PREFACE

Car rental agencies primarily serve people who have a car that is temporarily
out of reach or out of service, for example travelers who are out of town or
owners of damaged or destroyed vehicles who are awaiting repair or
insurance compensation. Because of the variety of sizes of their vehicles, car
rental agencies may also serve the self-moving industry needs, by renting
vans or trucks.

INTRODUCTION TO THE INDUSTRY

CAR RENTALS

Car hire in British English is a company that rents automobiles for short
periods of time (ranging from a few hours to a few weeks) for a fee. It is an
elaborate form of a rental shop, organized in numerous local branches,
primarily located near airports or busy city areas.

Car rental agencies primarily serve people who have a car that is temporarily
out of reach or out of service, for example travelers who are out of town or
owners of damaged or destroyed vehicles who are awaiting repair or
insurance compensation. Because of the variety of sizes of their vehicles, car
rental agencies may also serve the self-moving industry needs, by renting
vans or trucks.

Car rentals are subject to many conditions, which vary from one brand to
another. The vehicle must be returned in a good condition and must not
exceed a maximum driven distance, otherwise extra fees may be incurred.
Additionally, some companies set up a minimum age for the vehicle driver,
which in some cases is as high as 25, even in countries where the age of
majority is much lower. Recent conditions have utilized GPS technology to
limit maximum speeds or driving to specific regions.
Major car rental companies
• Cendant: Avis - Budget
• Vanguard: Alamo - National
• Dollar-Thrifty: Dollar - Thrifty
• Independents: Auto Europe - Beneluxcar - Hertz - Europcar –
Enterprise - Kemwel - Rent-A-Wreck - Sixt

There was a time in India when the portly Ambassador was India's most
coveted and popular car. The Indian car buyer had to wait for months on end
and even years before he could lay his hands on an ambassador or a Fiat
Padmini, which was usually handed over by nonchalant, supercilious
salesmen. It was the Maruti 800, a product of the Japanese car giant Suzuki
collaborating with Indian carmaker Maruti which became a veritable
watershed in the Indian auto market. It became the small car, which Indian
nuclear middle class families aspired to, it was compact and traffic-friendly,
it also was easily maneuvered through Indian by-lanes and ‘gallis’ with ease.

But now that too is history. India has become one of the world's fastest-
growing car markets with scores of models plying the city roads and
highways, from the home-grown Tata’s and Maruti’s to Volkswagens and
Rolls Royce’s.

Indians have emerged as avid car enthusiasts sporting their prized

possessions as status symbols and speed machines. Foreign car companies
have discovered the Indian consumer as well as the R & D potential in the
Indian technical fraternity and are setting up manufacturing plants right and
left across the country at lower costs.

The growing desire for cars also is a sign that Indian roads are finally good
enough for international cars to ride on. There are many four to six lane
highways in India now and the Golden Quadrilateral, which passes through
New Delhi, Calcutta, Madras and Mumbai proves that the Indian
government takes infrastructure development very seriously.
Millions of Indian families will enter the car boom bracket in the next two
years according to surveys. The auto boom in 2004 was with a 29 per cent
growth rate was followed by a lull in 2005 due to meteoric fuel costs and
more stringent anti-emission policies implemented by the Indian
government. Increasing Auto Loan interest rates from the bank also added to
the slowdown.

But all indicators in 2005 say that household income in India is galloping
towards a double-digit pace and 24 million households should be able to ride
in a new car by 2007.

The Indian automobile market is projected to grow by 7% next year. The

economy is booming and the middle class is getting easy finance schemes to
upgrade to four wheelers from scooters and motorcycles. In post-
liberalization India, backward linkages into the manufacturing of auto
components have enabled many Indian vendors to foray in to core
manufacturing.

Trends in new-age Indian auto industry

The Customer is King:

The most obvious aspect is the proliferation of new manufacturers and the
extension of demand in to all sub-segments like mid-size, premium mid-size
and super-luxury car segments instead of being limited to the small car
segment. The entry of foreign companies and the emerging stiff competition
has enabled the setting up of a firm manufacturing foundation, which are
allowing companies to develop new products from Indian soil.

The Indian government is embarking on setting stringent standards on

emission and safety related parameters for the auto industry and this has in
turn elevated the general standards in a crowded market. Features like anti-
lock braking systems, common rail injection, airbags and tiptronic
transmission are now becoming customary in most mid-size and first-rate
small cars. To speed things up, the average Indian car buyer is increasingly
savvy with his auto-facts and is a highly informed buyer, networked via the
internet and a spate of foreign and local journals and cable channels keeping
him up to speed on the what, when, where and why of the auto world.
Small car to dominate

The small car is still the best suited to Indian city roads and will see more
competition in future. But, extremely attractive interest rates for car
financing and competitive market policies do forecast that the mid-size car
will be increasingly affordable in the long run.

CAR RENTAL COS ADOPT NOVEL WAYS TO LURE CUSTOMERS

Renting a car is no longer about just plain hiring a cab. With more and more
international players jumping into this fast-growing business, car rental
companies are coming up with innovative strategies ranging from packages
targeted at women to promoting the self-drive concept to even auctioning
rent-a-car packages online to push sales.

Rental packages

European rentals major Sixt, for instance is planning to auction car rental
packages online starting at Re 1 in addition to marketing pre-paid vouchers
for both in-bound and outbound travelers. They have tied up with leading
travel Web sites for auctioning the packages. In addition, with the popularity
of travel Web sites increasing, we are increasingly leveraging upon these tie-
ups to offer facilities such as airport transfers.

According to estimates, over 5000 air tickets are booked daily on the top
domestic travel Web sites. Sixt is also planning to market rentals packages
for lady corporate travellers, which among other safety/convenience features
provides lady chauffeurs.

Self-drive biz
Meanwhile, with the concept of weekend getaways gaining popularity, car
rental companies are increasingly betting on the self-drive business as well.
Sixt would be focusing on Goa and Kochi for its self-drive business. Sixt,
which is rapidly expanding its presence across the country, is targeting its
fleet to over 5,000 cars over the next 18-20 months.
The Sona group, a leading automobile components maker, is all set to foray
into the car rentals and leasing domain through a new division called Sona
Mobility Services. The group has tied up with SIXT, one of Europe's largest
firms in the car rentals space, for the same. They will initially be investing
about $15 million. While they have already acquired a fleet of cars and
appointed 50 chauffeurs, this would be scaled up to 500 cars in the first year.
They are looking to achieve break-even in a year. The fleet would consist of
cars ranging from Indica's to Toyota Camry's.

The company has already appointed a COO - who has joined from SIXT in
the Netherlands - for the new division. The company will formally launch
the new operations during the forthcoming Auto Expo in Delhi, which is
starting on January 12. The Sona group would be looking to leverage upon
SIXT's global tie-ups and would initially be targeting German companies
familiar with SIXT. The $3-billion SIXT has alliances with companies such
as Lufthansa, KLM, and Siemens, among others. Being the master
franchisee for SIXT in India, the Sona group would also be developing its
own sub-franchisee network in all other regions excepting the North.

The car rentals space in India is currently worth Rs 9,000 crore, with 90 per
cent in the unorganized segment. People are increasingly demanding
premium, standardized service, which is missing right now. They have in-
house etiquette training programmes for the chauffeurs. They are also
investing in IT in a big way, including implementing GPS and allowing real-
time booking of vehicles.

Hertz, for instance, is looking to significantly expand its self-drive business.

The firm is expanding its fleet to include sports utility vehicles for the
holiday traveller and also to include cars such as a stretch limo. They are
promoting the self-drive concept aggressively. We have, for instance, made
the initial paperwork such as insurance much easier. Further, they are
offering high-end SUVs and even customised vehicles for the customers.
Hertz the global car hire giant is stepping on the accelerator. For more than a
decade after coming to India it has crawled along in the slow lane. Now, it's
looking at expanding its fleet of 500 vehicles to over 5,000 in the next three
years. That's only one part of Hertz's route map for the future. In India Hertz
cars have always come driven by chauffeurs. Now it believes the Indian
market is ready to get behind the steering wheel with self-drive vehicles.
So customers will be able to walk into Hertz offices and drive away with a
car of their choice. Self-drive is what distinguishes a taxi service from a car
rental company. World over Hertz is the largest car rental company and we
plan to make it the number one in India. The company will invest Rs 225
crore (Rs 2.25 billion) over the next three years to buy vehicles and the
infrastructure to back it. Talks are on with a financial institution for the cash.

Hertz has its route map clearly charted out. It's looking at four major areas --
chauffeur-driven cars for corporates, travel desks at hotels, self-drive and
fleet management. In 2002, Hertz conducted a survey and found that around
150,000 cars were registered as taxis. The industry is estimated to be around
Rs 3,000 crore (Rs 30 billion). Of this only around 10 per cent is organised
and includes around 20 players across the country. The big names are Avis,
which has tied up with the Oberoi Hotels, Travel House, which has a tie-up
with ITC WelcomGroup Hotels, and Orix, which has a tie-up with IL&FS.
Most of the other players treat car rental as a secondary business meant to
promote another business.

Hertz also plans to cater to small and medium enterprises and professionals.
It initially plans to strike deals with companies with which it already has a
working relationship. Currently, Hertz provides chauffeur-driven cars to
nearly 400 companies including IBM, Sony, KPMG, Compaq, etc.

