Transportation

1
Session 2

• Transportation

2
Grading

• SEMINARS
• Case work (3) 15 points (5 points for each
  case)
• Presentation of a chosen company 5 points
• Seminar work tourism development in a selected
  country 20 points (15 points written report, 5
  points presentation)

3
Introduction

• Without transportation, there is no tourism
• Modes of transportation are many, but there are 2
  broad categories
• Surface (both land water)
• Air
• Transportation can be
  intermodal

4
Introduction

• Different modes of travel
• 2. Air travel dominates
• Long-distance tourism
• Medium-distance tourism
• 3. Rail travel more limited
  than in past, but high-speed
  trains in
  inter-city
  corridors increasing

5
Introduction

• 4. Motorcoach travel
• Reaches many communities
  not served by other modes
• Only accounts for small
  percentage of miles traveled
• 5. Automobile travel dominates
• Shorter trips
• Domestic journeys
• 6. Inadequate transportation creates unfavorable
  image for destination lost potential

6
Transportation Problems

• 1. Congestion
• Especially roads airports during peak travel
• Delays cost time money
• 2. Security
• Basic requirement for tourism,
  especially after 9/11
• Adds cost consumes time
• Deters some travelers
• Hinders some destinations

7
Transportation Problems

• 3. Environment
• Traffic causes harm when
  it exceeds carrying capacity
• When it ignores principles
  of sustainability
• When pollution controls are lacking
• Seasonality
• High season creates
  overcrowding congestion
• Wastes profit potential of high demand
• Creates over-capacity during low demand

8
Cruises

• Trans-Atlantic passage was mainly by ship until
  1957
• Some ships were converted to cruise ships
• But ships specially-built for cruises
  are more efficient and
  profitable

9
Cruise Line Consolidation

• Carnival Corporation, worlds
  largest cruise company
• Carnival recently acquired
  Princess Cruises already owned
• Cunard, Costa, Holland America,
  Windstar, Seabourn
• Royal Caribbean is
  2nd largest cruise line
• Recently acquired Celebrity Cruises
• 4. Disney now operates cruises also

10
Passenger Ferries

• An important link in transportation systems in
  many parts of the world
• Some are over-crowded
• High-speed ferries
• Some ferries offer wide variety of services
• For millions of people commuting daily
• For tourists sightseeing or internal transport

11
Other Ships

• Ocean-going freighters, river
  cruises, yachts, ferry
  boats
• River cruises popular in USA (paddlewheelers with
  gambling) many other part of world

12
Trains Regaining Importance

• Many people dont like hassles of flying or
  congestion of driving
• Airports farther from city center, security
  waits, arrive 1-2 hours early to check-in, circle
  for landing, wait for bags upon arrival (hope
  they arrived too), then connect to city or home
• Train stations often in city centers,
  so easier to reach when departing
  easier to final destination
  when arriving

13
Trains Regaining Importance

• More high-speed trains being built
• Trains go during bad weather that grounds flights
  stop vehicular traffic
• Train passes convenient save
• EX Multi-country W. Europe beyond
• EX Single country Swiss Pass, Britrail pass
• 4. Many countries keep RRs under govt control

14
Specialty Trains

• Many trains are tourist attractions themselves
• Orient Express London to Istanbul
• Blue Train Cape Town
  to Johannesburg
• Copper Canyon Mexico
• Palace on Wheels India
• Indian-Pacific Australia
• Rail travel helps boost
  tourism, especially in
  Europe with
  its extensive, easy to use system
• Worlds largest railways Russia, India, China

15
Road Travel Highways

• 1930s, first multilane highway,
  Autobahn, built in Germany
• Cars became most popular
  form of transport
• Affordable cars available
• More better highways built

16
Why Travelers Prefer Cars

• Cars are relatively inexpensive to buy use,
  especially for families
• Convenience of having
  transportation at destination
• Ability to alter route
  pace of travel
• Opportunity to explore new places close-up
• Good roads service/facilities along the way
• Easier to carry lots of baggage
  other stuff with you in your own car
• You control whats inside, unlike
  plane, bus, ship, etc. its yours!

