INTERNATIONAL JOURNAL OF TOURISM RESEARCH
Int. J. Tourism Res. 1, 429±439 (1999)
The Role of the Tour Operator in South
America: Argentina, Chile, Paraguay and
Uruguay
Les M. Lumsdon and Jonathan S. Swift*
Staffordshire University Business School, Brindley Building, Leek Road, Stoke-on-Trent,
Staffordshire ST4 2DE, UK
ABSTRACT
The role of the tour operator in the supply
chain has focused traditionally on the
dominant position of companies situated in
the generating countries of Europe and North
America; despite recognition of the tour
operator located in emergent receiving
countries, the area has not been discussed
extensively. This paper investigates the
opinions of 37 tour operators in four
emerging countries in South America, with a
view to evaluating the nature and level of
contact with foreign tour operators and
suppliers. It assesses the degree of
internationalisation that occurs, and the
extent to which tour operators are involved in
the process of tourism development. The
paper con®rms the role of the receiving tour
operator within the distribution chain, but
concludes that in terms of stimulating
tourism development there is a need for more
research into the relationships between
government and the wide range of
organisations involved in the process.
Copyright # 1999 John Wiley & Sons, Ltd.
Received 2 January 1998; Revised 7 June 1998; Accepted 1 July
1998
Keywords: distribution system;
internationalisation; South America;
distribution chain; tourism development; tour
operators.
* Correspondence to: Dr J. Swift, Staffordshire University
Business School, Brindley Building, Leek Road, Stoke-on-
Trent, Staffordshire ST4 2DE, UK.
CCC 1099±23409/99/060429±11 $17.50
INTRODUCTION
A
lthough the concept of internationali-
sation in tourism has been the subject
of academic investigation, the discus-
sion has focused mainly on the relationship
between hotel groups, international carriers
and government organisations (Go and Pine,
1995, p. 11). The role of the tour operator has
been discussed to a lesser extent, focusing
primarily on companies based in the generat-
ing economies of North America (Reimer,
1990, pp. 501±512), and Europe (Gratton and
Richards, 1997, pp. 213±226). This re¯ects the
dominance in the international market of tour
operators in these economies, which often are
characterised by both vertical and horizontal
integration (Witt et al., 1991, p. 31). The
discussion has rarely focused on the role of
the destination-based tour operator, or the
extent to which such companies have inter-
nationalised their operations (e.g. by establish-
ing links across several markets), as part of the
process of tourism development. This paper
seeks to contribute to an area that according to
Higgins (1996, p. 11) is under-researched, and
concentrates on destination-based tour opera-
tors in four countries in South America where
tourism is experiencing a modest but sus-
tained pattern of growth.
From a generating country perspective, the
terms `tour operator' and `wholesaler' are
often used interchangeably; if there is a
difference it is that a wholesaler plans and
designs a package that is then sold on to
another company, whereas the tour operator
undertakes a similar function but also sells
directly to the public or by way of a retail
Copyright # 1999 John Wiley & Sons, Ltd.

430
agency. The tour operator also manages the
day-to-day operation of a package (Mill and
Morrison, 1992, p. 472), and brings together the
core elements of an inclusive travel packageÐ
namely transport and accommodation to and
within a pre-determined destination or desti-
nations. This may be enhanced by additional
services such as luggage and passenger trans-
fers, which sometimes are referred to as
ground handling. There are also tours at the
destination supplied by local tours providers,
as well as entertainment and catering, and in
some cases the provision of a tour guide or
representative. These subdivisions are recog-
nised by tour operators in the markets under
discussion.
The result is what is described commonly as
the inclusive tour, which is either lightly or
heavily packaged according to the require-
ments of the market. It is sold on to a retailer or
directly to the public. The main tasks of the
tour operator or wholesale business, according
to McIntosh et al. (1995, p. 139) consist:
¼primarily of planning, preparing, and
marketing of a vacation tour, including
making reservations and consolidating
transportation and ground services into a
tour assembled for a departure date to a
speci®c destination.
The raison d'etre for the existence of the whole-
saler or tour operator is that they both offer to
the market inclusive tours or packages at a
competitive price, and which offer standards
and levels of security that are not necessarily
guaranteed when a visitor arranges a holiday
independently.
