Reference no: EM133453182

Assignment:

Business travel agents into hotels

The package holiday business has mushroomed in the past 10-15 years. Travel agents and brochures abound in profusion. However, by and large, one has to make use of the packages that are provided and does not have a great deal of scope to travel exactly where one wants and to stay at specific hotels that one would like. For example, if one wants to spend two or three days in a certain part of Geneva, in a certain class of hotel, then unless one has a very helpful travel agent one may experience some difficulty in obtaining exactly what one wants.

Flights would seem easy enough to obtain, but finding a hotel that meets one's exact requirements is an altogether more difficult business. Even when one is looking for a package holiday, the job is not always that simple. Take for example the holiday couple who wanted to travel from Manchester to Santiago (Spain) and stay at one of the most famous hotels in that city. The couple wanted to travel in June but were unable to get flights for the dates they wanted or to stay at the hotel they had chosen.

Tour operators have blocks of reserved seats of a particular class on planes and arrangements along the same lines with hotels at the destination the plane is going to. Unfortunately, these do not always match with the holiday makers' requirements even when a booking is sought three to six months in advance.

Fortunately, a helpful travel agent can often get round the problem by booking plane and hotel reservations separately. However, this often costs the holiday maker more money and does not include transfer costs or facilities at the airport of destination. But the position is changing-at least for the business traveler. Large business travel agencies are moving into the hotel business. One UK hotel is opening a wing exclusively for clients of a particular business travel agency and a well known international business travel agency is finalizing a plan to take on thousands of hotel rooms in major US and European cities for the sole use of its clients. Many of the rooms are equipped with a personal computer and printer with a wide range of Windows applications and access to the Internet. One business travel agency saw the move as an extension of the product. It considered it was extending its branding just as supermarkets did with own label products 30 years ago.

Another business travel agent had been negotiating with hotel chains in the UK, Germany and North America about either taking allocations of rooms or buying them outright in year-long deals. It was far more interested in purchasing rooms in bulk rather than branding them. In return for assuming the risk, they can get the rooms at a cheaper rate. Even with returnable allocations, passing the administrative burden to the business travel agents will allow participating hotels to cut their rates. Yet another agency has taken over an entire floor of a London hotel. It already has a similar deal with hotels in Mexico City, Caracas, São Paulo, Buenos Aires and Stockholm. The rooms can only be booked through business travel agents and each floor has its own check-in area and free breakfast service.

Questions 1 How might the travel agents improve the kind of service they offer to the non-business traveller?

Question 2 Can you think of other kinds of service organization that might consider diversification/vertical integration?

Question 3 What would be the benefits of doing so to such organizations?