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PEST Analysis for a Company in the Tourism Industry

The Tourism industry is one of the fastest growing industries in the


world. The World Travel and Tourism Council estimates that in 2004
Travel and tourism is expected to generate
* US$ 5,490.4 billion of economic activity
* 10.4% of total GDP
* 214,697,000 jobs or 8.1% of total employment
* 12.2% of total exports [1]
My task is to conduct a PEST analysis for a company within the Tourism
industry.
Within the tourism industry, I have to select one area of interest
like transportation, accommodation and transportation etc. and then
one company doing business with these sectors related with the
tourism.
According to Leiper Transportation is the only link between the
tourist-generating region and destination region[2]So, transportation
was a more interesting sector to discuss in the report but I tried to
find a company which is related with all these main sub-sectors
discussed above in the report.
I have decided to look in the U.K market for such company because
Tourism is one of the largest industries in U.K, worth approximately
75.9 Billion to the U.K economy in 2002 and supporting around 2.1
million jobs. [3]
During my research on internet I found many companies offering
services in the tourism of U.K but I have decided to choose Simply
Travel because of its variety of services offering related with the
accommodation, transportation and attractions.
1.2 Problem Formulation
In the problem formulation part of my report I would describe the
overall situation of the U.K Tourism industry. The service concept of
Simply Travel will give us information about the services provided
by the company. I will find out about the customers, competitors of
the company. I will find out what political, economical, social and
technological factors affecting the company and its demand situation.
1.3 Limitations
The biggest limitation for writing this report is time and the pages
to write. It is a broad topic and it could be better presented if
available more time and space to write about, but still I have tried
to highlight some main points raised during my finding. My knowledge
about the company Simply Travel is internet-based and I could not
able to contact the company for further information. Due to the lack
of information about the company I will only describe one component of
the Service Management System. I will be describing only the OT part
of the SWOT analysis.
1.4 Methodology
Being inspired from the Service Management System I will describe the
service concept of the company .I will conduct a P.E.S.T analysis to
find out the political, economical, social and Technological factors
affecting the company. From SWOT analysis, I was conducting OT

analysis to find opportunities for the Simply travel in future.


1.5 Data
I will use Secondary data collected from different industry reports
available on internet for my report. Data provided in conducting
P.E.S.T analysis has been taken from www.statistics.gov.uk.
Chapter 2
2.1 Simply Travels Service Concept[4]
Established in 1978, Simply Travel has been providing travel solutions
since 26 years for the discerning travels who want more from their
holiday than just a decent tan. Not through the aggressive marketing
tactics, but by providing an attractive alternative to mass-market
package holidays has lead Simply travel to gain a big loyalty pool
among the holiday travellers.
Simply Travel serves its customers with wide variety of holidays
including destinations like Croatia, Greece, Italy, Morocco, Portugal,
Spain and Turkey.
Services provided by the company are intangible but still physical
tool and equipments used in operations are tangible if the customer
visits the companys for the services. To get a better understanding
of the services provided by Simply Travel I will split the services
into Core and Peripheral services.
Mentioning about the core services provided by the, company provides
hand- picked properties to meet the individual needs of its customers.
Ski holidays, winter sun, Family holidays (special locations for
family holidays with child care) helpful staff, peace of mind and
safety during the whole travel are the core services provided by the
company.
Unparalleled service, late availability, nannies for kids , pleasant
experiences for its customers are the peripheral services provided by
the company.
2.2 Service Package
Service package provided by the company for different holiday travels
includes all airport taxes, flights and transfers, accommodation
including breakfast and meals and the service of its representatives.
Chapter 3
3.1 Customers
Holidaymaking is the main reason that UK residents travel abroad. As
the company deals with the both inbound and outbound tourism I will
have a brief look on the inbound and outbound market. Number of
overseas visits by UK residents increased to 59.3 million in
2002.Expenditures by these visitors, excluding international fares
27.07 billion-slightly higher than the total for the domestic market
(which includes fares).
Describing about the demographics of the customers, most of the
customers are families with children and older people but latest trend
has been seen in the youth to take holidays.
3.1.1 Customers Buying Behaviour
Continued concerns over safety and security while travelling are found