Models that seek to explain the relationship
between suppliers within tourism distribution
channels recognise the complexity of the
behavioural patterns that bind such organisa-
tional structures. They rarely detail exactly how
companies interact with each other, however,
in terms of collective marketing or competitor
activities (Kotler et al., 1996, p. 463). Nor do
they delineate power points within the system.
One approach that does attempt to indicate the
degree of importance of each distribution link
is the transactional chain, as outlined by Witt et
al. (1991, p. 82). Each transactional partner in
the chain (i.e. the intermediaries between the
customer and the destination), has an oppor-
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L. M. Lumsdon and J. S. Swift
tunity to in¯uence the system, at what has
been de®ned as a brokerage point. The tour
operator in the receiving country or at the
destination, for example, is one such point; the
main justi®cation for this link in the chain is
that the destination-based operator offers
specialist services, described by Witt et al.
(1991, p. 82) as transactional capability, such as
local knowledge. It is argued, therefore, that
the destination-based tour operator has the
ability both to reduce costs and to increase
value and quality within the entire process.
Tour operators vary in size and nature of
operation; they range from the large interna-
tionally orientated companies such as Jetour in
Japan, Neckermann und Tur in Germany, or
Julia Tours in Spain, to smaller scale specialist
operators, which tend to prepare packages for
selected countries only (Journey Latin America
in the UK), or offer a dedicated range of
specialist activity holidays (such as Backroads
in the USA).
Airlines have strong ties with large-scale
tour operators in terms of crafting strategies to
stimulate the market for air travel through
intermediaries (Holloway, 1992, p. 118). Thus
companies such as American Airlines and
British Airways have developed extensive
networks into Latin America, and in the
process have engaged in a dialogue with tour
operators throughout Europe and North
America. At the opposite end of the spectrum
is the small-scale independent company,
which exist in all countries either to supply
outbound or inward packaging, and some-
times both. It is also the case that some travel
agencies also arrange packages for their clients
such as those in AsuncioÂn, Paraguay which
arrange short-break coach tours to Brazil. In
some instances, rail and coach operators de-
sign tours but they are not as signi®cant as
¯ight-based packages.
Within this framework, various authors
have directed their attention to the nature of
the management tasks necessary to devise and
deliver a package tour (see Sheldon, 1989, pp.
469±472; Lumsdon, 1997, pp. 189±190). In
particular, discussion has focused on the issue
of oligopolistic competition, economies of
scale, differential branding, pricing and dis-
tribution by the mass tour operator in the
generating market (Cooper et al., 1993, p. 203).
Int. J. Tourism Res. 1, 429±439 (1999)

Role of the Tour Operator in South America
THE TOUR OPERATOR IN EMERGING
COUNTRIES
The role of the tour operator in developing
countries is one that deserves attention. Jen-
kins (1991, p. 274) observes, for example, that:
¼the tour wholesaler acts as a catalyst of
demandÐhe interprets the market needs
of his clients and packages these needs
into destinations. His in¯uence on the
direction of demand is particularly sig-
ni®cant to long haul, relatively expensive,
destinations, i.e. most developing coun-
tries. Limited market knowledge, ®nance,
and experience force many of the more
distant countries offering high-priced,
low-volume tours to work with and
through specialist wholesalers. This can
impose serious limitations on tourism
policy making in the host country.
This preliminary study seeks to investigate the
roles adopted by small- to medium-sized tour
operators in four emerging economies in Latin
America. It focuses attention on the way in
which contacts are established with tour
operators in other countries and the extent to
which the network of supply relationships
stimulates both the distribution chain and
tourism development.
The empirical research was based on the
views of 37 executives or owners of tour
operations based in Argentina, Chile, Para-
guay and Uruguay. It discusses the issues that
these tour operators consider important in
their current markets and their relationships
with operators in other countries. In this
respect, it evaluates the extent to which they
have internationalised their operations, and
the way in which they envisage that the
process might develop in the future.
The inward-bound tour operator is involved
directly in the prospecting, design and whole-
saling of tours, but in many instances also
operates tour packages, on a subcontract basis,
and often represents a larger brand name such
as Neckermann or Kuoni. Initial results from
this study suggest that such companies are
important in the establishment of the tourism
chain at a destination, although their involve-
ment is often less conspicuous in the compli-
cated web of interaction between government,
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431
international carriers and travel distribution.
