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What is a tour operator and how does it work?

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The tour operator is an integral component of tourism, yet many people are unclear about what a tour operator actually is or what they do.

In this article I will explain what a tour operator is and why tour operators are important. I will also talk about what the difference between a tour operator and a travel agent is, as well as the different types of tour operators.

What is a tour operator?

Tour operators are inextricably linked to the package holiday model. The tour operator is the person or organisation who creates the package. A travel agency is then used to sell the package holiday.

In the chain of distribution, the tour operator is represented by the term ‘wholesaler’. This is because the tour operator is responsible for purchasing products of services in bulk and then redistributing them as a packaged product to consumers.

To put it simply, a tour operator is the person or organisation who takes the individual elements of a holiday (e.g. transfer, hotel, transport) and packages these together.

The types of package vary. Most commonly, tour operators are associated with mass tourism and the traditional package holiday market. However, tour operators do also play an important role in the production of niche tourism products and services too.

Definitions of tour operator

If you’re looking for a formal definition of a tour operator with a reputable source, you may want to reference Polyther, who in 1993, defined the tour operator as;

‘[an organisation or person] who has the responsibility of putting the tour ingredients together, marketing it, making reservations and handling actual operation’.

Similarly, Holloway (1992) states that;

tour operations undertake a distinct function in the tourism industry, they purchase separate elements of tourism products/services and combine them into a package tour which they sell directly or indirectly to the tourists.

The Organisation for Economic and Cultural Development (OECD) define a tour operator as follows;

‘Tour operators are businesses that combine two or more travel services (e.g., transport, accommodation, meals, entertainment, sightseeing) and sell them through travel agencies or directly to final consumers as a single product (called a package tour) for a global price. The components of a package tour might be pre-established or can result from an “a la carte” procedure, in which the visitor decides the combination of services he/she wishes to acquire.’

Importance of tour operators

Tour operators are an important part of the tourism industry.

Tour operators make the logistics of organising a holiday much easier for the consumer. This makes people more likely to travel, more often.

Tour operators have a lot of power. If they choose to sell holidays in a particular location, for example, then that location will receive many of the associated positive and negative economic impacts of tourism.

Tour operators are often vertically or horizontally integrated with other organisations, such as travel agents and airlines. This allows for easier management and distribution of products.

Tour operators typically build holidays en masse. This means that economies of scale play a key role in driving down prices- the more you produce the cheaper the product becomes! This is obviously beneficial to the consumer and helps travel agents to have a competitive advantage when selling holidays.

The difference between a tour operator and a travel agent

Many people are not aware that a travel agent and a tour operator are actually two totally different organisations and they are not aware of the difference between a tour operator and a travel agent.

In fact, it is quite easy to understand this difference!

A tour operator is the organisation which puts the different elements of a holiday together. And the travel agent is the organisation who sells it to the consumer.

Whilst this differentiation is pretty easy to comprehend, it is easy to understand why people get tour operators and travel agents confused. This is largely because many organisations will operate under the same company. For example, TUI has a tour operator and a travel agent (and an airline too). As a result, many people do not realise that in actual fact, there are two separate organisations doing two separate jobs.

What does a tour operator do?

parked boat
Photo by Asad Photo Maldives on

Ultimately, a tour operator is responsible for putting the different elements of a holiday together into a commodified package.

To do this, there are a number of different roles and responsibilities that tour operator staff will have. This includes:

  • Data analysis- which destinations will sell best, how many holidays should they sell etc
  • Assessing suitability of accommodation, transfer and transport options
  • Liaising with stakeholders e.g. coach operators, airlines, hoteliers and resort representatives
  • Negotiating contracts
  • Confirming reservations with airlines/hotels
  • Managing and responding to customer feedback
  • Undertaking market research
  • Production of marketing material
  • Providing pricing information
  • Handling bookings, invoicing and issuing of tickets
  • Working with travel consultants from different travel agencies to put holiday packages together

Products and services sold by tour operators

Tour operators have a number of products and services that they sell, depending on their specific business model, business intentions and target market. A tour operator will typically package together two of more elements to form a packaged product, which is then sold at an inclusive price.