Hertz is looking at customers who feel a driver is a hindrance and he divides

customers into three different types. One is the fuel-conscious customer who
hires a car to go on a holiday with his family and would like a fuel-efficient
car. Second is a person who may be driving an Ikon or Esteem, but would
like to try an SUV. Thirdly, there's the person who may on special occasions
like to go all out and drive a Mercedes or some other luxury car. Around the
world Hertz has agreements under which vehicle manufacturers buy back
cars. In India too it has similar deals and the manufacturers buy back cars
after three years. It has taken Hertz a long time to get into high gear. Now
it's getting ready to move at high speed.
THEIR FLEET

AMBASSADOR (Standard Car) (Non Air

Conditioned) Spacious, safe and good
value for money and most popular car
used by tourists.
Passengers : 4 (Including Driver)
Luggage : 4 (Incl. roof top carrier)
(Air Conditioned) Spacious, safe and
good value for money and most popular
car used by tourists. Passengers : 4
(Including Driver) Luggage : 4 (Incl. roof
top carrier)

TATA SAFARI (4X4) (6 seater / suv)(Air

Conditioned)India's best 4 wheel drive and
safest vehicle with dual air-conditioning
and is most suitable for small group and
families.
Passengers : 6 (Including Driver)
Luggage : 3 (Incl. roof top carrier)
TATA SUMO (6 seater standard)(Non-
Air Conditioned)India's best 4 wheel drive
and safest vehicle most suitable for small
group and families
Passengers : 6 (Including Driver)
Luggage : 5 (Incl. roof top carrier)
TATA INDICA (Standard Car)(Air
Conditoned) Compact car from Tata's, one
of the most experienced automobile
manufacturers in India. Passengers : 4
(Including Driver)
Luggage : 3 (Incl. roof top carrier)

MITSUBISHI LANCER (Luxury Car)

(Air Conditioned)Most Successful car in
its class in India manufactured by
Japanese car manufacturers Mitsubishi
Motors. Passengers : 4 (Including Driver)
Luggage : 3 (Incl. roof top carrier)

TOYOTA QUALIS (6 seater) (Air

Conditioned) By Toyota Japan offers best
A/c and comfort in its class.
Recommended for small groups or large
family.
Passengers : 6 (Including Driver)
Luggage : 5 (Incl. roof top carrier)(Air
Conditioned)
TOYOTA QUALIS (8 seater)
By Toyota Japan offers best A/c and
comfort in its class. Recommended for
small groups or large family.
Passengers : 8 (Including Driver)
Luggage : 5 (Incl. roof top carrier)
Chevrolet Tavera
Manufacturer - General Motors India
Ltd. Engine-
Power- 2.6L Direct Injection Turbo Diesel
Number of cylinders 4, inline, traverse
mounted
Piston Displacement 2489 cc
Max. Power 84 PS @ 3800 rpm
Max. Torque 18 Knm @ 1700 rpm
Dimensions - Length 4335 mm
Width 1690 mm
Height 1775 mm
Ground Clearance 194 mm
Boot Space: Four normal size suitcase

Toyota Innova
Manufacturer - Toyota Kirloskar Motors
Ltd.
Engine- No. of Cylinders - 4 cyls.in-line,
Diesel Displacement(cc) - 2446 CC
Maximum Power(bhp/rpm) - 75 bhp /4200
rpm
Maximum Torque(Kgm/rpm) 15.4 kgm /
2400 rpm
Dimensions: Overall Height(mm) 1880
mm
Overall Length(mm) 4425 mm
Overall Width(mm) 1655 mm
Ground Clearance(mm) 178 mm
Kerb Weight 1540 kg
Boot Space : In Build Covered Carrier at
the roof with a capacity of 7-10 Normal
size Bags/ Suit cases
TRAVEL AGENCIES
This industry comprises establishments primarily engaged in furnishing
travel information and arranging tours, transportation, rental cars, and
lodging for travelers.

Travel agents have been significantly affected by two factors in the early
2000s. First, travelers are increasingly using the Internet to book their travel,
bypassing traditional agents. Second, the terrorist attacks of September 11,
2001 brought all travel—both business and leisure—within the United States
to a screeching halt. In the aftermath of the attacks, security concerns and a
depressed economy left agents with few customers. Just as travel agents
were looking for consumers to regain confidence in the safety of travel and
as the economy showed the first signs of recovery, the United States entered
into the Second Persian Gulf War in early 2003, once again leaving
Americans feeling the need to stay close to home.

Although experts agree that the economy as well as the travel industry will
eventually rebound, even if consumers overcome their cautionary feelings
regarding air travel, the future role of travel agents is made murky by the
every-growing use of the Internet to plan and book travel arrangements.
Agents will also have to deal with less-than-perfect relations with airlines,
cruises, and tour groups—all of whom are themselves struggling to stay
afloat.

ORGANIZATION AND STRUCTURE

The travel agency industry is young, dynamic, and in a relatively constant
state of transformation and growth. While no longer expanding at the
explosive rate (almost 20 percent annually) of the early 1980s, the industry
continues to grow—in terms of the number of locations—by nearly 6
percent every year. During the 2000s, mergers and acquisitions are expected
to substantial, and the mega-firm is expected to be an increasing important
facet of the industry.

Regional Distribution. Travel agencies can be found in virtually every

community in the United States. The greatest share of travel agency
locations has been in the eastern United States (30 percent), with the western
United States close behind (28 percent). The South has a 22 percent share,
and the Midwest has 19 percent. Central city locations account for more than
50 percent of the total, and the uneven growth of the 1980s—with the
suburbs and small towns gaining disproportionate numbers of locations—not
only subsided, but reversed itself. The share of rural and town locations
dropped quite significantly to 9 percent, from nearly 12 percent in the late
1980s. With the emergence of Satellite Ticket Printers (STPs), automated
ticket distribution machines began to replace branch offices altogether, a
trend that may well continue.

Consolidation. In examining location revenue trends in the travel agency

marketplace, the pattern seems somewhat obscure. Not only is the
proportion of larger agencies (those with more than $5 million in revenue)
growing rapidly, but also the proportion of smaller ones (grossing under $1
million) is increasing at an equally conspicuous rate. The percentage of the
industry's large locations has risen steadily to 11 percent, and their share of
total industry revenue has risen to more than 33 percent. At the same time,
small locations make up almost 30 percent of the industry. While seemingly
contradictory, these trends are, in fact, results of the same overall movement
of the industry toward consolidation into a number of "mega-agencies," or
regional and national branch and franchise networks. Such firms have the
resources to set up large offices in prime locations and to establish small
branch agencies that are run in coordination with the main offices. Whether
or not these smaller branches are profitable, they do augment name
recognition, which is of utmost importance to any agency in this
increasingly competitive market.

The steady expansion of the industry in the 1990s had a completely different
character than the boom period advances of the 1980s. The segment of the
industry that expanded most in the 1980s—comprising the majority of the
independent, single-location agencies with between $1 million and $5
million in revenue—came under pressure. The majority of agency locations
still fell into this category in the 1990s, but it was a dwindling majority.
Especially significant was the decrease in agency locations at the lower end
of this group—those grossing between $1 million and $2 million—which
were not as eagerly pursued by the acquisition-minded mega-agencies as
were those locations with greater revenues.
The high level of consolidation activity in the travel agency industry is best
assessed through the steep upturn in acquisitions. Almost a third of all
agencies have acquired another agency already, and there are no signs of the
buying spree slackening. In 1991 American Express Company purchased
Lifeco of Houston, a firm whose airline ticket sales exceeded $1 billion
annually. This acquisition provided a new scale for the already highly
charged marketplace environment. Many smaller agencies also felt they had
much to gain in terms of access to the latest technological innovations and
overall support than they had to lose in giving up their autonomy. For this
reason, they pursued buyers. Typically, the cost of purchasing an agency
location is set at between 3 percent and 7 percent of its latest annual sales.

Smaller Agencies. Despite the industry's consolidation, it remains first and

foremost an industry of small businesses. Even in the face of intensifying
competition, single-location firms still make up the vast majority of
agencies, and in addition, they have successfully developed alternative
business strategies to stay afloat. One common tactic is to seek out corporate
clients—89 percent of all agencies handle at least one corporate account.
While only large agencies can manage the travel accounts of most medium-
sized and large corporations, these accounts make up about only 28 percent
of all the corporations that use travel agencies. The rest (those with fewer
than 100 employees) compose a huge market for the services of smaller
agencies. The average number of corporate accounts an agency manages
dropped to 38 from a high of 43 in 1989, proof that small agencies have
made inroads into the realm of business travel. Quite simply, more agencies
are attracting fewer business clients: certain companies may feel better
served by an agency without too many other commitments. The
particularized service that a small agency can provide has proven to be an
effective selling point in building an agency's business travel base.