Tourism ¯ows
The four countries that formed the focus of the
study, Argentina, Chile, Paraguay and Uru-
guay, have all registered a net increase in
incoming visitor numbers during the past
decade. This is illustrated in Table 1.
Argentina is the strongest tourism economy
of the four, with both a growing inbound and
outbound market; it is followed by Chile,
which is rapidly becoming a major competitor.
Uruguay and Paraguay are the weaker of the
four in terms of tourism development.
Although at ®rst glance the ®gures for Ur-
uguay suggest a healthy level of visitor
arrivals, this is somewhat misleading because
much of the inbound tourism is generated
mainly from its neighbouring countries and
consists predominantly of low-spending short-
break visitors. For example, Uruguay and
Argentina are connected by regular hydrofoil
and ferry services offering a fast crossing of the
River Plate, and many Argentinians take
advantage of these for short stays at the resort
of Punta del Este. There are also transitory
movements between Brazil and Argentina and
a large component of Uruguayan nationals
returning home to visit friends and relatives.
Uruguay is not, therefore, a primary destina-
tion for international long-haul travel.
Paraguay is similar in that many of the
arrivals recorded as international visits are
transitory stops at the Brazilian or Argentinian
borders en route to the Igassu Falls. Where
Paraguay tends to differ from Uruguay, how-
ever, is that it seeks to develop signi®cantly its
international potential, particularly in terms of
European and North American markets. A
breakdown of the originating markets indi-
cates the importance of periphery countries in
comparison with the long-haul generators of
Europe and the USA. For example, 72.6% of
visitors to Uruguay are from Argentina as are
54.7% of foreign visitors to Chile. The impor-
tance of neighbouring countries, in terms of
volume if not value, should not be under-
estimated. In this respect most South American
countries recognise and are engaged in the
development of the intraregional market but
look increasingly to higher spending long-haul
Int. J. Tourism Res. 1, 429±439 (1999)
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432 L. M. Lumsdon and J. S. Swift

Table 1. Foreign visitor arrivals (1985±1994). Source: adapted from Yunis (1996) and World Tourist
Organisation (1998)
Destination and number of arrivals

Year Argentina Chile Paraguay Uruguay

1985 1 503 099 418 100 263 000 1 031 373
1986 1 774 483 581 100 371 000 1 147 881
1987 1 843 107 575 200 303 000 1 046 940
1988 2 125 140 623 900 284 000 1 035 980
1989 2 491 719 797 400 279 000 1 240 431
1990 2 727 987 942 900 280 000 1 267 040
1991 2 870 346 1 349 100 361 000 1 509 962
1992 3 030 319 1 283 300 334 000 1 801 672
1993 3 532 053 1 412 500 404 000 2 002 543
1994 3 866 474 1 622 800 406 000 2 175 457
1995 4 101 000 1 540 000 438 000 2 022 000
1996 4 286 000 1 450 000 426 000 2 152 000
1997 4 540 000 1 693 000 387 000 2 316 000

tourism, although this still accounts for a small
proportion of total tourism.
RESEARCH METHODS
The key aim of the research was to evaluate the
role of the tour operator in the supply chain
with regard to internationalisation and tour-
ism development. In particular, it was neces-
sary to gather information regarding the way
in which tour operators seek to establish
contacts and develop relationships with tour
operators based in other countries, for both
inward- and outward-bound operations.
Given the nature of the research and in
particular the degree of opinion and attitudi-
nal response anticipated, it was decided to
adopt face-to-face interviews with senior ex-
ecutives responsible for commercial negotia-
tion within the respective companies, rather
than use self-completion questionnaires. The
sample was framed to provide a cross-section
of tour operators; included, however, were the
major, long-standing companies in each coun-
try, each of which had extensive knowledge of
their country and its major markets. It was also
decided to include a number of smaller
specialists, such as those providing nature
tours and those catering for niche markets
based on historic ties with Europe and the VFR
Copyright # 1999 John Wiley & Sons, Ltd.
(Visiting Friends and Relatives) market. With
one exception in Santiago, all of the companies
fall into the categorisation of Small-to-Medium
Sized Enterprises (SMEs) employing less than
50 full-time employees and in many instances
less than 10.
