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Roles and Responsibilities of Organisations - Activity

How do the responsibilities of organisations in travel and tourism affect the industry when companies fail to achieve success or to survive?

Background

TUI (http://www.tui-uk.co.uk/) is one of the main players in the UK industry. Its activities are structured into different operating companies. These firms are vertically integrated, with TUI owning the UK's largest tour operator, largest retail travel agent and a charter airline. Go to 'The Business Today' section of the company's Web site to see the full list of brands covered by TUI's activities.

In September 2004, TUI announced 800 redundancies as part of its attempts to stem losses and keep its shareholders happy. TUI's business activities in detail can be summarised as follows:

  • The UK is one of TUI's most important markets
  • Within TUI's Northern European division the UK accounts for 80% of its revenue
  • TUI owns Thomson, the UK's largest tour operator
  • It also owns Lunn Poly, Britain's biggest travel agency
  • Its airline, Britannia, carried more than 8 million passengers in 2003
  • TUI employs 13 000 staff in the UK
A Lunn Poly shop

Image: Lunn Poly is a familiar face on the British high street.

TUI's relative decline has been attributed to the following factors by industry observers:

  • The decline in the proportion of travel bookings taken by retail travel agencies
  • The rise in the proportion of travel bookings made on the Internet
  • The expansion of no-frills budget airlines such as easyJet and Ryanair
  • The downturn in international travel caused by security fears after the terrorist attacks of September 11th 2001

Faced with such commercial pressures, TUI plans to take the following action:

  • Close a proportion of Lunn Poly's 800 travel agencies
  • Re-brand Britannia to take the same name as TUI's budget airline, 'Thomson Fly'
  • Look for new ways to generate revenues and cut costs

Tasks

  • In the case of TUI, what action do you think the firm should take to protect its business in future?
  • Investigate the relative strength of TUI's airline business in terms of the number of passengers carried, when compared to figures for easyJet. The BBC news story, Easyjet passenger numbers surge, may help.

What happens when a travel company goes bust?

This is not likely to happen in TUI's case. But its losses have become a major concern, not least for its main shareholder, German investment firm WestLB. Holding 31% of TUI's shares, WestLB has signalled that it wants to sell its stake by the end of 2004.

Unfortunately, though, travel firms do fail from time to time. When they do so, there are serious implications for:

  • Customers who may be stranded overseas, or may lose money over their travel or holiday bookings
  • Suppliers who will lose revenue as a result
  • Business customers who rely on the goods and services provided
  • Regulators such as the Civil Aviation Authority (CAA)

Research Task

The Association of British Travel Agents (ABTA) and the CAA provide protection for consumers in the travel and tourism industry. There are financial rules that ABTA members must comply with; in addition, the CAA runs a scheme providing cover if air travel companies cease trading.

The following URLs are links to further information on the protection provided by ABTA and the CAA:

  1. Write a brief list of what the two organisations, ABTA and the CAA do to protect travel and tourism consumers' interests, when their travel or holiday plans go wrong.
  2. Find evidence in the 'Stranded' article to show firms in the industry are inter-dependent.
  3. In July 2004, the CAA gave advice to the Government on the protection that will be needed in the future for flights and holidays that go wrong. The report, Financial Protection for Air Travellers and Package Holidaymakers in the Future, containing this advice can be accessed from the CAA Web site (http://www.caa.co.uk/cpg/atol/consultations/default.asp).

    This report indicates that protection for international leisure air travel from the UK has been in decline since 1997. (This information is contained in section 5 of the report 'The Scope of Protection'). Why do you think this has happened and what impact do you expect there to be on the industry if this level of protection continues to fall?