Promoting themselves in terms of the unique, personal service that they

offer, small agencies have also secured a place in the leisure travel market, a
market in which the travel agent is often solicited as an advisor to the
traveler. Although not widespread, there has been some noteworthy
fragmentation of the leisure market into agencies specializing in travel
niches (e.g., student travel, or travel to a certain part of the world).
Consortiums. Membership in travel consortiums is seen as a way of
benefiting from consolidation without ceding direct control of the business.
Through consortium membership, an agency develops close working
relationships with other member agencies. An increase in purchasing power
results in significantly higher override commissions from preferred suppliers
and in cheaper access to expensive services that foster office efficiency.
These immediate paybacks, however, are not the only focus. Many agencies
feel consortiums, through annual meetings and newsletters, ensure that they
remain up to date on broad developments in the industry. Consortiums also
give travel agents a unified voice that increases their ability to influence
supplier developments that affect them. In the 1990s nearly half of all U.S.
travel agencies became affiliated with a consortium of some sort, and there
are few signs of this trend slowing, since business travel consortiums have
begun to catch up to leisure travel consortiums in membership numbers.
Of course, consortiums are not only set up for small agencies, and the
growing number of business travel associations are welcoming more and
more mega-agencies. Access to consortium arrangements will ultimately
serve to protect the travel agency industry from complete consolidation by
ensuring that it retains some degree of its small-business character while still
adjusting to the increasingly complex demands of the American traveler.

Trade Associations. In seeking greater efficiency and better returns in the

1990s, an industry proliferated with independent operators, consortiums, and
mega-agencies still sought a kind of uniformity. Market-driven joint
ventures were not, however, the only coordinating mechanisms that served
to integrate the industry. For example, several large trade associations act to
influence government policy decisions on behalf of the travel complex as a
whole. These associations also provide educational services for their
members and promote the benefits of using travel agents. The largest of
these trade associations, the American Society of Travel Agents (ASTA),
boasted 29,000 travel agents in 170 countries in 1999. Seventy to 75 percent
of this nonprofit organization's funding comes from its member dues, the
rest from an annual conference. The second largest trade association, the
Association of Retail Travel Agents (ARTA), has a much smaller
membership—3,000 travel agents—and a more specific agenda of
promoting their interests. Other important travel agent associations include
the Travel and Tourism Research Association and the Alliance of
Independent Travel agents. Related associations include the American Bus
Association, American Hotel & Motel Association, and Cruise Line
International Association.

While providing services for travel agents, such associations also legitimize
the trade itself. Because only Rhode Island requires its travel agents to be
licensed, an ASTA or ARTA membership offers assurance to both suppliers
and consumers that an agent has some qualification beyond the easily
obtainable agency accreditation, which is granted by the Airlines Reporting
Corp. (ARC). In what has become a very technical field, there has been an
increasing need for further standards of expertise, and educational bodies
such as the Institute of Certified Travel Agents (ICTA) have begun to serve
a crucial role. The ICTA, a 16,000-member association that seeks to
improve the level of competence within the industry, offers a course through
which agents can become Certified Travel Counselors (CTC), a title that
already carries significant weight within the industry. Another certification
which has come into demand with the growth of corporate travel is that of
Certified Meeting Professional (CMP), which allows an individual to
oversee every aspect of a business meeting.

Nine states currently require some regulation, certification, or registration of

retail sellers of travel services: California, Hawaii, Illinois, Ohio, Rhode
Island, Washington, Iowa, Florida, and Oregon.

Suppliers. Travel agencies rely entirely on commissions from their

suppliers. Commissions, as a rule, are set at 10 percent of a booking, but
slightly different arrangements can be made with each supplier. Travel
agents may contact several suppliers to set up an appointment with each or
use one of two coordinating bodies accepted by various suppliers as a kind
of clearinghouse establishing the validity of agents. ARC agents are allowed
to use standard ticket stock for more than 100 domestic and international
carriers. ARC also provides weekly reconciliation of sales, refunds,
exchanges, and commission payments to travel agents via a third party.
While ARC appointment is not required of agents, it would be difficult to
provide full services without it. A minimum of $20,000 is required to be
appointed or retained by ARC. This acts as both a financial screen and a
protection against default.
Airlines are the only suppliers who give significant commission overrides
(marginally higher commissions) to agencies with which they have a
preferred supplier relationship, whether negotiated through a consortium or
through the agency itself. These overrides appear to be relatively effective in
influencing agents' booking habits. More than two-thirds of all agencies
book particular carriers in order to receive overrides, and these locations
obtain overrides on about a third of all the air tickets they book. It is more
common for overrides to be passed on to a business client than to a leisure
client, mainly because the market for corporate accounts is highly
competitive and, because of the higher prices a corporate traveler generally
pays for last-minute scheduling, the commission will already be substantial.
The use of overrides for leisure travel is on the rise, however, as it becomes
an increasingly competitive sector.

The industry's dependence on air travel resulted in a marked consistency of

products offered by travel agencies. Airline tickets make up nearly 60
percent of a travel agency's business on average, more than all other "travel
products" combined. This attachment to the airline industry poses problems
for some travel agencies, and so has prompted an effort within the industry
to decrease dependence on airline ticket sales. With air travel continuing to
increase, however, this dependency may be unavoidable. The remainder of a
travel agency's business comes from cruise bookings (which make up 16
percent of total industry sales), hotel bookings (12 percent), car rentals (8
percent), and rail travel and other bookings (4 percent).

Tour and vacation packages, organized through tour operators with

minimum arrangements, have increased in popularity. Packages allow for
better control of costs in advance, and assure the customer that they will be
taken care of in case of an emergency. For agents, they are easily put
together and provide higher, more dependable commissions. Specialized
tours (often called Foreign Individual Tours or FITs) are becoming confined
to the luxury market, a welcome trend for agents because FITs are often
time-consuming to organize.

Car rental companies use a variety of strategies to lure travel agency

business, including commission incentives, free client upgrades, low
familiarization trip rates, and frequent contests. Regardless of what kind of
inducement is offered, however, car rental bookings are still generally
viewed by agents as an added service for their clients. More often than not,
an agent will make car reservations based on the efficiency and
dependability of the car rental company's system rather than on what
rewards are being offered. Payment of commissions has become less of a
problem as car rental companies have begun to centralize their payment
systems and have designated full-time agent assistants to deal with travel
agent inquiries or commission payment concerns. In 1997 a New York State
Court of Appeals ruled that rental companies cannot refuse to rent
automobiles to drivers on the basis of age. Drivers under 25 or 21 were
routinely denied rental because of higher accident rates. Since other states
are considering similar legislation, this could, according to a Hertz
Corporation spokesman quoted in ASTA Travel Industry Headlines, give car
rentals "virtually unlimited exposure" to insurance liabilities.

As more hotels acknowledge their dependence on travel agents for

reservation bookings, the relationship between the two industries is greatly
improving. Evidence of this is seen in the effort by many hotels to simplify
and speed up the payment of travel agency commissions. In the past,
commission payments could take anywhere from a few days to a couple of
months and come with confusing statements from branch hotels. Now, a
large hotel company, with a centralized commission payment system, issues
payments and statements regularly from one office that deals with individual
branch problems internally. Such centralization safeguards travel agents
from having to spend valuable time chasing down commissions and makes
agents far more comfortable in booking hotel reservations.

STPs and On-Site Agents. In order to meet corporate demand for efficiency
and specialized service, two strategies were adopted to better manage the
travel accounts of large companies. Some agencies are offering to install
satellite ticket printers in corporate offices so that a ticket and/or boarding
pass can be distributed directly and immediately to the client. Some 13
percent of all agencies use such delivery systems, with the average number
for an agency location being three. A smaller but growing number of
agencies have gone so far as to set up on-site departments for their major
clients (those who contribute more than $41 million in sales, for instance).
Such departments, which are run and paid for by the agency but work in
client-supplied office space, give the company more direct control over its
travel arrangements and thus create savings and enforce travel policy On-site
agents also work in conjunction with in-house travel departments to set
budgets, negotiate with vendors, and create travel expense reports.

BACKGROUND AND DEVELOPMENT

The Early Years. Because travel agency surveys have only been taken since
the early 1970s, it is difficult to speak with much certainty about the state of
the industry prior to this time, except to note that it bore little resemblance to
the industry of the 1990s. ASTA was founded in 1931 as a society for
steamship agents, at a time when steamships and trains were the
predominant means of travel. A small group of agents booked tour packages
and cruises in these early days. Later, with the spread of air travel,
particularly with the introduction of larger passenger jets in the 1960s, travel
agencies became much more prominent. Despite their prominence, travel
agencies still remained a select group. For a long period of time, an agent
actually had to be appointed by an airline commission in order to book
airline tickets. In many ways this obstacle spurred the industry's expansion
into car rentals and hotel bookings. For many years, however, travel
agencies remained essentially unsustainable without inside connections to
the airline industry.
The Deregulation Watershed. In 1978 the Carter administration's airline
deregulation legislation, designed by Alfred E. Kahn, chairman of the Civil
Aviation Board, transformed the industry completely. In just three years the
number of agency locations rose by 30 percent, from 14,804 in 1978 to
19,203 in 1981, and the average revenue per agency was up 23 percent, from
$1.3 million to $1.6 million. Such broad-based, steep increases were, and
remain, unparalleled and clearly point to deregulation as a watershed in the
history of the travel agency industry. By eliminating fixed pricing and
opening up air travel to competition, deregulation allowed more people to
travel more cheaply. The benefits of travel agency services also suddenly
became much clearer. With a floating market, and new airlines either
popping up or going under with shocking speed, travel agencies were in a
better position than anyone else to find the best ticket at the best price.
Companies suddenly forced to trim budgets also came to be recognize travel
agencies as the most cost-effective mode of ticket distribution