Interviews also were conducted with gov-
ernment departments in Argentina, Paraguay
and Chile in order to discuss trends and
understand the relationship between govern-
ment, trade associations and tour operators.
During these initial interviews, lists of compa-
nies were provided by the respective govern-
ment departments in each country; all the
companies were located in the capital cities of
their respective countries. Those selected were
telephoned ®rst to seek approval for interview,
and to determine their status as a tour
operator/wholesaler. The telephone call was
followed by a fax con®rming an appointment,
and providing a list of the topics that would
form part of the discussion, although it was
decided at the outset of each interview that the
approach would be not be constrained by a
rigid structure. Table 2 summarises the num-
ber of operators interviewed and the main
thrust of their business.
The in-depth interviews were conducted by
the authors in Spanish, with the exception of
three respondents, who were of English
Int. J. Tourism Res. 1, 429±439 (1999)

Role of the Tour Operator in South America
Table 2. Tour operators: numbers interviewed and main direction of business
Primarily inward Primarily outward
Country bound bound
Argentina 7 6
Chile 3 2
Paraguay 1 6
Uruguay 1 1
descent or who used English in daily transac-
tions. Each respondent was asked their views
about the development of the tourist market in
their country, speci®cally:
(1) the nature of their market (whether in-
bound, outbound, business, incentive or
consumer orientated, specialist or general,
and which generating countries or regions
are their main markets);
(2) the methods used to contact other tour
operators, and the criteria used for selec-
tion;
(3) the formation and maintenance of relation-
ships with other companies in the chain;
(4) the role of the national government in
developing tourism;
(5) the future of the market.
RESEARCH FINDINGS
The nature of the market
Respondents were asked to describe the
current market for tourism as an opening to
the interview. Most tour operators consider the
market for both inbound and outbound tour-
ism in their respective countries to be in
growth, a point that is veri®ed by government
statistics. This, it was argued, was a conse-
quence of relative political and economic
stability in recent years. Apart from operators
in Paraguay, all those surveyed reported a
sustained demand for domestic tourism (albeit
small), although this is never likely to be a
major part of their business activity in any of
the countries under discussion within the
forseeable future.
In terms of outbound travel (business,
incentive and pleasure), this also was noted
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433
Even split between
outward and Total number of
inward bound operators
3 16
4 9
3 10
0 2
as a market in growth. Although it is possible
to undertake a more sophisticated segmenta-
tion of the market, the tour operators divided it
crudely into two core segments. Firstly, they
identi®ed upper and upper middle income
earners seeking long-haul pleasure trips to
Europe and to the USA. Although the key
destinations are still Spain and Italy, the
pattern is changing to include Greece and the
Middle East. There has not been a commensu-
rate interest in demand for cultural tourism
within Latin American, although the Brazi-
lians have shown a marked preference for a
southern tour from RõÂo de Janeiro to Santiago,
Puerto Montt, Buenos Aires and returning to
RõÂo de Janeiro.
The second major segment is the middle
income group, with less disposable income
and typically including younger travellers,
who are choosing Cuba, CancuÂn, The Domin-
ican Republic, Miami and RõÂo de Janeiro. In
many instances these are comparatively cheap-
er than other offerings, even when compared
with domestic trips in Chile or Paraguay. The
destinations of Latin America (especially Cuba
and The Dominican Republic) now feature
very strongly against the more traditional
beach holiday destinations in Uruguay and
Brazil. The Caribbean islands are aggressively
promoted to the South American market, often
in association with airline companies looking
to build charter business. In many instances,
the packages provide a better quality offering
in relation to the domestic markets of the
countries concerned. These emerging destina-
tions are also gaining advantage from the
relative strength and stability of currencies in
South America, as exempli®ed, for example,
by the parity between the Argentinian peso
and the USA dollar. Thus, the rapid growth of
Int. J. Tourism Res. 1, 429±439 (1999)

434
the outbound market in recent years may have
retarded the development of domestic tourism
in Argentina and Chile. Additional factors also
may include the relatively underdeveloped
infrastructure: this is especially apparent in
Uruguay and Paraguay.
Of the long-haul incoming markets the most
important is the USA, followed by Europe.
