanding. The last principle refers to the constant finding of new
elements of the tourist arrangement, for the reason that this package arrangement is as
attractive as possible to the end-users. In most cases, tour operators do not sell directly, but
through a network of travel agencies, so we can say that tour operators marginalize the
function of selling their travel product. Due to the expansion of the supply market, there is a
constant expansion of tourist demand, between which there's a cause-and-effect relationship.
The main tasks of tour operators on the tourist market are reflected in the specific functions
that this business entity performs on it. In the theoretical tourist literature that touches on the
issue of tour operators, there is usually only one function of tour operators most noticeable on
the market, and that is the formation and sale of tourist package deals. However, even in the
book Reiseveranstaltung (Tour Operators) which deals with the problems of tour operators in
a complex and very systematic way, the main functions of tour operators are not specific and
systematically explained, but they can be partially derived from the presented content.
(Kasper,1990).
As it was established, there are 5 basic functions of a tour operator, of which the main one is
the organizational one. These functions are in order:
1.) Formation of a tourist package arrangement.
2.) Promotion of package arrangements in the market.
3.) Sale of arrangements.
4.) Protection of tourist consumers.
5.) The role of coordinator and implementer of the interests of bidders and users of the tourist
product

3 The role of modern trends in the development of tour operator

business

As in any other area, the travel industry is constantly changing and trying to follow new trends
and ways of doing business. Tour operators cannot allow themselves to lag behind new trends
in the world because otherwise, they would lose their competitive advantage. For tourism
trends to grow in 2021, it is important to anticipate all possible factors.
"It is known that in tourism, as a rule, demand drives supply. For the emergence of a new
selective species, the emergence of some additional demand is required, which should be
distinguished from the already existing one. This means that it is new in form and motive. Such
new or conditionally new demand is still unknown or conditionally unknown to the demand

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Salzburg University of Applied Sciences, Bachelor Programme IMT-E 2018 | Marijana Mitic

market, and it initiates the development of additional supply, which shapes new tourism
products in the tourism market. ”(Mowforth & Munt,1998,pp63)
There are more market opportunities such as the emergence of new markets, different market
niches, digital trends, new ways of traveling, types of accommodation, and even types of
travelers. Tour operators are aware of this and strive to cover all categories. (Spremić, 2017)
Today, it is not so difficult to find out the expectations of travelers when forming a package
deal because they are the ones who will say their wishes and preferences. However, with
market specializations, tour operators are directed from the mass of tourism to one specific
segment and it is necessary to keep pace with technology to meet consumer requirements
and respond to additional information about the desired destinations. Specialist tour operators
should also be aware of crisis management if a certain destination becomes dangerous for
the visitor. (Spremić,2017)

• Technology development
By accepting and taking advantage of new technologies, the tour operator specialist becomes
more than an organizer-entrepreneur of package deals. New information accompanied by the
development of technology is faster, accurate, and comprehensive, so the service within the
destination is better and more professional. Such a service creates added value that
consumers recognize, and then they are willing to pay a higher price. Technological processes
create advantages for tour operators by rapidly disseminating information and promotion
through online and TV presentations, websites, mobile applications, pdf brochures, AR & VR
reality, and many more. (Žigienė et al., 2019)
For instance, VR helps tourists to more easily decide where they want to travel, especially in
the areas that do not have "famous" destinations but abound in natural and cultural attractions
that will convince tourists through VR that they should visit them. VR should be viewed as a
tool that, in marketing terms, represents a useful and effective way to motivate tourists. This
is especially true of virtual tours that allow tourists to experience a tourist destination even
before they visit. African tour operator Matoke tours have launched a virtual tourist 3D
brochure that offers six 3D experiences from Uganda, in which tourists e.g., face to face with
a gorilla or flying in a hot air balloon. This application managed to evoke the tension and feeling
of the trip itself even before it started, while the goal of the application is to make it easier for
potential tourists to decide which trip to book. (Žigienė et al., 2019)

