Unit 2: Business of Travel and Tourism – Notes

Tourism Industry Background

  1. What is the value of the UK tourism industry? £127 billion 
  2. Is the UK tourism industry in growth and how it is performing vs the rest of the UK economy? Uk tourism is in growth and is worth around 10% of UK economy 
  3. How many people does the tourism industry employ and what % of the UK economy does this represent? 3 million people are employed in the tourist industry and its 10% a year
  4. What is GDP? Gross domestic produce – everything a country produces in a year
  5. What is revenue to the exchequer?  money made in taxes – £6 million
  6. What is the global travel industry worth? $5.8 trillion and by 2018 it should be worth $10.8

Types of Organisations:
  • Public LTD
  • Private Limited Company 
  • Sole Traders
  • Partnerships 
  • Franchises 
  • Co-operatives

  • Franchise – buying the right to sell a company’s products or services under the branded name 
  • Private Limited Company – a company which is not listed on the London stock exchange and usually has limited liability 
  • Dividends – a share of profits made as a payment to the share holders
  • Share Capital – the money raised by selling shares of a business 
  1. What is Company House? Where you can go and buy a company
  2. What companies have executive directors and non executive directors? Private companies
  3. What is the name of people responsible for governing a charity? Trustees 
  4. Who controls co-operatives? The members
  5. What does horizontal integration mean? A company that buys other in it’s field 

What documents are you required to submit to company house in order to set up a business?

Certificate of Incorporation
  • Application completed 
  • When completed and successful certificate of incorporation issued
  • Limited company formed 
Memorandum of Association 
  • Name, location and nature of business 
  • Shows share capital in a company and how divided 
  • If setting up business with others – how many shares each of you have and sign it 
Article of Association 
  • How is the company run?
  • Right share holders name 
  • Rights directors name 

Sources of Finance 

  • Loans: repayment schedules, interest rates, guarantee and business plan 
  • Overdraft: more flexible than loan, quick to arrange, less security/ guarantee required, penalties 
Friends and Family 
  • Small businesses use them as a source
  • Creates a family enterprise 
  • No hands on commitment
Shareholders/ Private Equity Finances 
  • Issue shares
  • Become part owners with voting rights 
  • Profits distributed as dividends 
  • Regional tourist boards advises on sources 
  • Government of EU funds 
  • One off payment, not repaid or any interest payable 
  • Strict eligibility criteria 
Public Funding 
  • European Regional Development Fund – 1975: Financial instrument for fisheries guidance fund, European agricultural guidance and guarantee fund, European social fund 

Horizontal integration occurs when a company owns or controls other businesses at the same level of the distribution chain. e.g: a multiple travel agency chain taking over an independent travel agency in a town, or a hotel chain buying up an independent hotel 

News articles:

Virgin Atlantic Cancels Little Red Domestic Flights
  1. Virgin Atlantic is a private organisation 
  2. Virgin Atlantic is a private LTD company 
  3. Virgin Atlantic set up the airline to connect long haul virgin customers to other parts of the UK
  4. It hasn’t worked because not many people booked the flight (business passengers didn’t’ use it as much)
  5. Virgin Atlantic’s competition was British Airways and they couldn’t compete against BA’s huge domestic network and having to ground flights 
Euro Disney Shares Tumble 15% on Debt Financing Plans 
  1. Euro Disney is a private organisation 
  2. Euro Disney is a public LTD company 
  3. Euro Disney is struggling because there is around 600m euros in debt and there is an economic downturn
  4. Euro Disney are doing various things to improve revenues by Walt Disney injecting more than 400m euros, Euro Disney have released new shares for existing and new shareholders to buy

Competitive advantage: an advantage gained over competitors by giving better value to consumers so that they choose your product and not theirs. 

Business change their structure to gain competitive advantage 
  • In travel and tourism, a consortium refers to an organisation made up of independent travel agents and agencies 
  • They join together to increase their buying power, commissions and amenities they are able to provide clients 
  • Agents and agencies must meet a threshold shares volume requirement in order to be invited to join a consortium
  • Member benefits include marketing programs, commission overrides, agent training and education, Fam trips, technical tools, client referrals and networking opportunities 
  • Travel the world with the star alliance network 
  • The member airlines of the alliance network are among the most respected in the world 
  • In order to become members, all airlines must comply with the highest industry standards of customer service, security and technical infrastructure 
  • Together, they offer convenient and comfortable travel to almost any destination in the world 
An interline partnership is where one carrier markets service and places it code on another carries flight. this offers carries an opportunity to provide service to destinations not in their route structure. These schedules are considered online bookings for most situations. An exception could be the minimum connecting time, which is sometimes equal to the off-line connecting time. 

Business Case Content 

  • Name, purpose and mission statement 
  • Objectives 
  • How you will gain competitive advantage 
  • How you are filling a gap in the market
  • Cash flow forecast
  • Timescales for set up 
  • Operation of enterprise – sources of finance, ownership, marketing and staff

Business Plan:
What is a mission statement?
A short sentence or paragraph used by a company to explain, in simple and concise terms, it’s purpose for being, 

Short term smart target (within first year of opening) – advertise the business twice a week via TV, magazine, radio and social media 
Pay for links and ads on FB page,  page set up is free 
Cashflow – the assessment of cash coming in and out of the business at any given time. 

Sell idea to bank
Shows you know how to manage flow of money 
Knows peaks and troughs 

The Basics of a Cashflow:
  • Opening balance: the money you start with 
  • Total cash inflows: sales, loans and grant
  • Total cash outflows: utility bills, expenses, wages, rent, loan repayment, mortgage, tax, raw materials, supplies and repairs/maintenance 
  • Closing balance: opening balance- inflows and outflows 

Summary of the Scenario:
In this unit, which is unit two: the business of travel and tourism, this unit I will learn up till December. The first objective I will cover is knowing the different types of organisations which are involved in the travel and tourism industry and know the characteristics of different types of organisations. I will understand these objectives bu writing an information pack via using notes and independent research 

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