Argentina is by far the most popular destina-
tion but Chile is gaining ground: both offer a
variety of landscapes, and access to the
Antarctic. Uruguay and Paraguay have yet to
penetrate the mainstream long-haul market
and tend to receive far fewer visitors; Paraguay
being known primarily for the Igassu Falls, its
Jesuit Ruins, and as a centre for shopping.
Rudimentary visitor pro®ling by the opera-
tors indicates that they receive two key
incoming groups. The most important are the
50 years plus age group, many of whom have a
professional or managerial background. The
Spanish, Italians and North Americans seek
higher standards of accommodation and a mix
of landscape, city life and shopping. The
German, British and Australian markets tend
to be more interested in nature and culture,
and are willing to trade down in terms of
accommodation but not in authenticity. A
secondary group of visitor is less important
for tour operators; it is the younger, more
independent traveller, who is more budget
conscious and therefore seeks only a limited
use of the services available.
Contact methods
All the companies concerned maintained con-
tact with key accommodation providers and
carriers, although many expected trade asso-
ciations to be in a position to in¯uence such
organisations in order to develop strategic
alliances that may favour market develop-
ment. Within this context, the tour operators
were asked how they initiated discussions
with other companies, for example, regarding
the design of a package, or in satisfying a new
market requirement. Many indicated that they
relied entirely on established contacts, or
would continue much as before in their
approach, a point that concerned a number of
companies:
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L. M. Lumsdon and J. S. Swift
Tour operators tend to suffer from tunnel
vision, and remain very much with the
markets with which they ®rst started. As
there is increasingly ®erce competition in
this industry, there are likely to be
increasing numbers of casualties: at pre-
sent there is an estimated 20% failure rate
amongst operatorsÐbut they are gradu-
ally changing the way they do business.
Those that do succeed are generally
characterised by the high level of ¯ex-
ibility in their operations, and a focus on
quality: others have not adopted this
mentality and tend to stick with what they
know. (Tour Operator, Argentina)
The main method of contact both in Latin
America and Europe remains the travel trade
fairs, such as `Buy Argentina' (Argentina),
`Nordeste' (Brazil) and the European fairsÐ
ITB (Berlin), Fitur (Madrid) and, the World
Travel Market (London). In the USA, many
choose Miami as a place to do business, at fairs
such as La Cumbre, because, as one Paragua-
yan operator commented: `¼ they understand
the South American way of doing business'
Many of the respondents felt that the fairs had
a number of limitations, such as travel time
and cost, and having to spend time with those
who are marginal or time wasters rather than
with serious contacts. The core reason why
companies feel obliged to attend, however,
was explained by a Chilean operator:
You have to go to the trade fairs and meet
people face to face ¼ this is the best means
of building con®dence. In terms of any-
thing other than networking, trade fairs
are not very useful.
More importantly, workshops such as `Pow-
Wow' in the USA, or those organised as part of
trade fairs elsewhere were considered very
important by a signi®cant minority of opera-
tors. These workshops allow a preliminary
screening of a potential partner in the chain,
and an opportunity to assess whether the two
companies could work together.
Thirdly, a number of companies referred to
personal contacts, recommendations and busi-
ness being developed by diligent use of fax
and telephone. The key lies in the level of
continuous contact, and the opportunity to
Int. J. Tourism Res. 1, 429±439 (1999)

Role of the Tour Operator in South America
Table 3. Tour operators: preferred methods of making and maintaining contact with foreign operators. Most
respondents speci®ed one or two main contact methods and many simply replied that it varied according to
the circumstances
Contact Methods First choice
Seeking views of national ¯ag carriers
Contact with embassies
Receiving requests by telephone and FAX
Personal recommendation
Sales of®ces or representatives
Trade fairs
Workshops
evaluate how businesses react to prompts and
requests. For example, one company set a
response time of no longer than 20 minutes to
reply to a request from another operator. The
degree of importance of the various contact
methods is listed in Table 3.
Respondents were then asked to discuss the
key criteria which they applied when evaluat-
ing whether to work with another operator or
not. Most operators mentioned in general
discussion that sourcing and being sourced
was a continuous process, and that this was
simply a managerial decision based on experi-
ence. A number of respondents, however,
prioritised the factors that they considered
essential. The two cited most commonly were
the price±value dimension, and secondly the
®nancial security of a company. Other impor-
tant criteria were high levels of service, level of
know-how, followed by reliability. The main
reasons offered by the respondents are listed in
Table 4.