• Sustainable destination development

Tourist arrivals significantly affect the destinations and create economic, environmental, and
socio-cultural differences. Every stay in the coastal area, fishing, land use, and climate change
affect the area of the destination. To avoid devastation and burdening the destination,
integration of tourism stakeholders with municipal, city, and county officials is needed to plan
spatial plans. Mass tourism as a traditional form of travel is not friendly for the environment
because it uses huge amounts of energy, water and consumer goods, and fewer luxury items.
Therefore, the creation of specialized package deals of newer selective forms of tourism
through tour operators’ enables sustainable destination development and less intensive
workload and social responsibility towards the environment. (GSTC,2019)
The solution for sustainable development is the integration of several different stakeholders in
the tourism market. For example, the emergence of destination management companies or
partnerships between tour operators and local people allows the protection of the destination
through the placement of new indigenous products or services and the possibility of extending
the season, thereby reducing costs and creating a greater reputation of tour operators. By

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Salzburg University of Applied Sciences, Bachelor Programme IMT-E 2018 | Marijana Mitic

developing additional services, sophisticated and competitive products, and creating greater
value, it is possible to create a tourist offer that satisfies guests with its specificity, while
avoiding creating added value by the mass of guests thus avoiding excessive impact on the
environment. a flagship initiative to train, manage and certify companies committed to
sustainable development. (GSTC,2019) The Travelife system helps tour operators and travel
agencies manage and enhance social and environmental impacts by adhering to sustainability
criteria. Finally, when the company meets the requirements, it will receive Travelife
certification. An increasing number of tourists who use cleanliness and care for the
environment as the main reference point when choosing a package deal, and when choosing
a mediator, try to choose those who are environmentally aware. (Travellife, n.d)
The main characteristics of a sustainable tourism product are (Meler & Ham, 2012):

• promoting sustainable activities close to the natural environment;

• serving individual visitors or small groups;
• emphasis on product quality and personalized service;
• orientation to the local environment and local products;
• promoting responsible behavior and raising awareness of the need to protect nature.
Tourists who practice ecotourism are not only thinking about getting as much as possible for
the money they have invested, but they also want to influence the area they have decided to
visit as little as possible. Such tourists prefer local indigenous products, getting to know local
customs and culture, visiting some protected natural areas and the like. (Meler & Ham, 2012)
Such guests also take into account the mode of transport, so many, if they have the options,
opt for the railway, since it has less impact on the environment than cars.

• Crisis management
Tour operators specializing in a particular segment in the event of a crisis may experience
failure. Nowadays, when crime, terrorism, and political crises even pandemics are on the rise,
tour operators avoid such risky destinations. On the other hand, today, when developing new
forms of tourism, war and crisis places in the future become sought after and desirable tourist
markets for the development of dark tourism. Characteristic of Holocaust memorial centers,
camps, cemeteries, places where celebrities were killed, prisons, museums with "dark"
themes or monuments to warfighters. (Minar,2019)
As far as business is concerned, the development of an e-system for direct booking can lead
to a decline in the business of tour operators, but then the client is responsible in case of any
omission on the trip in his arrangement. The solution to this problem is trust and security in
the organization of the tour operator and its insurance service providers. In addition to the
development of applications, the business of tour operators is also threatened by competition
in the form of low-cost carriers that occupy the already well-known tourist markets of for
example Malaga, Ibiza, Palma de Mallorca, Dubrovnik, or Split. Having lower transportation
costs, customers choose to travel on their arrangement. By planning, communicating, and
adapting quickly, financial problems and crises can be avoided. (Minar,2019) Various authors
have been determining the phases and ways of planning and acting in case of crises for years.
Systematization leads to important phases of crisis management:
1. Pre-event behavior - in this phase, crisis prevention measures are taken (preparation of a
plan, growth management, review of the security system, and preparation of all research of a
particular destination to mitigate the effects of potential crises (Paraskevas,2013)

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Salzburg University of Applied Sciences, Bachelor Programme IMT-E 2018 | Marijana Mitic