Since the early post-deregulation years, travel agents' enthusiasm for airline
competition has cooled somewhat. In particular, the frequent price wars
create havoc for travel agencies. When special fare offers are made, for
instance, not only are agents unprepared, but their reservation systems are
rarely loaded with new fares fast enough to avoid problems. Despite the fact
that agencies continue to handle nearly 80 percent of airline ticket sales, no
true partnership has evolved between the two industries. As a percentage of
all travel agency revenue, revenue generated by the airlines has, in fact,
fallen moderately from 63 percent in the early 1980s to around 56 percent.
Both sides have tried to reduce their co-dependence; the airlines have
developed frequent flier programs as alternatives to preferred supplier
relationships, and travel agencies have built closer ties to other suppliers.
A number of travel agents and tour operators were upset when the U.S.
Travel and Tourism Agency was eliminated in 1996 along with its $16.3
million budget. This made the United States the only major country without
a national tourist agency. Private industry stepped in, and the new United
States National Tourism Organization Act was passed by the United States
Senate in September 1996. It is estimated to have an $80 million budget to
promote the United States to foreign tourists. Patterned after the U.S.
Olympic Committee, the National Tourism Organization is funded by
business sponsors who pay an annual fee to use its logo in advertising and
promotion. The organization's avowed goal is to put the United States back
on top of the international tourism market.
Despite a leveling off in overall growth, the U.S. travel agency industry
remains vibrant and is well-placed to benefit from the promise of future
increases in both leisure and business travel. Even in a prolonged
recessionary period, cumulative agency revenues have remained up, and it
appears that there is still some room for agencies to grow within the travel
complex. While they have no real competition in airline ticket sales, tours,
and cruises, their proportion of the car rental and hotel reservation markets
show room for growth. Even without any marked improvement in their
relationship with these two suppliers, however, the industry is so closely
aligned to the airline and cruise industries that the years ahead, while they
may show further consolidation and cost containment, will surely be
prosperous. In addition, the recent focus on airline industry upheaval and the
Clinton administration's commitment to airline industry reform was
welcome news to agencies who continue to depend on that sector of the
travel economy. With the outgrowth of consortiums and mega-agencies,
travel agencies have more leverage than ever before, which will enable them
to play a significant role in airline industry reforms. Finally, and perhaps
most importantly, travel agencies have proven themselves flexible enough to
adapt to the ever-changing habits of American travelers.
Travel is currently the leading services export in the United States, bringing
in $93 billion (including water transportation) from 46.4 million
international visitors in 1998, which was $18.7 billion more than U.S.
travelers spent abroad that year. Travel and tourism is also the third largest
retail industry, next to automobile dealers and food stores. Total 1998 output
from both domestic and international travel was approximately $1.2 trillion,
which was 13.6 percent of the Gross National Product (GNP). The entire
industry employed 7.6 million people in 1998, up from 6.6 million in 1995.
Travel within the United States continues to represent a large segment of the
industry: in 1998, Americans spent $424 billion on travel away from home
without leaving the country.

According the U.S. Census Bureau, travel agencies brought in

approximately $11.1 billion in receipts for 1998.

Post-deregulation commissions continued to drop through the latter 1990s as

commission caps, ticketless travel, and cost cutting all began to take their
toll. In October 1999 airlines cut their commissions to travel agencies down
to 5 percent, the third reduction since 1995. In effect were a $50 commission
cap on round-trip domestic flights and a cap of $100 on international flights.
Electronic ticketing and Internet booking remained the biggest threats to
travel agency income. According to ASTA, however, travel agents were still
booking about 80 percent of all flights in 1999 despite the continued threat
of direct online purchasing. Some of the most frequented Internet travel sites
in 1999 included BizTravel.Com, GetThere.com, Priceline.com, and
Travelocity.

Travel Weekly's "1999 U.S. Consumer Travel Survey" reported that travel
agents ranked higher than doctors, lawyers, and stockbrokers with respect to
the value provided for the work (they were out-ranked by teachers,
pharmacists, and accountants). Notwithstanding, the Federal Trade
Commission (FTC) reported that Americans lose $12 billion yearly in travel
fraud, mostly from nonregistered agencies.
CURRENT CONDITIONS
The entire travel industry was rocked by the events of September 11, 2001,
when four commercial airplanes were hijacked by terrorists concurrently,
with two crashing into the New York World Trade Center, one into the
Pentagon in Washington, D.C., and another brought down prematurely in
Pennsylvania by passengers on-board who struggled with the terrorists. The
horrific events sent shock waves through the nation, and travel ground to a
halt. Travel expenditures fell significantly. In 2000, U.S. consumers spent a
total of $570.5 billion on travel. In 2001 that figure dropped to $537.2
billion and dropped again in 2002 to approximately $525.1 billion.

Travel agents are attempting to cope with the stagnant travel industry by
focusing less on air travel and more on cruises, vacation packages,
alternative means of transportation (e.g., rail and bus), as well as revenue-
boosting vacation add-ons such as spa packages, shopping trips, or special
evenings-out. However, even when the economy recovers and people begin
to travel again, the Internet clearly will remain the agents' long-standing
competition. Expedia.com, Priceline.com, Orbitz.com, Travelocity.com, and
Cheaptickets.com are proving to be worthy opponents. Some predict that the
future of travel agencies will involve a fragmenting into numerous small
agencies that primarily handle upscale cruises, local travel, and cruises and
large "mega-agencies," who will operate both offline and/or online to
provide a mass marketing approach to consumers looking for discounted
prices.

The market arena is also changing for travel agencies regarding airline
commissions. A trend beginning in 1995 when commission fees were
reduced by Delta, in 2002 the major airlines finally pulled the trigger on
what travel agents had expected: zero commissions. The move could save
airlines up to $1 billion annually, and it is also intended to push travelers to
book directly with the airline via online reservation options. With no
commission-based revenues, most agencies were forced to increase services
fees. Although a vast majority of agents were not pleased with the airlines'
decision to do away with commissions, most had plans in place to
accommodate a new fee-based structure.
RESEARCH AND TECHNOLOGY
Travel agencies have provided fertile ground for the application of cutting
edge computer technology. Computer reservation systems (CRSs) are used
by all but 4 percent of the industry. Of the five CRS vendors, Sabre has the
largest market share of the industry at 35 percent; the other vendors include
Apollo (23 percent), System One (20 percent), Pars (17 percent), and Data II
(9 percent). Agents have become very comfortable with using CRSs and
have started to employ them in uses beyond airline bookings. More car
rental companies and hotels can be accessed through CRSs than tour
companies and cruises, and agents have responded by making the majority
of both their car and hotel reservations (68 percent and 53 percent,
respectively) by computer. The most important specialized software to
appear in conjunction with CRSs is the fare-auditing scan, which checks a
system for better fares and/or routing. Such software has already given many
large corporate agencies an invaluable marketing tool. Other quality-control
software, such as automated accounting systems (used by 51 percent of all
agencies), should continue to proliferate within the industry. The U.S.
Department of Transportation, in fact, expected to issue new CRS rules that
will make it easier for agencies to buy third-party software and hardware for
accessing their CRSs.

The emergence of Satellite Ticket Printer Networks (STPNs) and Electronic

Ticket Delivery Networks (ETDNs) promises to have a major impact on
travel agency ticket delivery. Starting in 1986, STPNs allowed agencies to
set up ticket machines on client premises. The advent of third-party ticketing
networks, used by agencies that cannot afford to establish networks
themselves, has given agents the ability to issue tickets through their STPNs
at a number of different locations. New networks are being developed that
are essentially the same manner as STPNs but are not agency accredited by
the Airlines Reporting Corp. (ARC). The ARC is expected to approve them,
however, and many envision ticketing locations popping up in much the
same as automated bank tellers machines. Without agency accreditation,
though, ETDN vendors will neither sell tickets nor offer any kind of travel
counseling.

Electronic ticketing and bookings via the Internet are revolutionizing the
industry. Because of reduced personal interaction, electronic tickets promise
to slash transaction costs.
Several airlines are promoting direct self-ticketing. USAir Group
Incorporated has provided its Priority Travelworks disks, which allow online
reservations to 70,000 of the 19 million people in its frequent flyer program.
United Airlines Incorporated sells its online connection for $24.95 a year but
also provides for free drinks coupons and headsets. It also charges $2.50 per
hour of connect time which is waived with the online purchase of a ticket.
Northwest Airlines Incorporated's online registration is available through
Compuserve. Delta, TransWorld Airlines Incorporated, and others plan to
introduce their versions. The airlines are well positioned to capture online
traffic because of their share in reservation systems such as Sabre, Apollo,
and World-span, which are used by travel agents.