Key issues
Respondents were asked about the interna-
tional supply chain and in particular those
issues facing tour operators in emerging
tourism economies; the factors raised tended
to be common across the four countries under
consideration. The major concern is the lack of
infrastructure, which deters hotel developers
and dampens the interest of major interna-
tional tour operators. For example, one Argen-
tinian tour operator felt that the lack of an
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435
Number of operators
Second choice Third choice
0 0 1
0 1 0
8 0 2
2 0 1
2 1 0
10 6 0
7 5 0
airport at Calafate was retarding the growth of
one of his country's major resorts.
Many also pointed to the lack of three-star
hotel accommodation, an increase in which
they considered essential if the inbound
market were to be expanded. In Paraguay all
tour operators pointed out that their efforts to
stimulate the incoming market were con-
strained by the lack of basic infrastructure.
AsuncioÂn airport, for example, currently is not
able to service international long-haul ¯ights,
even if a carrier could be encouraged to
contemplate a direct routing. Furthermore,
the lack of roads and core facilities required
by visitors means that there is little scope to
develop tours, even at Igassu Falls.
In terms of the transactional chain some
operators were frustrated that tour operators
in originating countries were not willing to
share in the risk of selecting new destinations.
This was especially the case in Paraguay,
where many respondents considered that their
efforts were being ignored by the large
European and North American operators
primarily because it is not on a long-haul air
route.
A third major concern was subcontracting
and how this potentially can be damaging in
the supply chain. Quality cannot always be
assured and this may result in a loss of brand
image, which could have taken years to build:
for example, one successful Argentinian op-
erator was reluctant to join forces with
European companies because it feared a
dilution of image and reputation. Other
Int. J. Tourism Res. 1, 429±439 (1999)

436
Table 4. Criteria for selection of foreign tour operator/supplier
Criteria for selection of supplier or tour operator
Price/value for money
Financial security/solvency
High level of service quality
High level of experience/know-how
Reliability
Sales volume (i.e. large scale)
Attention to detail
Hotel/location
companies were concerned that too often a
European or American operation would
award a Latin American contract to one major
operator, for example, in RõÂo de Janeiro. This
company would, in turn, subcontract to tour
operators in the countries concerned, perhaps
putting together a grand tour type of package.
If the Brazilian tour operator subsequently lost
the contract, then the other companies would
also be likely to be replaced, regardless of their
level of investment on the programme and
their degree of competence and professional-
ism. This was seen as a major drawback of
being involved as a third party to a substantial
contract.
Many companies indicated that they were in
the process of attempting to eliminate the retail
level or to remove another layer of operation
in order to reduce the length of the supply
chain. In some instances, it was argued that
their offerings were overstated or misre-
presented by retailers or other operators
and hence customer expectations heightened
unduly, subsequently leading to problems
later.
Several noted that global distribution sys-
tems increasingly offered the option of trading
directly with the consumer and this appealed
to most of the tour operators because quality
control is thought to be more pressing than in
the past. One of the easiest ways to retain
control over the process would be to cut the
length of the chain, which is not always
possible when subcontracting. This also in-
volves attempting to overcome what one
operator described as the `Latin effect', which
still prevails:
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L. M. Lumsdon and J. S. Swift
Number of respondents mentioning this criteria
8
7
6
5
4
2
2
2
Every time a cruise ship docks, it is sent to
a different berth for no apparent reason. It
is dif®cult to get to know which berth it
will be sent to in advance, and to make
appropriate administrative organisation.
This is why knowing people is so im-
portant. (Tour Operator, Argentina)
Role of the government
Although most tour operators appear to enjoy
a good working relationship with the respec-
tive government organisations responsible for
tourism promotion, there is a degree of
scepticism in the private sector about the role
of government in tourism development. The
major criticism is that government affords
insuf®cient priority to tourism:
The government prefers to promote cop-
per and wine, and leave tourism waiting
in the queue. (Tour Operator, Chile)
There is also concern that the direction of
tourism policy is lacking. Although there
might be a policy or a strategy document on
the shelf, and possibly major promotional
activity, there continues to be a lack of
development in the necessary infrastructure.
