European Tour Operators External Analysis European Tour Essay

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European Tour Operators

External Analysis European Tour Operators

European Tourism Industry

Tourism plays a key role in the economy of the European Union. This sector contributes 5% to the gross domestic product of Europe. The European tourism industry consists of 1.8 million enterprises and these enterprises employee almost 5.2% of the total workforce of the European Union. The tourism industry of the European Union consists of a wide variety of products and a large number of stakeholders that are dispersed geographically.(The European Commission, 2010, pp. 1-91)

Apart from the domestic competitiveness the European tourism industry is a key player in the global tourism market as well. (The European Commission, 2010, pp. 1-91) The graph below demonstrates the share of the European tourism industry in the global tourism market;

(The European Commission, 2010, pp. 1-91)

As evident from the above chart, the European tourism industry captures eighty percent of the global tourism sector, therefore, it can be concluded that this sector of the European economy is a key player in not only the development of European economy but also the international tourism industry as well. (The European Commission, 2010, pp. 1-91)

PESTEL Analysis

The European industry confronts a number of political, economic, social, technological, environmental and legal factors that can impact its performance in an influential manner. All of these factors are discussed below;

Political Factors

The political factors that can affect the performance of the European tourism industry include;

The European government has proposed to increase the tax in relation to the tourism industry from 5% to 10%. The industry is currently trying to urge the government to abandon this proposal as this would make Europe the highest taxed tourism destination and will have a negative impact on the performance of the tourism industry.(Key Note Limited, 2013)

A positive political factor for the tourism industry is the proposal of the European commission that bans the illegal practices of the airlines in relation to airline fares as most of the airlines do not disclose their real price to the customers and the customers end up paying more than the disclosed prices at the last moment. This practice of the airlines does not enable the customer to compare the actual prices.(Key Note Limited, 2013)

Economic Factors

The important economic factors in relation to the tourism industry include;

The proposals of a committee of MPs to increase the taxes in air travel so that the green house gas emissions can be reduced can have a negative impact on the tourism industry.(Key Note Limited, 2013)

The breakup of a consumer protection scheme under ATOL can lead towards an increase in company failures and number of frauds and can have a negative impact on the performance of the tourism industry.(Key Note Limited, 2013)

The 2012 Olympics can have positive long-term impacts on the European tourism industry. As this trend was visible in most of the Olympic hosts, such as Australia, who suffered from a decrease in tourism in the beginning but saw a sharp increase in tourism in the long-term.(Key Note Limited, 2013)

Social Factors

The social factors that the European tourism industry confronts include;

The European Union comprises of about 10 million disabled people who have a combined income of more than 50 billion pounds. The tourism industry is taking initiatives to attract these people to the industry and to increase its customer base.(Key Note Limited, 2013)

The industry has also established a strong an appropriate intranet that enables the consultants and other concerned people to work from their homes and maintain an effective balance between their work and family lives.(Key Note Limited, 2013)

Technological Factors

The technological challenges and facts in relation to European tourism industry are mentioned below;

Technology has become one of the strongest weapons of the tourism industry but as technology becomes obsolete quickly, therefore, the industry has to go through a structural change during the past decade.(Key Note Limited, 2013)

The hotel sector has followed the trail of the airline industry and has established a system of online check-ins for the convenience of the customers.(Key Note Limited, 2013)

With the advancements in technology the dynamic packaging concept has also evolved which fulfills the desires of consumers in relation to flexibility and convenience in travel packages.(Key Note Limited, 2013)

Legal Factors

The legal issues that can influence the performance of the European industry are discussed below;

The major legal factors that may affect the performance of the European tourism industry include; the wider reform of the European aviation low, the demolishment of the European appeal court and the concerns that prevail in relation holiday protection confusion in the European Union.(The European Commission, 2009, pp. 69-73)

Environmental Factors

The environmental factors in relation to European tourism industry are;

The changes in the global climate are expected to lead towards a boost in the tourism industry as more and more tourists are expected to visit Europe.

The tourism industry is always criticized for the impacts that it has on the environment; therefore, the industry has devised strategies that would enable it to operate in an environmentally responsible manner and would enhance its Corporate Social Responsibility (CSR) practices. (The European Commission, 2009, pp. 69-73)

SWOT Analysis

Strengths

The European Union is one of the strongest players of the global tourism industry. It has a history of providing the customers with a wide of variety products within a concentrated geographical location. This industry has got an effective infrastructure and is considered as a safe destination in relation to tourism. In addition to that, the European tourism industry also has a strong R & D. infrastructure that enables it to provide the consumers with innovative products. (Action For More Sustainable European Tourism, 2007, pp. 1-43)

Weaknesses

The organizations in the European industry generally do not get involved in the product innovation. In addition to that, most of the SMEs in the tourism industry have low technology incentives. Moreover, this industry is still striving to achieve sustainable tourism practices without any definite roadmap or strategy. Considerable fragmentation within the industry and the aging population of Europe are the major weaknesses of the tourism industry. Furthermore, this industry also suffers a lot due to its extensive dependence on the 3S; sea, sun and sand. (Kelessidis and Kalonaki, 2009, pp. 1-136)

Opportunities

The tourism industry has an effective availability of funds at national level. Moreover, the industry has also integrated ICT technology with its system. The enhancement of technology has enabled the industry to have an easy access to the information. Moreover, the industry also confronts a wide array of opportunities in relation to rural tourism and agro tourism. (Kelessidis and Kalonaki, 2009, pp. 1-136)

Threats

The industry now faces a strong competition from its neighboring countries. In addition to that, the global crisis also had a deteriorating impact on the tourism industry of the European Union. The negative impacts of tourism on the environment and the seasonal variations are the other considerable threats that the tourism industry confronts. (Action For More Sustainable European Tourism, 2007, pp. 1-43)

Porter's Five Forces Analysis

Potential Entrants

The tourism industry requires high capital investment. In addition to that, more than 70% of the European tourism market is controlled by top ten players, therefore, price retaliation is low and the degree of brand recognition is very high and it acts as barrier for new entrants. It can, therefore, be concluded that the tourism industry has a low threat of new entrants. (The European Commission, 2004, pp. 1-77)

Substitutes

TV, games and social activities can act as the substitutes for tourism but the degree of threat which these factors pose is very low. In addition to that, a low of product differentiation exists in the European tourism industry; therefore, the threat of substitutes is also low in this industry. (Gangadharan, 2011, pp. 1-6)

Suppliers

Suppliers in the tourism have a high negotiation power against the companies that have low share in the industry, whereas, they have low negotiation power against the companies who have high share in the industry and pose the threat of backward integration. Therefore, it can be concluded that the suppliers have moderate power in the tourism industry of the European Union. (Gangadharan, 2011, pp. 1-6)

Buyers

The buyers confront low switching cost because of the development of internet and online sales but, as discussed above, because of the prevalence of lower degree of differentiation and lower number of substitutes the bargaining power of the buyers in the tourism industry is low. (Gangadharan, 2011, pp. 1-6)

Competitive Rivalry

The competitive rivalry in the tourism industry is moderate. The high fixed cost in the industry largely facilitates the market players. In addition to that, significant difference exists in the market share of various players. These factors limit the competitive rivalry in the tourism industry to a low level. (The European Commission, 2004, pp. 1-77)

Conclusion

The European tourism industry is a key player and a dominant sector in Europe. This sector is evolving continuously due to the changes in technology, environment…[continue]

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