Examples include:

  • Package holidays
  • Accommodation
  • Transfers
  • Excursions
  • Information on destinations
  • Representative service in resorts

Types of tour operator

Tour operators come in all shapes and sizes. Some are large, multinational organisations and other are small, independent business.

Different types of tour operators develop products for different types of tourism. This can include the mass market, niche tourism market, special interest tourism, the luxury market, tailor-made products and dynamic packages.

great wall of china
Photo by Johannes Plenio on

There are four different types of tour operators, which I will explain below.

  1. Inbound Tour Operators
  2. Outbound Tour Operators
  3. Domestic Tour Operators
  4. Ground Operators
The tour operator. types of tour operators.

Inbound tour operators

An inbound tour operator is one who facilitates inbound tourism.

The aim of an inbound tour operator is to bring tourists in to a particular country or countries.

Inbound tour operators will often collaborate with local travel agencies and transport operators to facilitate travel arrangements for their customers.

Inbound tour operator example: A group of German tourists conduct a tour of China, encompassing a visit to Shanghai, Hangzhou and the Yellow Mountains. The tour operator who organises their travel is Chinese-based company China Highlights. This company is based locally in China and they offer local, Chinese tours.

Outbound tour operators

An outbound tour operator is one who facilitates outbound tourism.

The aim of an outbound tour operator is to send tourists out of a particular country or countries.

Outbound tour operators will often collaborate with foreign travel agencies and transport operators to facilitate travel arrangements for their customers.

Outbound tour operator example: A family of four from Liverpool, UK want to book an all-inclusive summer sun holiday in Alicante. They book through TUI, the largest tour operator in Britain, who specialises in outbound travel. They are based in the UK, but they work with foreign partners to facilitate holidays overseas.

Domestic tour operators

A domestic tour operator is one who facilitates domestic tourism.

The aim of a domestic tour operator is to organise travel within a particular country or countries.

Domestic tour operators will often collaborate with domestic travel agencies and transport operators to facilitate travel arrangements for their customers. Domestic tour operators will often also serve the inbound tourism market.

Domestic tour operator example: A group of twenty-something boys from Chicago want to travel to Florida for the spring break holiday. They want to do a tour of the local attractions in the area and have some time to relax on the beach. They organise their travel through the tour company, Trek America. Staff at this company are experts in domestic travel within the USA.

Ground tour operators

A ground tour operator is an organisation who dopes the ground work as grass roots level.

Many tour operators do not have connections in all places around the world, therefore they build a network of connections to help them run their business.

Essentially, some of the work is passed on to a third party, known as a ground operator. This work may include negotiating local contracts, liaising with local suppliers and providing market data, amongst other things.

This is especially common for small tour operators.

You may also hear ground tour operators referred to as handling operators or handling agents.

Ground tour operator example: A backpacker wants to ‘give something back’ and book a volunteer tourism holiday in Kerala. She wanted to use a known and trusted tour operator to book her trip so she booked it with Intrepid Travel. Intrepid Travel create and sell adventure holidays all over the world, and it is impossible for them to have contacts and every staff in every corner of the globe. Therefore they work with local ground operators, who do the work on the ground. In this instance, the ground organisation is Iris Travel– a tour operator based in Kerela, India.

The Association of Independent Tour Operators

The Association of Independent Tour Operators, abbreviated as AITO, is a travel industry trade group (like ABTA or ATOL) based in Britain. They launched in 1976.

The AITO represents around 120 independent tour operators across 200 countries.

These tour operators provide access to a huge range of activities including city breaks, safaris, luxury holidays and much more. The AITO is based in Twickenham, south-west London.

The AITO does a variety of things. Most importantly, you can be reassured that your holiday is well-protected thanks to the Association of Independent Tour Operators.

They assess every member financially as well as by their own business practice code before granting membership; this means that you are guaranteed clear and accurate descriptions of holidays as well as tour standards that are consistently monitored.

The tour operator: To conclude

Tour operators are an important part of the tourism industry, and with AITO, you have added security when booking your travels through a tour operator. Hopefully after reading this article you are now confident with what a tour operator is, how these organisations work and the different types of tour operators operating the market.

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