2. Behavior during a crisis or "emergency phase" - the essence of the phase is communication,
sending messages, security of rescue operations of people and property. At this stage, the
consequences of the crisis are being felt. (Paraskevas,2013)
3. Post-crisis actions - this phase consists of short-term and long-term actions. The short-term
needs are to restore much-needed services and bring the community back to normal, and the
long-term phase continues in the short term by repairing damaged infrastructure, counseling
victims, reinvesting, protecting the environment, improving safety measures, and using results
and knowledge to respond in the future. (Paraskevas,2013)
The mentioned guide through the phases still helps in adapting to certain risks. It is necessary
to plan well and avoid a crisis with quality communication because otherwise, the business of
the tour operator will collapse. (OECD,2020)
In the international tourist market, day by day, all tour operators are facing increasing
competition, especially specialists due to their frequent need to set aside quality and
attractiveness. The survival of specialist tour operators depends on speed and adaptability
within the integration. Associations of tour operators with a special segment of activity in a
certain niche are becoming more frequent because they create a win-win situation on the
market. (OECD,2020) The trust they gain as an integration enables them to have the loyalty
of existing and at the same time the interest of new clients. The advantage of the association
is in expanding the business to more destinations, and thus reducing the risk within crises in
one destination, but also a greater opportunity to hire experts in destinations to create
attractiveness. (OECD,2020) Within the association, investment opportunities are greater, so
it is important to find the best experts at the local level (tourist guides, skippers, safari guides)
who thoroughly know the destination. Their knowledge contributes to the tour operator offering
the best experience and original travel from the routes themselves to even space travel in the
future. (OECD,2020)

4 Impact of COVID 19 to tour operator business

In the first half of 2020, there were 65 percent fewer international tourist arrivals in the world
than in the same period 2019, and Europe is the second most affected region in the world with
the Covid-19 pandemic with 66 percent fewer arrivals, according to the latest UNWTO data.
The number of tourist arrivals in the world was 93 percent less than in June 2019, which shows
the extremely strong impact of the Covid-19 pandemic on the world tourism and travel industry.
(UNWTO,2020) New data for world tourism are summarized in a new edition World Tourism
Barometer, and the UN Specialized Tourism Agency commented that the 65 percent drop in
international tourist arrivals during the first half of 2020 was "an unprecedented decline, as
countries around the world closed their borders and imposed travel restrictions in response to
the pandemic." They also state that the massive decline in tourist demand for international
travel during the period January-June 2020 led to a loss of 440 million international arrivals
and about 460 billion US dollars in export revenues from international tourism. This is
approximately five times higher loss in international revenues from tourism than was recorded
in 2009 amid the global economic and financial crisis. (UNWTO,2020) Because of such
developments, they have repeatedly warned governments around the world to work closely
with the private sector to relaunch global tourism, especially now that they say safe and

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responsible international travel is possible in many parts of the world. As a big part of the
tourism sector, the tour operator business is also infected by COVID 19 crisis.
The key question which many tourism industry owners are asking nowadays is “will my
company survive?” Unfortunately, some tour operators would simply not be able to survive
COVID-19's economic consequences. It's equally important to consider why certain
companies are if you're a tour operator company making plans to keep your business alive.
Knowing why will allow them to be on the lookout for warning signs which, in return, will aid in
the development of their company's survival strategy. The reasons why tour operators fail to
survive COVID-19 are detailed in the following list. (Tourwriter,2020) Many companies would
be affected by a combination of these factors.

• Overcapitalized: the cash runway (the amount of time a company's cash would last if
it keeps spending at its current rate) was insufficient to handle the sudden and
prolonged decline in business. (Tourwriter,2020)
• Government funding: When the company is located in a country or area where
government support is small or non-existent, they have no one to turn to when their
revenue stream dried up due to border restrictions. (Tourwriter,2020)
• Overexposure to labor costs: the company depended heavily on human labor for
activities that could have been done more efficiently with software and/or processes.
Wages are a significant investment and a significant portion of a company's costs.
(Tourwriter,2020)
• New or recently acquired business: Whether a business is new or recently purchased,
it is possible that it was dependent on unbroken travel and tourism to develop
financially and raise attention. They no longer have the cash to fall back on because
the circumstances have changed. (Tourwriter,2020)
Now more than ever, people and businesses want security and assurance that everything will
indeed return to some version of normal. Nevertheless, this path will be long since UNWTO
reports that we cannot expect pracademic tourism levels before 2023. The scale of the covid-
19 pandemic poses concerns about the tour operator industry's prospects. However, the main
way for tour operators to “beat” the pandemic is to analyze and adopt new trends and
strategies. The recent study suggests Wenzel's classification of strategies on the responses
to crises. They are retrenchment, persevering, innovating, and exit. These methods are the
product of a thorough study of several articles on crises/shocks and companies' strategic
responses. (Montes ,2020) They also provide main principles for managers and employees to
adapt to an unforeseen crisis over a variety of time horizons: short, medium, long, or at any
time. As a result, the tactics should apply to tourism businesses (e.g., tour operators) in the
light of COVID-19, which appears to have both short- and long-term implications for the
tourism industry (UNCTAD, 2020).

