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Unlock This CourseThink about the last time someone you know went on holiday. They probably used a travel agent, flew with an airline, stayed in a hotel and maybe booked a tour. Each of those is a separate organisation but they all work together to make the trip happen. This is what we call an interrelationship in travel and tourism.
Organisations in travel and tourism rarely work completely alone. They link up, partner with each other, buy each other out, or form alliances all to make more money, offer better services and stay ahead of the competition.
Key Definitions:
This is when two organisations doing the same type of job in the industry join together. For example, two tour operators merging into one big company. This reduces competition and helps them gain more customers and buying power.
Example: TUI Group owns multiple tour operators across Europe including Thomson and First Choice both were originally separate companies that merged horizontally.
This is when organisations at different stages of the holiday chain join together. A tour operator might buy an airline (forward integration) or a travel agency might be bought by a tour operator (backward integration).
Example: TUI owns TUI Airways (airline), TUI hotels and TUI travel agencies covering the whole holiday from booking to flying to staying.
There are several different ways that travel and tourism organisations connect with each other. Some are very close (like mergers), while others are more casual (like a hotel recommending a local tour company). Let's look at the main types:
A merger is when two companies agree to join together and become one. A takeover (or acquisition) is when one company buys another. Both result in fewer, bigger companies controlling more of the market.
Bigger market share, reduced costs, more resources, stronger brand, less competition.
Job losses, less choice for consumers, possible monopoly, cultural clashes between companies.
In 2007, Thomas Cook merged with MyTravel Group to form one of Europe's largest travel companies.
Sometimes organisations don't want to fully merge they just want to work together on specific things. A strategic alliance lets them do this while staying independent. This is very common with airlines.
The world's three biggest airline alliances are:
These alliances let passengers earn and use air miles across different airlines, share airport lounges and book connecting flights more easily even though the airlines are still separate companies.
Star Alliance was founded in 1997 and is the world's largest airline alliance with 26 member airlines. A passenger flying from London to Tokyo might fly British Midland to Frankfurt, then Lufthansa to Tokyo all on one ticket, earning miles on one loyalty card. The airlines share check-in facilities, lounges and booking systems. This makes travel smoother for passengers and cheaper to run for the airlines. Members don't merge they stay separate businesses but cooperate on key services.
A franchise is when a business pays to use another company's brand, name and way of working. The original company (franchisor) gets money and grows its brand. The new business (franchisee) gets a ready-made, trusted name.
In travel and tourism, this is common with:
This is one of the most common types of interrelationship. A preferred supplier agreement is when a travel agent agrees to sell mostly one tour operator's holidays in exchange for better commission rates or support.
For example, a travel agency might have a preferred partnership with TUI meaning they'll recommend TUI holidays first, display TUI brochures and receive training from TUI. TUI benefits from guaranteed sales; the agency benefits from higher commission and marketing support.
TUI is one of the best examples of vertical integration in travel and tourism. The company owns and controls almost every part of the holiday chain:
By owning all these parts, TUI keeps profits within the group, controls quality at every stage and can offer package holidays at competitive prices. When you book a TUI holiday, almost every pound you spend stays within TUI.
Interrelationships don't just happen between private companies. Organisations from the public sector (government-run), private sector (profit-making businesses) and voluntary sector (charities and non-profits) also work together in travel and tourism.
Local councils (public sector) often work with private hotels and attractions to promote tourism in their area. For example, VisitBritain (a public body) partners with private airlines and hotels to market the UK abroad. The government provides funding and credibility; private businesses provide services and investment.
Private tour operators sometimes partner with conservation charities (voluntary sector). For example, a safari company might work with the WWF to promote responsible tourism. The tour operator gains a green reputation; the charity gets funding and awareness. Tourists benefit from knowing their trip supports conservation.
There are clear reasons why travel and tourism organisations choose to form interrelationships rather than going it alone:
It's not all positive working together or merging can cause real problems too:
When two companies merge, they often have duplicate roles. Many staff may be made redundant as the new combined company cuts costs.
If one company controls too much of the market, customers have fewer alternatives. Prices can rise and quality can drop without competition.
In the UK and EU, large mergers must be approved by competition authorities to prevent monopolies. Some mergers are blocked entirely.
Thomas Cook was one of the world's oldest travel companies and a highly integrated business it owned airlines, hotels and travel agencies. When it collapsed in September 2019, the impact was enormous precisely because of its integration. Over 150,000 British tourists were stranded abroad. Around 9,000 UK jobs were lost overnight. The Civil Aviation Authority had to run the biggest peacetime repatriation in UK history to bring people home. This case shows that while integration can be powerful, it also means that if one part fails, the whole system can collapse.
The relationship between travel agents and tour operators is one of the most important interrelationships in the industry. Traditionally:
This is a classic example of organisations at different levels working together. However, the internet has changed this many tour operators now sell directly to customers online, cutting out the travel agent. This has forced travel agents to adapt by offering specialist advice and added value that websites can't provide.
Hotels and transport providers constantly work together. Airlines and hotels often have commission agreements when a hotel booking comes through an airline's website, the hotel pays the airline a percentage. Similarly, hotels work with:
Booking.com is an Online Travel Agency (OTA) that acts as a middleman between tourists and hotels. Independent hotels that couldn't afford their own marketing now appear on a global platform with millions of users. The hotel pays Booking.com a commission (typically 15–25%) for each booking. This is a classic interrelationship the hotel gets customers it wouldn't otherwise reach; Booking.com earns commission without owning a single hotel room. However, some hotels feel the commission rates are too high and are trying to encourage direct bookings instead.