Problem
The problem presented in the case is that of offering a tour plan to the students. An online travel service provider, which has positioned it specifically for the students, aims at getting an added edge by providing packaged tours to the students during their vacations or semester breaks. However, the management of the firm is not sure whether to provide the tours during spring or Christmas break and what kind of destinations should be offered. Another problem that might become a hindrance is if this new approach would clash with the company’s positioning as an “education-oriented online travel service”.
Objective
The paper aims to understand if the feasibility of the plan i.e. to offer special travel plans for students. It is supposed to be a packaged tour for students according to discipline – for instance, art students will be offered to travel to all well-known art museums all over the world, or management students given a detour of seats of management and marketing. The essay aims to understand if this plan is feasible. What are the pros and cons of the plan and how far will it help the company’s positioning.
Opinion
E-commerce has helped the global travel and tourism industry to flourish (Mamaghani 365). Information technology has provided consumers more options to choose from and helped them to do a proper budget planning. Evidently, this has increased the buyer’s power. This is evident from the fact that almost three-forth of the travelers do online research before purchasing their tickets (Mamaghani 365). As the travel industry has undergone an evolution through technological advancements, firms have started facing increased competition. In order to carve a niche for themselves, firms must try to position themselves uniquely and target their customers accordingly. Therefore the only way to attain competitiveness is to differentiate the product offerings and suitable for target customers. However, before any decision regarding the feasibility of the plan is taken a thorough understanding of the target market is necessary.
Areas of Strengths
The main strengths of the plan are its target customers. If we assume that we are targeting full-time college students then the average age of the students will be less than 25 years. Survey on college-age population’s consumption expenditure conducted in the US in 2001 showed that traveling comprised 4.7 percent of the total expenditure of the students in 1996-98 (BLS 48). The data on travel expenditure in 2000 shows the share of aggregate expenditure on travel and vacation remains to be 4 percent in the US (Janini 81). Further, in 2000 data, 36 percent of Americans fewer than 25 years reported a trip. Therefore, many people are willing to travel under the age group of 25 years that is actually the age group of students as identified by a previous survey by Bureau of Labor Statistics (BLS 46). Thus, Americans under the age of 25 years spend a lot on traveling.
The targeted scheme is for students in colleges and universities in the US. According to the U.S. Department of Education, in 2007 there were 13,782,702 students enrolled for full-time and part-time courses in the US colleges and universities and is expected to increase 10 percent by 2017 (National Center for Education Statistics). Further, the total population within the age group of 18 to 24 years is 29,435,332 (US Census Bureau).This shows that the number of target customers is very high.
The travel and tourism industry globally is expected to grow (EIU 10). However, the main growth will depend on cost as the forecast shows that low-cost travel options will gain higher growth. Further internet will provide greater options to the travelers. The forecast states that more target-oriented packaging of travel destinations is the key to success (EIU). In this respect, packaging of students oriented travel packages is a good idea. Thus, the key to travel packaging lies in packaging “exotic, long-haul destinations, where travelers are more likely to seek professional advice” (EIU 13). Therefore, in order to packaging of travel destinations it should also include destinations like Egypt for history students or India or China for management students in order to show how the vibrant outsourcing operations in the countries.
Areas of Concern
Competition in the travel and tourism market is immense among the online travel portals. In the US, the main portals are Travelocity, Expedia, and Orbitz (Trends Update). They constantly undertake customized and personalized travel options, vacation plans, and other promotional strategies to attract customers. As competition is intense, there is a high entry barrier to entry. Therefore, constant differentiation is necessary to remain competitive in this market. Further suppliers have a medium to high bargaining power as they usually include large airline companies or hotels.
The economic recession has brought down consumer demand and expenditure. Further higher volatility of prices of crude oil and fuel has increased the cost of traveling reducing demand (EIU). This will increase the cost of air travel. Inflation worldwide has increased prices, which is expected to push up costs for the company, forcing it increases prices.
There has been a decline in the travel expenditure of young people in the college-going age. The study shows that there is a decline in the share of travel and trip expenditure on the total spending outlay of people less than 25 years from 4.8 percent in 1984-85 to 2.9 percent in 2004-05 (Paulin 61). Thus, there has been a substitutive decline in travel expenditure of young people from the 1980s to the 2000s. The report suggests an overall decline in travel expenses. This trend is expected to have a negative effect on the proposed plan. Further, this age group has the lowest budget allocation for travel and vacation. Therefore, the company will be making its product offering to a very niche target group.
Recommendations
Travel planning in today’s market has become difficult as with information technology, customers have more options to choose from and therefore they often end up making their own travel plans. Therefore, a customized travel plan for students showing them specific areas of interest with a guide is a good idea. Customization of the travel plan further will fetch more customers. However, a few things must be followed. First, travel cost is a constraint for students. It only comprises 2.8 percent of the total expenditure outlay of young adults less than 25 years. Therefore, it is imperative that the company should provide plans, which would be cost-effective. This, however, is the difficult part with increasing inflation and cost of airplane fuel.
Niche’s market strategy must have more focused product offerings. Therefore, in the case of students it must be understood that they have a very limited budget constraint, and therefore must have more offerings in terms of low-cost flight offerings. Thus, partnership with hotels specializing in students is a possible option.
Conclusion
Internet has changed the travel and tourism industry and made the marketplace more accessible to customers especially with internet booking services. Therefore, online travel portals are bound to be successful. However, in the US market there are large portals with which competition for a small player is not possible. Therefore, a niche market strategy targeting students is lucrative. However, the expense of traveling for young adults has been reduced historically indicating a shrinking market. Further internet access has reduced the dependence of customers on package tours as they can customize their tours according to their convenience. Therefore, this plan may not be a possibility in the present context of the travel industry.
Works Cited
BLS. “Expenditures of college-age students and nonstudents.” 2001. Monthly Labor Review. Web.
EIU. “World travel and tourism outlook: A corner turned.” Industry Forecast. 2006.
Janini, George. “Travel Expenditures in 2000.” 2003. U.S. Bureau of Labor Statistics Consumer Expenditure Surveys – Consumer Expenditure Survey Anthology. Web.
Mamaghani, Farrokh. “Impact of E-commerce on Travel and Tourism: An Historical Analysis.” International Journal of Management Vol. 26 No. 3 (2009): 365-375.
National Center for Education Statistics. “Digest of Education Statistics, 2008.” 2009. U.S. Department of Education. Web.
Paulin, Geoffrey. Examining Expenditure Patterns of Young Single Adults in a Historical Context: Two Recent Generations Compared. Consumer Expenditure Survey Anthology. U.S. Bureau of Labor Statistics, Division of Consumer Expenditure Surveys, 2008.
Trends Update. Competition Among Top Online Travel Sites. 2009. Web.
US Census Bureau. “Educational Attainment US.” 2008. 2005-2007 American Community Survey 3-Year Estimates. Web.