17
Rental Cars

• Growth in rental car industry parallels growth in
  airline industry
• Largest fleet Enterprise
• Largest tourism market share Hertz
• Fleet utilization managers must anticipate
  demand for rental periods, car types, pickup
  return locations, insurance, and fuel options

18
Rental Cars

• Charges added to basic costs can include
• Mileage /or topping off gas tank
• Insurance (liability collision)
• Drop-off (at different location)
• Airport fees
• Taxes
• If you rent car abroad,
  you may need an
  International Drivers Permit
• May be minimum age limits (25) in USA

19
Buses

• Most pervasive form of intercity
  transportation in the world
• Buses also used heavily for multiple-country
  tours of Europe and throughout USA
• Buses are key inter-modal link for pax between
  home, work, tourism destinations
  and airports, seaports, and
  train stations
• Intercity bus travel has
  much better image in Europe
  Asia than USA
• Customer profile under
  age 24, over age 65

20
Growth Opportunities for Buses

• Bus usage is increasing due to popularity with
  charter tour operators
• Buses are flexible economic
  to operate for group travel
• As baby boomers age, they become prime targets

21
Airline Industry

• Negative aspects of flying
• Airline travel is extremely safe, but accidents
  are catastrophic
• Time is lost going to and
  from airports, weather delays/
  cancellations, circling
  airports
• Flying can be expensive,
  especially for family
• Security hassles
• Loss of control of space and routine

22
Airline Problems

• Suffers financially from wars, epidemics,
  increases in oil (fuel) prices, terrorism, etc.
• Tourism needs airlines without them
• Low-cost carriers
• Legacy airlines

23
Sources of Airline Data

• 1. ATA Annual Report
• Published by Air Transport
  Association
• One of best sources of data
  on airline industry
• 2. World Transport Statistics
• Published by IATA
• Forecasts financial/traffic statistics
• 3. World Airline Report
• Published by Air Transport World
• Covers worlds top 25 airlines financial data

24
Airline Alliances

• Airlines need strategic partners
• Alliances are not MA, but
  enhance routes, service, revenue
• 1992 Air France KLM (first alliance)
• 1997 Star Alliance
• Originally Lufthansa, Air Canada, Thai, SAS
• Added United, Varig, Air New Zealand, ANA,
  Austrian Airways, BMI, Asiana, LOT, Spanair, U.S.
  Airways, Lauda, Singapore, Austrian Arrows

25
Airline Alliances

• 5. SkyTeam
• Aeromexico, Air France, Alitalia, CSA, Delta,
  Korean Air, Continental, KLM, Northwest
• 6. Oneworld
• American, British Airways, QANTAS, Cathay
  Pacific, Aer Lingus, Iberia, LAN, Finnair

26
Two New Aircrafts

• Worlds 2 largest aircrafts manufacturers are
• Boeing (USA)
• Airbus (Europe)
• Boeing 787 Dreamliner
• Airbus A380

27
Airlines Organizations

• IATA International Air Transport Association
• Composed of almost all international airlines
• Founded in 1919, reorganized in 1945
• Purpose Facilitate pax cargo across route
  structures and foreign borders (one system)
• Pax buy 1 tix, fly multiple carriers countries

28
Airlines Profit Margins

• Airlines operate on very thin profit margins
• For survival profitability, concerns are
• Controlling costs maximizing revenue
• Airlines biggest expenses are
• Operating costs, i.e. labor fuel
• Equipment, especially aircraft right size plane
  for routes uniformity regional jets
• Costs, except labor,
  difficult to control
• Need high load factor ( of available seats sold)
  per revenue pax mile on each flight

29
Airline Hub Spoke System

• Airlines select hubs in major cities
• Pax from other cities it serves are
  funneled through hub to their final
  destination

30
Hub Cities of Airlines

• Continental Airlines Houston, Newark, Guam
• KLM Royal Dutch
  Airlines Amsterdam
• Delta Air Lines Atlanta
• Lufthansa German
  Airlines Frankfurt
• SAS Copenhagen
• Northwest Detroit,
  Minneapolis, Memphis
• United Airlines Chicago
• British Airways London Heathrow
• Varig Sao Paulo Rio de Janeiro

31
Airline Language Codes

• Every airline has a code of 2 letters
• American Airlines AA, Lufthansa LH
• Every city with scheduled
  pax service has an airport
  code of 3 letters
• Narita International
  Airport Tokyo (NRT)
• Orlando International
  Airport MCO
• Airline service has codes of 1 or more letters
• First class F, coach economy Y
• Advanced purchase exchange APEX