This was particularly stressed by Paraguayan
operators, who felt that a ministry of tourism
with a much stronger political power base
would be a preferred solution. The issue was
compounded, it was argued, by the extensive
use of political patronage in the selection of
tourism of®cials rather than on the basis of
experience and capability.
Int. J. Tourism Res. 1, 429±439 (1999)

Role of the Tour Operator in South America
Future of the market
With regard to the future of the market, many
tour operators were optimistic if only the
infrastructure could be improved and the
importance of tourism recognised by govern-
ments. The advent of the common market
`Mercosur' would be an advantage in building
stronger intraregional markets and possibly
domestic markets out of the main urban areas.
Most operators, however, would still be look-
ing to develop the long-haul inbound market:
several had already initiated contacts in the
Asian market, especially looking to develop
Japan, China and South Korea. Others were
investigating the development of the Austra-
lasian market.
In terms of tourism offerings for the incom-
ing market, many operators pointed to the
potential growth of the adventure±eco market.
In Paraguay most considered there to be a
major opportunity, `¼with some care and
imaginative planning', to develop eco-tourism
in the isolated Chaco region in the east of the
country. There was also an interest in new
circuits, such as the Uruguayan operator who
pointed to the joint initiative with Argentina
and Brazil to develop the proposed `Guacho
Trail'.
DISCUSSION
The research con®rms the key role played by
small- to medium-sized tour operators based
in South American destination countries. By
contrast, it reaf®rms the importance of the
international tour operator as a gatekeeper to
the market. Furthermore, it tends to con®rm
Jenkin's comment about the role of the
specialist tour company within the supply
chain, as the authors found that operators act
as brokers between the interregional operator
and local suppliers during what is best
described as an early developmental stage of
tourism in South America.
Operators are also key in¯uencers in the
process of improving quality standards. They
concern themselves with the upgrading of the
offering to the standards required by the long-
haul markets. In this respect, the reference to
enhancement of transactional capability refers
as much to the maintenance of quality stan-
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437
dards as it does to the potential to extract
added value from local suppliers. Many of the
operators included in this study considered
this to be a frustrating task given the lack of
service culture in the destinations under
consideration, and where some sectors have
been dominated by traditional families who
seek to yield increased return in compensation
for the lean years, rather than investing for the
future. Such organisations tend to display a
lack of managerial and operative training.
Although most of the tour operators also are
family ®rms, based in the capital cities, several
have outgrown the initial familial structures.
They have developed either as business travel
specialists or have concentrated on the strong
historic VFR markets in Europe, principally
Spain, Italy and Germany. During the past
decade, many have built on these core markets
by developing either the inbound or outbound
pleasure travel sectors, focusing particularly
on intraregional, North American or European
markets. This related market diversi®cation
has bene®ted many tour operators, with the
exception of the traditional specialist VFR
organisations. As the market becomes more
sophisticated, these are most likely to fail
because they tend not to take advantage of
technological advance, and they are generally
the least ¯exible in terms of a changing market
environment. This will allow the larger orga-
nisations to consolidate the mature sectors of
the market, while penetrating the more lucra-
tive long-haul pleasure travel market. The
discussions with the tour operators indicate
that they have focused on the classic approach
to internationalisation. Melin (1992, p. 103), for
example, claims that:
¼®rms start their internationalization in
markets with the lowest perceived market
uncertainty, in other words, markets that
they can rather easily understand, often in
neighbouring countries.
In this case, tour operators have concentrated
initially on intraregional supply, and in terms
of developing long-haul markets have done so
in association with major operators who
provide a degree of security. This is especially
the position with those operators who handle
small volumes, and are almost totally reliant
on the European or North American tour
Int. J. Tourism Res. 1, 429±439 (1999)

438
company to negotiate, design and administer
an outbound tour on their behalf. Thus, several
respondents had established contact with
major European operators such as the Span-
ish-based Julia Tours to manage all of their
European packages; Julia Tours, in turn has a
number of of®ces and representatives based in
South America. Dealing with Europe via a
Spanish-based company reduces the psychic
distance between the Latin American operator
and the target market, because they can
undertake transactions within a similar lan-
guage and cultural framework.