• “Retrenchment strategy refers to a narrowed scope of a firm's activities by decreasing

costs, assets, product lines, number of staff, and concentrating on core activities.
Retrenchment contributes to firm recovery as it concentrates on the existing firm's
operation by cutting out complexity and improving transparency. Some scholars raise
doubts about the effectiveness of this strategy. Nevertheless, retrenchment is not the
only strategic response to a crisis, and it might partly be a viable response to the crisis
in the short run.” (Do et al., 2021)
• “Persevering strategy aims at "sustaining a firm's business activities in response to the
crisis" Many scholars have proved that preserving strategy may better contribute to
firms than innovating strategy. For example, Chakrabarti (2015) suggests that
persevering helped Asian manufacturing firms a better survival rate during the

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Salzburg University of Applied Sciences, Bachelor Programme IMT-E 2018 | Marijana Mitic

economic crisis of 1997. This finding suggests that firms facing crisis events might
forgo possible benefits when leaving prior paths immediately. Consequently,
preserving strategy minimized the adverse impacts and might be an effective strategic
response to the economic shock.” (Do et al., 2021)
• “Renewal strategy by innovating can be defined as "firms' adaptation to changing
environments" It disrupts the firms' inertia by adjusting or changing their core
competencies to reach long-term performance. Success depends on the CEO's
perceptions and the role of organizational innovation. Given that prolonged crises often
make firms coping with difficulties to return to the previous state, strategic renewal is
essential for firms' survival in the long run. The opportunity space for conducting
successful strategic renewal varies with the type of environmental scarcity they have
to cope with.” (Do et al., 2021)
• “Exit strategy relates to portfolio reorganizing, business restructuring, divestment,
product/market positioning in declining industries, or business activities discontinuing.
Previous studies indicate that as business exits help firms release committed
resources, it can be beneficial for strategic renewal and create opportunities for setting
up new ventures. An exit strategy is essential in evolutionary processes such as the
substitution of old products, markets, or firms 'competencies for new ones. Unlike
bankruptcy, exit strategy neither represents business failure nor is it the last choice
when other response-to-crisis strategies fail.” (Do et al., 2021)

5 Conclusion

Recovering from COVID-19 will be defiantly a long journey not only for tour operators but for
the entire tourism industry. To sustain their businesses, tour operators will need to constantly
analyze the market and adapt to the new changes on the market. One of the possibilities would
be to embrace new trends and technological developments. In support of this is the
implementation of information and communication technology that provides an innovative
approach to improve services and end-user satisfaction. Furthermore, tour operators need to
focus on those emerging trends when providing new value-added services that will attract and
retain customers. Additionally, the implementation of a crisis management plan should be the
main aspect for the recovery of tour operators. Not only it could help businesses to recover
from this pandemic but also can prepare them for a similar situation in the future.
In conclusion, this might be one of the biggest challenges for the tour operator business so
far. Nevertheless, in every challenge, there is an opportunity. Tour operator’s opportunity will
be focusing more on innovation and adaptation of new trends to keep their business and grow
in the future.

6 References

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Do, B., Nguyen, N., D’Souza, C., Bui, H. D., & Nguyen, T. N. H. (2021). Strategic responses
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Žigienė, G., Rybakovas, E., & Alzbutas, R. (2019). Artificial Intelligence Based Commercial
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