Geography Reference
In-Depth Information
improving communication and co-ordination between different components associated
with the production of tourism, other developments (notably horizontal and vertical
integration) assist in addressing the fragmentation of elements within the supply system.
Likewise, tour operators are able to use economies of scale and their sheer buying power
over suppliers to derive a competitive advantage in the assembly of tour components into
packages. The tour operators also have the power and ability to shift the product to match
demand, and to exercise an extraordinary degree of power over both inter-industry
transactions and the spatial distribution of tourist flows. As Agarwal et al. (2000:244-45)
indicate, 'increasing scale, or market concentration, has been achieved through horizontal
and vertical integration as airlines expand into tour operations, tour operators acquire
airlines and travel agencies and invest in the accommodation sector', a feature also
observed by Ioannides (1995). As a result, the process of market concentration can occur
through various strategies (or a combination thereof): strategic alliances, mergers,
acquisitions and take-overs, franchising agreements and the use of marketing consortia.
Such strategies are used by the highly globalised multinational economies of scale, to
reduce competition and to seek greater control of the market. Strategic alliances also
assist in this regard, since suppliers in one part of the system are dependent on those
either upstream or downstream. Therefore, there is pressure on suppliers to exert control
over other suppliers through transaction arrangements (i.e. through long-term contracts,
vertical and horizontal integration) as well as through commissions, licensing and
franchising. The two most powerful organisations in this respect are national airlines and
tour wholesalers (also known as tour operators). Through the financial
Figure 3.3:
Four types of tourism
transaction chain
Source:
after Witt et al. (1991:81) and Page (1994b)