32
Airline Language Flights

• Nonstop
• Direct (through)
• Connecting

33
Airline Language Trips

• 1. One-way
• 2. Round-trip
• 3. Circle trip
• 4. Open-jaw

34
Yield Management Basics

• YM (RM) requires
• Allocating capacity (seats,
  rooms, etc.) to customers
• At right price
• Accomplishing business goals
• YM (RM) goals are to
• Maximize revenue (yield)
• Enhance customer service
  ( increase loyalty)
• Increase profitability
• Improve operating efficiency (lower cost)

35
Yield Management Conditions

• Capacity is relatively fixed or finite
• Demand increases, but airline cannot add more
  seats (hotels cannot add more rooms)
• Demand can be divided
  into market segments
• Based on customer
  profiles (needs/demos)
• Inventory is perishable
• After plane leaves gate,
  no more seats can be filled
  
  with revenue-generating pax

36
Yield Management Conditions

• 4. Services can be sold well in advance (APEX)
• Demand fluctuates substantially
• Marginal sales costs are low
  marginal capacity costs are high

37
Technology Helps with YM

• Modern technology allows
  airlines to sell empty seats
  close to departure
  date/time
• This is done via the airlines website
• Also done via tourism
  intermediary websites
• This allows airlines to move its distressed
  inventory without advertising price reductions

38
Example of YM (RM)

• 37-seat aircraft (same model for larger planes)
• 150-miles flight
• From past reservations, we
  know we can probably sell
• All 37 seats to pleasure travelers who
  buy APEX fares (37 x 39 1,443)
• 17 seats to business travelers who buy
  full-fare coach tix (15 x 98 1,666)
• 4. But neither of these 2 markets enables
  us to maximize our revenue for this flight

39
Example of YM (RM)

• But a combination of both markets would
• Plus, in addition to 30-day APEX fares (37), and
  the last minute full-fares (98), we
  can also offer 14-day APEX fares (59)
• This gives us more flexibility to reach markets
• Provides pax better opportunities
• To secure reservations
• Or save money
• 5. Data tells us some
  pax with reservations
  
  will be no shows, so
  we overbook flight

40
Example of YM (RM)

• YM strategy based on computer software analysis
  of past reservations data is to sell
• 8 of the 30-day APEX fares 8 x 39 312
• 12 of the 14-day APEX fares 12 x 59 708
• 17 of the full fare tix 17x 98 1,666
• If this strategy works, our total revenue for
  this flight would be 2,686
• This is almost double what either of the
  other options would earn on their own
• Our target markets also remain diversified

41
Statistics from Our YM (RM)

• ASM (available seat miles)
• 150 miles x 37 seats 5,550
• RPM (revenue passenger miles)
• 150 miles x 37 pax 5,500
• Load factor (RPM divided by ASM)
• 5,500 divided by 5,550 1 or 100
• 100 load factor is ideal 60-70 is normal
• To be profitable, airlines must
  know price sensitivity
  (elasticity) of
  their target markets

42
Internets Impact on Distribution

• All travel distribution channels sectors have
  been changed by use of Internet websites
• Airlines have been impacted most of all
• For airlines, Internet usage has resulted in
• Transparency in inventory
• Transparency in pricing
• Prior to Internet, travelers
  bought air tix via
• Airline office
• Travel agencies

43
Online Booking Engines for Air Tix

• Marketers created online booking engines allowing
  travelers to compare airline seat inventories by
• Price (based on class of service, day
  of week, time of day, time between
  connections, of connections,
  etc.)
• Schedule (departure, arrival, routing, duration)
• Best prices or best schedule can be listed first
• Result Internet expanded point-of-purchase
  competition demand for lowest prices

44
Other Links

• Transportation is also divided into
• External home-destination (gateway-gateway)
• Internal local transport within destination
• Important modes of internal transport are
• Subways light-rail systems
• Trolleys, trams, streetcars
• Taxis, limos, rental
  cars, shuttle buses

45
Walking Cycling

• Most tourists enjoy walking do much of it
• Go sightseeing, explore the city, pub crawl
• Walking paths are part of destination planning
• Bicycle tours are also very popular
• Many cities throughout the world have both
  walking cycling paths