Hotels, travel agents and quasi-travel agents have also taken to the Internet
to allow do-it-yourself bookings to save costs, frequently providing access to
databases previously reserved for travel agents and posting significant sales.
For example, the Marriott hotel chain allows reservations over the Internet.
The travel industry has embraced the Internet at a pace second only to the
computer industry, but there are mixed reactions as to the impact of the
Internet on travel agencies. Some feel that the ability to make one's own
reservations and bookings will eliminate the need for a travel agent, but
there is also the speculation that the fundamental role of the travel agent will
remain unchanged; that is, they will continue to act as travel consultants
because of their knowledge of the industry, although they may work in-
house for larger corporations.

Tourism is the act of travel for the purpose of recreation and business, and
the provision of services for this act. Tourists are people who are "traveling
to and staying in places outside their usual environment for not more than
one consecutive year for leisure, business and other purposes not related to
the exercise of an activity remunerated from within the place visited"
(official UNWTO definition). The distance between these two places is of
no significance.

A more comprehensive definition would be that tourism is a service

industry, comprising a number of tangible and intangible components. The
tangible elements include transport systems — air, rail, road, water and now,
space; hospitality services — accommodation, foods and beverages, tours,
souvenirs; and related services such as banking, insurance and safety and
security. The intangible elements include: rest and relaxation, culture,
escape, adventure, new and different experiences.

Many countries depend heavily upon travel expenditures by foreigners as a

source of taxation and as a source of income for the enterprises that sell
(export) services to these travellers. Consequently the development of
tourism is often a strategy employed either by a Non-governmental
organization (NGO) or a governmental agency to promote a particular
region for the purpose of increasing commerce through exporting goods and
services to non-locals.

Sometimes Tourism and Travel are used interchangeably. In this context

travel has a similar definition to tourism, but implies a more purposeful
journey.

The terms tourism and tourist are sometimes used pejoratively, implying a
shallow interest in the societies and places that the tourist visits.

One of the earliest definitions of tourism was given by the Austrian

economist Hermann Von Schullard in 1910. He defined it as, "sum total of
operators, mainly of an economic nature, which directly relate to the entry,
stay and movement of foreigners inside and outside a certain country, city or
a region."

Hunziker and Krapf, in 1942, defined Tourism as, "Tourism is the totality of
the relationship and phenomenon arising from the travel and stay of
strangers, provided that the stay does not imply the establishment of a
permanent residence and is not connected with a remunerative activities."

In 1976 Tourism Society of England defined it as "Tourism is the temporary,

short-term movement of people to destination outside the places where they
normally live and work and their activities during the stay at each
destination. It includes movements for all purposes."
In 1981 International Association of Scientific Experts in Tourism defined
Tourism in terms of particular activities selected by choice and undertaken
outside the home environment.
Tourism may be classified into the following types:
• Inbound international tourism: Visits to a country by nonresident of that
country
• Outbound international tourism: Visits by the residents of a country to
another country
• Internal tourism: Visits by residents of a country to their own
• Domestic tourism: Inbound international tourism + internal tourism
• National tourism: Internal tourists + outbound international tourism

There has been a discernible upmarket trend in tourism over the last few
decades, especially in Europe where international travel for short breaks is
commonplace. Tourists have higher levels of disposable income and greater
leisure time. They are also better educated and have more sophisticated
tastes. There is now a demand for a better quality product in many quarters.
This has resulted in the following trends:-

• The old 'sun, sea, and sand' mass market has fragmented. People want
more specialized versions of it, such as 'Club 18 -30', quieter resorts
with select hotels, self-catering, etc.
• People are taking second holidays in the form of short breaks/city breaks,
ranging from British and European cities to country hotels.
• There has been a growth in niche markets catering for special interests or
activities.

The developments in technology and transport infrastructure (particularly

the advent of jumbo jets) have placed some types of holiday in the
affordable mainstream:-
• The development of a mass cruise holiday market.
• The advent of affordable holidays to long-haul destinations such as
Thailand or Kenya.
 • The phenomenon of the low budget airline, utilising a new generation of
small regional airports.

There have also been changes in lifestyle, which may call into question the
current definitions of tourism. Some people (particularly the 45+ and retired)
may be adopting a tourism lifestyle, living as a tourist all the year round -
eating out several times a week, going to the theatre, daytripping, and
indulging in short breaks several times a year.

Much of this results in impulse purchasing. This is facilitated by internet

purchasing of tourism products. Some sites have now started to offer
dynamic packaging, in which an inclusive price is quoted for a tailor- made
package requested by the customer upon impulse.

There have been a few setbacks in tourism, such as the September 11, 2001
attacks and terrorist threats to tourist destinations such as Bali and European
cities. Some of the tourist destinations, including the Costa del Sol, the
Baleares and Cancún have lost popularity due to shifting tastes. In this
context, the excessive building and environmental destruction often
associated with traditional "sun and beach" tourism may contribute to a
destination's saturation and subsequent decline. This appears to be the case
with Spain's Costa Brava, a byword for this kind of tourism in the 1960s and
1970s. With only 11% of the Costa Brava now unblemished by low-quality
development (Greenpeace Spain's figure), the destination now faces a crisis
in its tourist industry. Sustainable tourism is becoming more popular as
people start to realize the devastating effects tourism can have on
communities.

Receptive tourism is now growing at a very rapid rate in many developing

countries, where it is often the most important economic activity in local
GDP.
In recent years, second holidays or vacations have become more popular as
people's discretionary income increases. Typical combinations are a package
to the typical mass tourist resort, with a winter skiing holiday or weekend
break to a city or national park.

On December 26, 2004 a tsunami, caused by the 2004 Indian Ocean

earthquake hit Asian countries bordering the Indian Ocean, and also the
Maldives. Tens of thousands of lives were lost, and many tourists died. This,
together with the vast clean-up operation in place, has stopped or severely
hampered tourism to the area.

Special forms of tourism

For the past few decades other forms of tourism, also known as niche
tourism, have been becoming more popular, particularly:
• Adventure tourism: tourism involving travel in rugged regions, or
adventurous sports such as mountaineering and hiking (tramping).
• Agritourism: farm based tourism, helping to support the local
agricultural economy.
• Ancestry tourism: (also known as genealogy tourism) is the travel with
the aim of tracing one's ancestry, visiting the birth places of these
ancestors and sometimes getting to know distant family.
• Armchair tourism and virtual tourism: not travelling physically, but
exploring the world through internet, books, TV, etc.
• Audio tourism: includes audio walking tours and other audio guided
forms of tourism including museum audio guides and audio travel
books.
• Bookstore Tourism is a grassroots effort to support independent
bookstores by promoting them as a travel destination.
• Cultural tourism: includes urban tourism, visiting historical or interesting
cities, such as Berlin, Kathmandu, Lahore, Lima, Buenos Aires,
London, Paris, Delhi, Rome, Prague, Dubrovnik, Beijing, Istanbul,
Kyoto, Warsaw, and experiencing their cultural heritages. This type of
tourism may also include specialized cultural experiences, such as art
museum tourism where the tourist visits many art museums during the
 tour, or opera tourism where the tourist sees many operas or concerts
during the tour.
• Dark tourism: is the travel to sites associated with death and suffering.
The first tourist agency to specialise in this kind of tourism started with
trips to Lakehurst, New Jersey, the scene of the Hindenburg airship
disaster.
• Disaster tourism: travelling to a disaster scene not primarily for helping,
but because it is interesting to see. It can be a problem if it hinders
rescue, relief and repair work.
• Drug tourism: travel to a country to obtain or consume drugs, either
legally or illegally.
• Ecotourism: sustainable tourism which has minimal impact on the
environment, such as safaris (Kenya), Rainforests (Belize) and hiking
(Lapland), or national parks.
• Educational tourism: may involve travelling to an education institution, a
wooded retreat or some other destination in order to take personal-
interest classes, such as cooking classes with a famous chef or crafts
classes.
• Extreme tourism tourism associated with high risk
• Gambling tourism, e.g. to Atlantic City, Las Vegas, Palm Springs,
California, [1], Macau or Monte Carlo for the purpose of gambling at
the casinos there.
• Garden tourism visiting botanical gardens famous places in the history of
gardening, such as Versailles and the Taj Mahal.
• Heritage tourism: visiting historical (Rome, Athens, Cracow) or
industrial sites, such as old canals, railways, battlegrounds, etc.
• Health tourism: usually to escape from cities or relieve stress, perhaps
for some 'fun in the sun', etc. Often to "health spas".
• Hobby tourism: tourism alone or with groups to participate in hobby
interests, to meet others with similar interests, or to experience
something pertinent to the hobby. Examples might be garden tours,
amateur radio DX-peditions, or square dance cruises.
• Inclusive tourism: tourism marketed to those with functional limits or
disabilities. Referred to as "Tourism for All" in some regions.
 Destinations often employ Universal Design and Universal Destination
Development principles.
• Medical tourism, e.g.: - for what is illegal in one's own country, e.g.
abortion, euthanasia; for instance, euthanasia for non-citizens is
provided by Dignitas in Switzerland.
- for advanced care that is not available in one's own country
- in the case that there are long waiting lists in one's own country
- for use of free or cheap health care organisations
• Pop-culture tourism: tourism by those that visit a particular location after
reading about it or seeing it in a film.
• Perpetual tourism: wealthy individuals always on vacation; some of
them, for tax purposes, to avoid being resident in any country.
• Pilgrimage Tourism: pilgrimages to ancient holy places (Rome and
Santiago de Compostela for Catholics, Temples and stupas of Nepal for
the Hindus and Buddhist, Mount Athos or Painted churches of northern
Moldavia for the Orthodox), religious sites such as mosques, shrines,
etc.
• Sex tourism: travelling solely for the purpose of sexual activity, usually
with prostitutes
• Solo Travel: travelling alone
• Sport travel: skiing, golf and scuba diving are popular ways to spend a
vacation. Also in this category is vacationing at the winter home of the
tourist's favorite baseball team, and seeing them play everyday.
• Space tourism
• Vacilando is a special kind of wanderer for whom the process of
travelling is more important than the destination.
• Wine tourism, the visiting of growing regions, vineyards, wineries,
tasting rooms, wine festivals, and similar places or events for the
purpose of consuming or purchasing wine.