In the same way there is a reliance on
Miami-based operators to act as brokers and
managers for tours in the USA. A small
number of the larger companies also have
established representatives and a few have
of®ces in the main capitals of Europe or in
regional cities such as Barcelona and Frank-
furt. This second stage of internationalisation
most probably is the extent to which such ®rms
will develop their relationship with long-haul
operators in generating countries.
The relationship, however, is not even:
many European operators have yet to be
convinced to establish a strong presence in
the South American market. They are, there-
fore, reluctant to diversify in any signi®cant
way from established destinations in, for
example, Mexico, Cuba and The Dominican
Republic. The exception, in terms of large
companies is Julia Tours, and to a lesser extent
smaller niche operators such as Viajes Ecuador
or Journey Latin America. Although they
actively pursue new tourism offerings, desti-
nation tour operators con®rm that a lack of
infrastructure or service capability means that
this is an incremental process at best.
In building a network of contacts within the
transactional chain, the trade fair and the
workshop are still the most important means
of establishing working relationships. The key
element remains personal contact and the
degree of trust associated with this, which is
a major component of physic closeness (HalleÂn
and Wiedersheim-Paul, 1984, p. 18). This is
crucial in the Latin American context, where
relationship marketing is an essential compo-
nent of business development. Issues of
®nancial security and value for money feature
strongly, however, but only after personal
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L. M. Lumsdon and J. S. Swift
recommendation.
Although the future of the market is
apparently bouyant (Yunis, 1996, p. 13), tour
operators are less positive given their collec-
tive perceived view of government involve-
ment and investment:
There still remains a vast potential to be
exploited, in terms of destinations, mar-
kets and offeringsÐthe future looks good,
but only if the government can see beyond
the development of the copper industry.
(Tour Operator, Chile)
In their estimation, it is the task of respective
governments, not domestic-based tour opera-
tors, to secure the necessary investment to
improve the basic tourism infrastructure. Dis-
cussions with government departments, how-
ever, suggested that they see their role as one
of establishing broad policy in consultation
with key trade associations within the country
concerned. They noted particularly the impor-
tance of the private sector and in many
instances indicated that government could
best serve the business sector by promoting
the country's potential abroad. There remains
an uneasy balance between government in-
volvement given the overall drive to privatisa-
tion and deregulation of business sectors. In
Chile, Sernatur, the government organisation
responsible for developing and promoting the
tourism sector, has assumed a lesser role in
comparison with the private sector Corpora-
cioÂn TurõÂstica de Chile, which has little public
sector involvement. Tour operators, however,
are still calling from more government re-
sources. In this respect, Jenkin's (1991) com-
ment regarding the role of tour operators
having an impact on tourism policy is not
entirely borne out by this research. The tour
operators in this study suggest that, despite
their company efforts, it is the failure of
government to execute development plans
that effectively retards tourism development
and its subsequent potential for an increased
contribution to GDP. An alternative point of
view is that major overseas tour operators are
the key to the stimulation of market develop-
ment, and through their actions they can
in¯uence airline capacity and a growth in
accommodation provision; inbound destina-
tion-based tour operators act as a bridge in this
Int. J. Tourism Res. 1, 429±439 (1999)

Role of the Tour Operator in South America
process. Only when this process is in ¯ow will
a government seek to determine some degree
of control by introducing policy measures and
development plans.
CONCLUSION
The level of internationalisation of tour opera-
tors and the complexity of the transactional
chain provides a partial insight into this
process; it is not entirely one way because tour
operators tend to generate inbound and out-
bound markets in parallel. The ®ndings of the
survey suggest that outbound operations
follow a classic pattern of internationalisation:
a series of relatively small and incremental
steps. In contrast, the nature of international
tour operators is exempli®ed by an often rapid
development of markets, but this relies not
only on the co-operation of the destination-
based operator but also on a complex set of
relationships between a number of organisa-
tions.
Although there is a strong case for destina-
tion-based tour operators, trade associations
and governments working more closely to-
gether to formulate policy, there is currently
little evidence to support the view that this is
happening to any great effect. This initial study
suggests that a more detailed exploration is
warranted, focusing on the intricate relation-
ship between tour operators, trade associa-
tions, accommodation providers and
governments to determine the driving forces
of tourism policy. The ®ndings from such a
wider ranging study should enable the re-
searchers to develop a more re®ned model of
tourism development, including a number of
factors explored in this paper.
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