A PESTEL analysis from the perspective of a European Travel Operator.
This is an analysis of the external factors affecting TUI. TUI are a large multinational company in the Travel operator sector. They have the second largest market share at 21%. The PESTEL categorises the environmental factors into the 6 key areas, political, economical, social, technological, environmental and legal. PESTEL helps understand the key drivers of change and external influences on the organisation (Johnson et al., 8th ed.)
Taxation Policies on travel methods by different countries has a large impact on the tourism industry, governments provide some subsidies and tax exemptions in their countries in order to promote the right tourism. Visas into certain countries can also cause people to stop travelling there as corrupt countries can charge large amounts of money to gain them.
Political instability can not only affect the country in which it is but also neighbouring countries. The same also happens when terrorist acts happen on a country or are from a country.
Globalisation of travel companies and airlines has meant that many countries can provide services that they could not before do to cultural knowledge. With companies being global there are also economies of scale to be gained. TUI??™s vertical and horizontal integration makes them very competitive and they provide services across all holidaying experiences.
Exchange rates area large part to the amount of tourists travelling from each country. If one countries currency becomes weaker than others it is more likely to become a holiday destination due to a foreseen ???value for money??™. This affects the company less as they have a stronger position than the customer in that they can charge the customer depending on the country with the stronger currency.
The recession has also caused some issues within the industry as there have been some companies that have not been successful. TUI managed to make it out of the difficult time due to their low budget holiday options and also offering services for finding holidays and short breaks within the customers??™ home countries. A large competitor XL Leisure Group has been unsuccessful through the recession and collapsed in 2008.
Brand image is a key part in the holidaying industry as in any, the brand that TUI have is different per country and is developed differently depending on the type of holiday is being sold. The TUI brand in the UK is Thomson, this brand has a strong Image and is known for doing a full range of holidays, they also own Late Rooms, this is a relatively new brand that is becoming well known and is aimed at low budget home holidaying.
Environmental image is now an important part for many companies, public opinion is that more needs to be done for the environment. Appendix 1 (Boston Consulting Group) shows how ???the general public??™ have a green out view now and that holidaying at home or near home is becoming more important (12th statement down). This may mean that fewer flights are bought and that more money is spent when people do go on holiday.
Using the internet for orders has helped many companies, within the holidaying industry it is used for searching for and booking holidays, it gives customers knowledge on destination and helps find the right destination for them, people can now tailor their own holidays. Te internet has been used by the companies for lowering overheads and staffing by having online booking bringing down costs. There are also fewer walk in stores in town centres and instead of paying high rent advertising is done in these locations for a much lower cost.
Business customers for flight providers have recently seen a drop in customers as video conferencing becomes more accessible. And people no longer need to travel in order to give presentations and meet with customers.
Natural disasters happen quite often for international companies. The biggest effect to TUI recently has been when Eyjafjallajokull erupted. This caused issues for many holiday makers that couldn??™t return to their home countries. ???The estimated cumulative cost to the Group, up to and including 18 April 2010, is circa ?20 million. Estimated daily costs thereafter ran at approximately ?5 million – ?6 million??™ (www.lse.co.uk).
Regulations set up in the different countries the operator works affect how the company works on a global scale. Some issues on taxes mean that operators will not work in certain countries. This can mean that to book hotels or flights to that location can cost some companies more as they do not provide too much of a benefit to that countries tourism industry.
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Boston Consulting Group (2009)
Johnson et al. (2005). Exploring Corporate Strategy (7th ed.). Essex: Pearson Education Limited.
BCG. (2009, January). Capturing the Green Advantage for Consumer Companies. Retrieved November 2, 2009, from The Boston Consultancy Group: http://www.bcg.com/documents/file15407.pdf