DISTRIBUTION CHANNELS
Distribution channels are different types and an organisation may adopt any
one type a combination of or all the types of the distribution channels. All
this depends on the type of services being provided by the organisation. In
this section various levels of channels will be discussed:
1) Single level channel : here service is directly distributed to the
consumers. For examples Airlines directly booking the tickets for the
customers or hotels directly books rooms for the customers.
2) One level channel: it implies a single where only type or category of
middlemen is used. For example Airlines uses travel agents/ ticketing
agentsfor bookinngs for air travel. There is only one intermediary
between the service supplier and the service user:

The following diagram gives the various options for using one level channel:

Travel Agent

Ticketing Agent
SERVICE SERVICE
SUPPLIERS USERS
Tour operator

Corporate Travel
Department

iii) Two level channel: in this case the distribution of services is through
two intermediaries. For example, in the airlines, General Sales Agent (GSA)
and travel agents form two levels of distribution channel.
iv) Multi level channels :Many time more than two categories of
intermediaries are simultaneously used in service industry and this is
particularly the case in tourism and travel industry. For example, the
wholesale tour planner sells their services to travel agents and tour operators.
INTERMEDIARIES IN TRAVEL AND TOURISM INDUSTRY
Intermediaries basically play a very important role in travel and tourism
industry. They are the resources for the organisastion . They provide
important services in terms of financial support, information, and promotion.
Information, promotion, selling, financing, and risk taking are the main
functions of the intermediaries or channel members.
Intermediaries increase the selling capacity of the organisation by providing
selling services at places close to the customers, increases the geographical
coverage of the market. different intermediaries can be sold to outbound tour
market segment through tour operators. For example, tour operators can sell
the services of the carriers to the outbound tourist market, individual
travelers through travel agent. The middleman also helps in minimising the
cost of incidental services for procuring the core service. The various types
of intermediaries in tourism industry as follows.

a) Travel agents are one of the most important intermediaries in travel and
tourism industry. As per the findings, travel agents accounts account for
75% of domestic air travel and 90% of international air travel, 95% of
international tour packages, 80% of international hotel booking and of
domestic tour booking.

These travel agents are middlemen of carriers, hoteliers, tour wholesalers

etc. they get commission around 10% of service cost no charges are levied
on the customers.

b) Tour whole dealer: tour wholesaler is the organisation which plans,

prepares, markets, and administers vacation and travel packages. These
packages are usually a combination of the services of various suppliers like
carriers, hotels guides etc.

c) Tour operator is a person or organisation which operates packages

prepared by tour wholesalers. Sometimes tour operators themselves provide
ground services like local transport, guides’ etc.

d) Corporate travel managers these are in house travel departments of

large corporations. Corporate travel department provides various benefits to
the organisation.
• Reduces business cost,
• Enhanced services are provide,
• Increased purchasing power through bulk buying, and
• Maintains the level of quality.
e) Incentive Travel Planner often , potential travelers become confirmed
ones, If they are offered some concessions. For examples in govt. or Pvt.
Institutions offer leave travel commission (LTC) to make travel the
employees. For these kind of traveler there are special kind of Incentive
Travel Planners like I.T.D.C. in India.

f) Consortium: many organisations distribute their services by interacting

with other orgs. consortium is the practice of offering similar service by a
group of suppliers. For example the preferred Hotel World Wide is an
org. with a group of more than 100 hotels. The hotels booking can be
done in any of others hotel from any individuals.

g) Franchising: it is a hybrid form of entrepreneurship. A parent company

customarily grants an individual or a company the right or privilege to do
a business by using its name and by following a set of pattern of
operation over a certain period of time, in a specified space.

SELECTION OF CHANNELS AND INTERMEDIARIES

Channel decision involves long term commitment and cost for the principal
suppliers.
In this regard the time and cost are highest as compared to any other
marketing decision. Thus level of channels’ selection and selection of
intermediaries are a very critical to the success of an enterprise. The
following factors play important role in these decisions:
 Intensity of distribution desired,
 Access to end user,
 Prevailing distribution practices,
 Revenue : Cost Analysis,
 Time horizon required for development of channel,
 Degree of control desired,
 Availability of channel participants,
 Choosing the best intermediary,
  Capability of channel participant,
 Geographical coverage desired,
 Market standing of the channel participant, and
 Financial status of the channel participant, etc.

Level of channels, selection of channel member’s etc. can give results only
when smooth and professional relation with intermediates are developed and
maintained. There is strong interdependency between say airlines and its
intermediaries like GSA ticketing agents etc.. the roles and responsibilities
should be clear and specific. This Should properly spelt out in order to avoid
any chances of conflict among the organisation and its intermediaries. For
example the percentage of commissions or royalties mode of payment, credit
time etc. are decide at the initial stage it self. It is also advisable to have
contracts agreements signed in this regard.

“The decision to use middle man involves the organisation in a number of

further decisions. The first is the problem of choosing the best middleman
from the large number who are available.. but might find that a desired
distributor id not willing to accept the assignment. Or the distributor might
handle the product only if given exclusive distribution. Or the distributor
might handle the product only if it receives better financial terms than are
being offered… the organisation must follow this up by carefully
establishing the terms and responsibilities of the distributors. This is called
the trade relations mix and consists of price policies, conditions of sale,
territorial rights and specific service to be perform by each party” Philip
Kotler

COMMERCIAL VEHICLES IN INDIA

All motorised road vehicles are tagged with a licence number in India. The
licence plate number is issued by the district-level Regional Transport Office
(RTO) of respective states - the main authority on road matters. The licence
plates are placed in the front and back of the vehicle. By law, all plates are
based on the Arabic (European) script, though many states violate this by
writing the numerals in the local script. Other guidelines include having the
plate lit up at night and the restriction of the fonts that could be used. In
some states such as Sikkim, cars bearing outside plates are barred from
entering restricted areas.

Plates for private car and two-wheeler owners have a white background with
black lettering (e.g., DL05 M 5399). Commercial vehicles such as taxis and
trucks have a yellow background and black text (e.g., DL 1Y 1985).
Vehicles belonging to foreign consulates also have the same yellow and
black colouring. The President of India and state governors travel in official
cars without licence plates. Instead they have the Emblem of India in gold
embossed on a red plate.

Since June 1, 2005, the Government of India has introduced High Security
Registration (HSR) number plates which are tamper proof. All new
motorised road vehicles that come into the market have to adhere to the new
plates, while existing vehicles have been given two years to comply.
Features incorporated include the number plate having a patented chromium
hologram; a laser numbering containing the alpha-numeric identification of
both the testing agency and manufacturers and a retro-reflective film bearing
a verification inscription "India" at a 45-degree inclination. The numbers
would be embossed on the plate, rather than being painted for better
visibility. The term "India" is to be in a light shade of blue.

PERMITS FOR GOODS VEHICLES

Goods Carrier Permits: Such permit is granted under Section 79 of the
Motor Vehicles Act, 1988, to a goods vehicle operating within the state.
Permits granted to a particular vehicle for carrying a particular load has to be
plied for that particular area only.

Counter Signatures of Goods Carrier permits:

These are the permits which are initially issued by one state and later on
endorsed in another state by the concerned State or Regional Transport
Authority under section 88 of Motor Vehicle Act, 1988. In view of the Delhi
Government Notification number F. PA/JCV/OPS/Tpt./1613/05/1447 dated
5th January 2006, counter signatures are not being done under section 88 of
Motor Vehicle Act, 1988 for those goods vehicle registered in other states
and having a gross vehicle weight upto 7500 kg. if not running on clean fuel.
National Permits: National permits are issued to goods vehicles to enable
them to go outside the home state. National Permit is issued for a minimum
of four continuous states (including the home state) under rule 86 & 87 of
Central Motor Vehicles Rules, 1989. For obtaining such permits the
maximum age of a particular vehicle should not exceed 12 years. However,
maximum age in case of a multi-axle vehicle should not exceed 15 years.
For the issue of National Permit, applicant has to apply on form 46 and 48
alongwith other formalities

PERMITS FOR PASSENGER VEHICLES

Auto Rickshaw and Taxi permits: Such permits are issued by MLO (AR)
Burari for carrying passengers to various places within Delhi. Fare is
charged as per the fare meter mounted on such Vehicles & as determined by
STA. Prevailing fares are as under:-

a) Auto-Rickshaw-Rs.8.00 for first kilometer and thereafter Rs.3.50 for

every additional kilometer.

b)Taxi-Rs.10.00 for first kilometer and thereafter Rs.5.00 for every

additional kilometer.