in the customers for holiday travels. Tourists are increasingly buying


experiences rather than a usual routine holiday. They try to find a
particular activity.
The fuel blockades at U.K petrol stations, the events of 11th
September 2001, the foot and mouth outbreak, SARS and Iraqi war has
had continuous affect on the buying behaviour of UK market customers.
Consumers are showing a continuing search for value for money from
their holiday choices. Consumers expect more choice, individuality and
variety.
3.2 Competitors
Aggressive marketing by low cost airlines and internet booking
agencies present a big challenge for the holiday market. Airlines like
British Airways are offering customers to make their own travel plans
through internet. Travel agents compete in variety of ways i.e. price,
quality and the package itself. Companies offer special discounted
packages and also compete on branding. As there are hundreds of
travel agents in the U.K market so, its difficult to specify the
competitors in the market. Travel select, Expedia, Travelocity, E
bookers and Thomas cook etc. are the big names in the market and
occupy the bigger part of holiday sales for the U.K customers.
3.3 Market
I can say that market is in a state of perfect competition and no
individual consumer and travel agent is in position to affect the
market.
Key success factors for Simply Travel are
* Effectively segmented and targeted adventure travellers market
within the larger travel market.
* Successfully positioned as travel specialists.
* Personal interaction, media and marketing.
* Repetition of customers, Loyalty pool
3.4 PEST analysis
To assess the market for the business of Simply Travel I will
conduct PEST analysis to find out about the Political, Economic,
Social and Technological factors in the external macro-environment.
3.4.1 Political Factors
Political arena has a huge influence upon the regulation of businesses
.It includes government regulations and legal issues under which
businesses should operate.
According to the findings, political environment of U.K. is quite
stable.
Issues like enlargement of European Union and war against terror have
had an effect on the political stability of the government.
In result of growing awareness of the environmental consequences, U.K
Government is planning actions to ensure aviation reflects its
environmental impacts. Proposals are emerging for a tax on aviation
fuel and VAT on air tickets.
Governments taxation policies and decision about the increasing the

petrol prices have affected the buying power of the individuals in


U.K.
The political decision as to whether a UK sign up to single European
currency is again having an effect on the businesses.
3.4.2 Economic Factors
Economic factors affect the purchasing power of potential customers
and also affect the individual companys offerings.
U.K economy is benefiting form gradual low inflation rate. Inflation
rate Inflation rate fell to 1.3% in February 2004.
In U.K, unemployment is low. According to labour market statistics in
January 2004 fell down to 4.8 per cent. Job confidence is high and
because of this confidence spending by consumer is also high.
Predictions point to continuing GDP growth over the period averaging
around 2.4% a year (GDP rose by 0.9% in fourth quarter of 2003), with
real household disposable income rising at a somewhat faster rate.
Household expenditures rose to 0.9 per cent with the increase in
disposable income.
The UKs deficit on trade in goods and services in February 2004 stood
at 3.2 billion compared with the revised deficit for January of 4.4
billion.
Continued sales growth has been observed during the past few months in
the UK economy.
Exchange rates are favourable for UK residents for travelling abroad
due to strong position of British Pound against the other foreign
currencies. Euro used as a single currency in many European
countries, is also stable against the other foreign currencies.
Latest predictions for the UK economy suggest that it will remain one
of the strongest economies in the world over the next five years, with
low inflation (inflation fell to 1.3% during February 2004), low
unemployment and reasonable economic growth.
The downside is that disparities between the wealthier parts of the
country, not all in the south east of England, and pockets of
deprivation, will get wider, with implications for travel demand.
These are likely to influence the growth of the UK resident travel
market.
3.4.3 Social Factors
A trend of getting internet access at home and buying online is
developing in the UK. According to statistics in September 2003, 11.9
million households online were recorded.
Listening to music or radio is a popular choice among the UK
residents.92% of people content to spend their evenings and weekends
watching TV or hired videos. To socialize, most people think to
entertain family and friends at home rather than going out (79%).
A great trend has been seen in U.K population about diet and health
issues in the recent years. This trend leads towards the need of more
fitness clubs and organic food for the people from U.K Changes in the
structure of the population because of the immigrants from Europe,
Asia and Africa etc. will also affect the supply and demands of goods
within the U.K economy.