Maxicabs:
Such permit are issued by STA to vehicles carrying passengers to various
parts of Delhi on a fixed route and as per the fare fixed by the STA. Total
seating capacity of such vehicles should not exceed more than 12 excluding
the Driver.

Phat Phat Sewa : The operators using the three wheeled Harley - Davidson
engine vehicles were issued Phat Phat Sewa permits.
These vehicles have since been replaced with vehicles having maximum
seating capacity of 9. They ply on a fixed route and charge the fare as per
S.T.A. approval.

Eco Friendly Sewa: Transport Department has issued permits to battery

operated 3 wheeled vehicles having seating capacity up to 10.

CONTRACT CARRIAGE BUSES PERMITS (CHARTERED BUSES):

This is the most common type of permit used for hire and reward purpose.
The permit holder can operate under a contract with his client for a fixed
destination within Delhi or outside Delhi. For this an agreement should be
executed between the clients and the operators and the list of passengers
should also be available with the driver of bus. The permit holder cannot
pick passengers other than those mentioned in the list. Such type of buses
are also known as Chartered Buses. These permits are issued under section
74 of Motor Vehicles Act, 1988. The applicant has to apply on form PCA
alongwith other formalities.

STAGE CARRIAGE PERMITS:

State Transport Authority announces scheme for grant of stage carriage
permit from time to time, depending upon the requirement of buses on
different route of the city. These permits are issued under section 72 of
Motor Vehicles Act, 1988. The permit holders can operate their bus under
their allotted routes for picking up passengers from one place to another. All
DTC and private stage carriage buses come under this category. The fares
are fixed by STA. Prevailing fares are as under:
a) Upto 4 Kilometeters Rs.2.00
b) From 4 to 8 Kilometers Rs.5.00
c) From 8 to 12 Kilometers Rs.7.00
d) From 12 to 16 Kilometers & above Rs.10.00
e) For Green Line and LTDs of DTC Rs.10.00
TEMPORARY PERMITS : A temporary permit is issued by STA under
Section 87 of Motor Vehicles Act, 1988 to transport vehicle for a limited
period, enabling the vehicle to go out side Delhi for the following reasons:-

a) For the conveyance of passengers on special occasions such as to and

from fairs and religious gatherings, or
b) For the purposes of a seasonal business, or
c) To meet a particular temporary need, or
d) Pending decision on an application for the renewal of a permit.

The applicant has to apply on form P. TEMP. A. DLY/DLZ (ALL India

Tourist Permits cab): This permit is given for motor cabs having seating
capacity of five. The colour of the cabs are permitted as white only. The
applicant for this permit should have an office having telephone at suitable
tourist passengers booking place .The applicant should have authorised
parking place to park these vehicles and adequate financial resources to
purchase the vehicle. The road tax\passenger tax of vehicle is paid at state
borders. DLZ permits are given to luxury cars. RENT-A-CAB PERMITS:
With the increase in no. of multinationals Companies & tourists
requirements Rent-A-Cab scheme was launched in India in 1989. Under this
scheme the passenger drives the vehicle himself & fare is charged on no. of
days the cab is used. The applicant should have a 24 hrs. accessible
telephone, adequate parking space, experience of passenger transport
business. The applicant in addition should have a fleet of 50 cabs of which
50% should be air-conditioned. The permit of these schemes are also valid
throughout India provided the passenger taxes were paid to the
corresponding states

INSTITUTION/SCHOOL BUSES:
The vehicles of Educational Institution registered under the Societies Act
1960 (21 of 1960) are issued contract carriage permit by STA. These
vehicles are also exempted from road tax. For identification these vehicles
are painted in golden yellow paint. Special provisions have been
incorporated in Delhi Motor Vehicles Rules, 1993 for additional safeguards
in respect of the safety of the children.
ALL INDIA TOURIST PERMIT (AITP):
This permit is given to luxury buses which have white colour with a blue
ribbon of five centimeters width at the center of exterior of the body and the
word “Tourist” shall be inserted on two sides of the vehicle within a circle of
sixty centimeters diameter. A tourist permit shall be deemed to be invalid
from the date on which the motor vehicle covered by the permit completes 9
years in the case of Motor Cab and 8 years where the motor vehicle is other
than a motor cab, unless the motor vehicle is replaced by another, the latter
vehicle shall not be more than 2 years old on the date of such replacement.
The seating layout shall be two and two or one and two or one and one on
either side, all seats facing forwards. The Vehicles should also have other
facilities like public address system, drinking water, push full back seats,
fans, curtains, a separate driver cabin etc. The applicant has to apply on form
45 & 48 along with other formalities.

CASE ANALYSIS OF BPO INDUSTRY

Inefficient vehicle routing, ambiguity over transportation bills, rising
transportation costs, real-time control of vehicles, and pressure to increase
call engagement is affecting the bottom-line of BPO outfits. One solution
they are looking at: vehicle routing optimisation software.

The biggest challenge for BPO is how to arrange the pickup and drop of
4,500 employees who work in 48 shifts in a day. After HR and telecom,
transportation is the third-largest expense head in a BPO outfit, amounting to
17 percent of total expenses and directly impacting its revenues.
Additionally, a cab carrying four to five employees that reports 30
minutes late for duty costs the company $184 (at the rate of $80 per
hour). Factors such as accuracy of employee pickup and drop, on time
reporting and safety of employees ought to be measured by BPOs as they
directly affect the bottomline. For example, the accuracy of employee
pickup and vehicles reaching on time should be 97 percent. Wrong pickups
directly affect revenues.
• Hughes BPO Services prepares a roster (route plan) based on the
employees’ locations that are given to the driver. This process gets
further complicated if an agent falls ill, for then an immediate
arrangement has to be made to pick up another employee as a
replacement. Now consider this: a call centre is expecting calls to
 peak at 7 pm because its client has advertised a new scheme in the
papers, and instead of 100 they need 150 agents to handle the call
engagement. An automated vehicle route optimisation solution
completely automates the entire roster plan, then maps the shortest
route the vehicles can take.
• Cab utilisation ratio Cab (vehicle) utilisation was poor in most BPOs
because they have manual vehicle routing systems in place. In an 8-
seater cab, the occupancy was found to be in the range of 2-3 people,
leading to high running costs—Rs 4,000-6,000 per employee per
month. Sharma says, “Ideally, the cab utilisation rate has to be in
the range of 4-5 per cab. BPO firms should look at investing in a
vehicle route optimisation solution if their cab utilisation rate is less
than four.

The routing should be such that there is maximum occupancy with minimum
travel time. Optimise that route The vehicle route optimisation solution
market has come into its own. It is a Rs 2 crore market, with companies
such as Wipro Spectramind, Converges, Dell, Vertex, Hughes and American
Express using these solutions.

At present over 450 BPOs/call centres are operating across the country and
over half a million employees are working in this sector. As nearly 30,000 to
35,000 vehicles are plying on Indian roads to meet requirements of this
sector, transportation is the third major expense area of the BPOs.
 FACTS & FINDINGS
Travel and tourism is a true pioneer of international human interaction and
trade. But this ancient human activity acquired the label of tourism only in
modern times. Now tourism is acting as a catalyst of development process at
the national and at the global levels. In India activities related to travel and
tourism dates back to ancient times. Here travel for pilgrimage, visiting
friends and relatives, attending fairs and festivals or trade is most ancient
tradition. Even during vedic period religious travel was prevalent.

The word “Tirtha” meaning pilgrimage occurs in the “Rigveda” at about

eight places. There are a number of places where religious tourism is the
backbone of the economy. Development of tourism is responsible for
development of physical infrastructure, which is needed for development of
all other activities.

Cultural as well as human development includes development of languages,

literature, built heritage, dance, drama and local arts and crafts etc. Another
aspect related to tourism development is social development. Through
tourism, intermingling of two different societies take place which creates
cultural and social understanding. Tourism opens rigid societies to outside
world and promotes education and broadmindedness.

Women empowerment also an offshoot of such cultural interactions.

Tourism is also responsible for creation of employment, flow of money from
haves to have not, increase in the demand of local talents and creates a
multiplier effect in the whole economy which helps in eradicating poverty.

Tourism is not only a major social phenomenon of the modern society with
enormous economic consequences but also the world’s largest export
industry, which accounts for about 8% of the total world’s exports, more
than 30% of international trade in services, 10.7% of the global work force
and about 12% of world gross domestic product. It is also dubbed as the
‘largest smokeless industry’ and contributes towards preservation of clean
environment.

Looking back at the trend in the growth of international tourism we see that
in the 1950s the total arrival was only 25 million, generating receipts of $
2.1 billion. The absolute number of arrivals multiplied two and half times
between 1960s and 1970s. And thereafter it has almost double every decade.
The receipts have grown even faster, $18 billion in 1970 increased to $ 105
billion in 1980. Today it is well known that as a contributor to the global
economy tourism has no equal. Going by the figures we can say that
advantage tourism is -
- Employs 10.6 percent of the global workforce;
- Contributes 10.2 percent to world’s gdp;
- Generates tax revenues of $655 billion;
- Is the largest industry with $3.4 trillion gross output;
- Accounts for 10.9 percent of all consumers spending;
- 10.7 percent of capital investment in the world; and
- -6.9 percent of all government spending.