Continued concerns over safety and security while travelling are found
in the U.K residents.
Lifestyle changes have also been affecting the U.K travel market for a
number of years. Postponing the start of the family and an increase in
the number of households consisting of couples with two incomes are
the main trends toward the changing life style. Changing fashions,
which are difficult to predict also have an affect on the market.
3.4.4 Technological Factors
The rapid development of technology is affecting the businesses in UK
and all over the world. Changes in the technology have changed the way
businesses operate i.e. Internet booking for tickets and holidays.
Faster changing development in technology creates a need to react
quickly for different businesses in order they want to maintain the
competitive environment by providing the same innovative services,
which their competitors are offering.
Distribution of products by the use of technologies e.g. marketing
information systems, customer relationship management are also common
practices with different businesses for effective services to their
customers.
Chapter 4
4.1 Impacts on demand situation
Findings from the PEST analysis will enable me to comment on the
impacts on the demand situation of the customers of the Simply
Travel.
Elasticities
Changes in the quantity demanded due to change in price and income are
very important for the tourism industry. Rising disposable income
among the UK residents is the positive indication for the Simply
Travel that people will have enough money to buy companys products.
However, Governments fiscal policies for tax on aviation fuel and VAT
on air tickets will impact the companys supply of services at the
same rate. Higher prices of the tour packages will lead to lesser
demand among the UK residents.
Cross-Price Elasticities
Not only a price change in the UK due to taxes is important but also
the price of the facilities in other destinations where company serves
is also important. For example rising prices in Italy, Spain etc. for
different tourism related products will also make supply of products
expensive for the tourists.
Trends
Latest trends of home- entertainment and more awareness about the diet
and health-issues does also have an impact on the demand of the
tourist. Company will have to compile the Supplies of services
packages with variety of facilities available according to
individuals choice, so it can make supply of the products a bit
expensive for the customers.
Purchasing method
Growing direct purchases of holiday packages from airlines will impact

the demand situation .Buying the package direct from suppliers i.e.
Hotels, air lines will decrease the demand of the tourists.
Moreover, low inflation rate and high employment rate and favourable
exchange rate will increase the buying power of the tourists so it
will increase the demand in British holiday travellers for the holiday
travels abroad.
4.2 OT analysis
To find opportunities and threats from the external environment for
the Simply Travel, I will conduct the OT analysis.
4.2.1 Opportunities
Opportunities exist for Simply Travel in expanding the service
package according to the latest trends such as
* Packages with individual concerned Diet and health matters
* Adding particular activities for the tourists, providing
experiences
* Providing more choice, individuality and variety.
And providing the real value for the money of the tourists.
4.2.1 Threats
Cheap airlines adding facilities for the travellers to make their own
travel plan is the biggest threat for the company.
Governments decision to add taxes on aviation fuel and VAT for air
lines are also a main threat for the company.
Latest trends of home entertainment i.e. listening radio, watching TV,
Inviting family and friends are also threatening the company.
Terrorist attacks like 9/11 is also a big threat for the company.
Chapter 5
Conclusion
I conclude my report by saying that the Holiday Travel market in UK is
in a state of perfect competition. Though there are positive signs in
the economy for present and near future and buying power of the
individuals is increasing day by day but still Simply Travel is in

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