With all this growth, the total arrival of tourists represents only about 7% of
the potential and capable travellers of the world’s population. Therefore, the
future growth potentials are phenomenal. Travel and tourism is said to be the
best industry of the 21st century. Even the microsoft head bill gates has
mentioned tourism as one of the three sectors to merit priority attention in
the future. The future projections given by the world tourism and travel
council are extremely impressive.
Travel and tourism in India is an integral part of Indian tradition and culture.
In the olden days, travel was primarily for pilgrimage - as the holy places
dotting the countryside attracted people from different parts of the vast sub-
continent. People also traveled to participate in melas, fairs and festivals in
different parts of the country. In such background developed a cultural
tradition where 'atithi devo bhava' (the guest is god) and 'vasudhaiva
kutumbakam' (the world is one family) became bywords of indian social
behaviour. From ancient time, the rulers in different parts of india built
luxurious palaces, enchanting gardens, marvelous temples, grand forts,
tombs and memorials giving expression to the depth of one's feelings and
sentiments. These remain today as testimony to the rich cultural heritage of
this land. The beauty of india's cultural heritage and the richness of the
nature's endowments make india a tourists' paradise. The enthusiasm to visit
these places and explore new ones continues.
Pandit jawaharlal nehru's oft-quoted remark : "welcome a tourist and send
back a friend" has been the essence of india tourism approach in the post-
independence era. Tourism is seen as an important instrument for national
integration and international understanding. Whatever may be the objectives
of tourism, even in those initial yeas of economic planning, the importance
of creating the infrastructure was recognized. The five star hotel ashok, the
pride of the government in those days, came up in the 50s.

Tourism industries are made up of groups of companies, which produce the

same or allied products and services. In most of the cases there would be
product differentiation.

While in some countries industries producing goods and services for tourists
are clubbed with other commercial and industrial activities, in others,
standard industrial classifications are established according to homogeneous
groups of industrial activities.

There are a large number of primary tourist enterprises. Most of these

enterprises are dependent on tourism for their survival. Examples of such
enterprises are as follows :
(a) Accommodation enterprises like hotels, motels, holiday homes, youth
hostels, guest houses, camping grounds. Inns, etc.
(b) Food and beverage services such as restaurants, cocktail bars, coffee
shops, tea houses, coffee houses etc.
(c) Transportation services including hire-cards, taxis, buses sigh-seeing
vehicles, special tourist trains, ropeways, ferries, cruise-boats, airlines.
(d) Travel agencies
(e) Tour operators
(f) Enterprises dealing with providing interpretation services, guiding
services, escorting services.
(g) Entertainment services such as sports programme, exhibitions, theatres,
cinemas, nightclubs, dance-halls theme parks, and racing, casinos and
gaming facilities.
(h)Enterprises manufacturing art products, handicrafts, souvenirs,
guidebooks, etc.
(i) Shopping establishments selling souvenir items.
(j) Duty free shops selling items of tourist interest.
(k) Agencies dealing with promotion and development of tourism financing
of tourism and providing insurance cover.

The Company of tourism functions as the nodal agency for development of

tourism in the country by coordinating and supplementing the efforts of the
state/union territory governments, catalyzing private investment,
strengthening promotional and market efforts and in providing trained
manpower resources.

Tourism and its growth in any country depends to large extent on that
country’s:
• Economic Environment
• SOCIAL ENVIRONMENT

During the last decade india has witnessed a number of changes in the
economic and social environment and it has clearly shown its impact on the
tourism scenario of the country.
Process of liberalization begun in india in early 90’s and has shown its
impact on the indian tourism industry. Thee has been a number of significant
changes in the indian tourism industry:
• Liberalization brought improvement in the quality of services offered,
because of increased competition in the market and shifting of focus towards
consumer. improvement has been witnessed in fields like :-

1) Information and travel assistance

2) Transportation

3) Hospitality etc.
• Liberalization has also opened channels of information to the Indian
consumer; the consumer came to know about the superior quality
products and services available in the international tourism market.
And has therefore started demanding same services matching the
international standards from the Indian tourism industry.
• Due to increased capital inflow and increased economic activity the
income level among different sections of the society has increased
significantly (but in a disproportionate manner) so they are in a
position to demand and pay for best services possible.

A number of changes have also taken place in the social environment of

the country which has shown its clear impact in the tourism
industry also.
• Changes have taken place in the family structure from joint family to
nuclear family structure. This has given more independence to the
families comprising of basically 2-4 members. Because of this newfound
freedom their urge to travel and enjoy their life has increased
tremendously.
• Shifting focus from savings to consumption because of the consistent and
increased level of income, less responsibility and availability of cheap
credit has changed mindset of consumer from higher savings to more
consumption. People have realized the importance of spending on
themselves rather than saving everything for their offspring, the
repercussion of which can be easily seen in the tourism sector, which is
now growing at an unprecedented rate.
 SAMPLE CONTRACT
To,
M/s
Subject:- Hiring of DLY Cars .
Sealed rate quotations are invited for hiring of DLY Cars (as per list
enclosed). If you are interested to undertake the contract on the terms and
conditions specified in para 5 below, you are requested to send you
quotations in sealed cover marked ‘quotations for hiring of DLY Cars. The
sealed cover containing the quotations should be addressed to the
undersigned by the name and sent to Room No. 910, Paryavaran Bhavan,
CGO Complex, Lodi Road, New Delhi – 110003.

2. The quotations should be accompanied with an earnest money Rs.

10,000/- (Rupees ten thousand only) in the form of demand draft of any
nationalized bank drawn in favour of the Pay & Accounts Officer, Company
of Environment and Forests, New Delhi – 110003 without which the
quotations will not be considered . No over-writing is allowed in the
quotations.

3. The quotations will be accepted up to 3.00 p.m. on 5.9.2005 and the same
will be opened at 3.30 p.m. on the same day at R.No. 910, Paryavaran
Bhavan, CGO Complex, Lodi Road, New Delhi – 110 003. An authorized
representative of your firm can remain present at the time of opening of
quotations.
Terms and conditions :-
(i) The firm bill have to provide nos. of DLY Cars and models as per
requirements of the Company for which for quotations are accepted
by the Company.
(ii) In case the firm fail to provide of DLY Cars on a particular day on, the
vehicle will be hired by the Company from the open market from
authorised services taxi stand, the difference between the rate of the
firms accepted by the Company and the market rate on which the
vehicle is hired from the authorised taxi stand will be
recovered/adjusted from the bills of the firm due for payment by the
Company .
(iii) In case of default on the part of the firm to provide requisite number of
cars for more than ten occasions during the contract period, the
contract will be terminated and awarded to another firm at the risk and
cost of the defaulting firm.
(iv) For out station duty the vehicle will have provided at the short notice by
the firms
(v) The successful tenderer will be required to furnish a security deposit of
Rs. 10,000/- (Rs. ten thousand only) within 10 days from the date of
acceptance of his tender. The security deposit shall be in the for of
fixed deposit, receipt drawn on any nationalized bank in favour of Pay
& Accounts Officer, Company of Environment & Forests, New Delhi
– 110003. The security deposit shall be refundable after the successful
completion of the contract.
(vi) The car would be insured in all respects by the firm. In case of any
accident or theft etc. all the claims arising out of it will be met by the
Agency and this Company shall not be liable in any matter
whatsoever
(vii) The car with the Driver would be placed at the disposal of this
Company as and when required. This Company would be free to use
the hired taxi in any manner for carrying officials.
(viii) In case the car provided to this Company breaks down or arrive late,
during the period of hire, the firm will immediately replace it with
another car. In case firm fail to make arrangements, Company will
hire car from market and actual expenses incurred on this account by
Company, will be deducted from the subsequent bill of the firm.
(ix) In case DLY Car do not report in time, a penalty of Rs. 1000/- per day
(8 hrs) per car will be levied on the agency which will be deducted
from the subsequent bill.
(x) DLY Taxis are in good working condition. The firm will keep the car in
neat and the seat covers should be in immaculate condition.
(xi) The DLY Taxis should not be more than two years old in respect of
Diesel and three year old in respect of the petrol.
(xii) The firm should have at least two fixed telephone lines at office
operational 24 hours and all drivers should be equipped with mobile
telephone facilities for proper communication.
(xiii) The decision of the Company shall be final and binding on the firm.
The Company also reserves the right to reject any quotation in full or
in part without assigning any reasons thereof.
(xiv) No dead mileage will be permitted. The meter reading would start from
Paryavaran Bhavan.
(xv) There should not be change in deployment of DLY Taxi and driver
without prior permission of the Competent Authority in the Company.
In case the car/driver is changed without prior permission, no payment
will be made for the same.
(xvi) The Drivers of the DLY Taxi should be well conversant with the Delhi
routes.
(xvii) DLY Taxi should comply all pollution control regulations and norms.
(xviii) Firm should meet all statuary requirements like minimum wages, etc.
Income –Tax, Service Tax, etc. Documents in this regard may be
enclosed with the quotation.

The HOD, MOEF reserves the right to reject any or all the tender without
assigning any reasons thereof.
(_________________)
Transport Head