Operating a tour company proved to be more expensive and harder to get off the ground than Hale thought it would be. To sell the tours nationally, he had to advertise. The company has grown steadily, however, with the rate faster now than at the beginning. Currently, the company handles more than 2,000 customers a year and has a staff of 15 including 10 tour leaders. The remaining staff are in reservations, marketing, bookkeeping, and equipment.
Hale himself plans the itineraries but confessed, "I didn't know anything about the travel field. I didn't even know what a tour operator was. The thought of a motor coach tour of Europe sickens me."
Backroads operates one to ten day bicycle tours, year round. Offering bikers "pampered camping," the tours are deluxe and feature first class hotels, country inns, and mountain resorts.
"I really like what I do," Hale asserted, but he only recommends starting up a tour operation to a small number of people. There are obstacles at every corner. It takes someone with a fair amount of long term outlook to get over the short term frustrations. You have to plug away. There are financial obstacles. You don't make any money for a long period of time until you get to a size customer base to support the operation. Like any business, you've got to pay your dues."
While Hale launched a successful tour company based on his special interest, other people may do so by virtue of a special way of selling.
'If it was just Jeffrey Joseph opening another tour operation, I'd say it was a thankless task, very difficult to do," said Joseph when he was about to open his company Spa Finders, which specializes in selling packaged spa vacations through a catalog. There are so many companies, and so many well financed ones already established. This is not an easy field to get into. Yet there are areas of travel that have hardly been touched special markets, special ways of selling. That's where I feel I can come in I won't have thousands of competitors.
"I said to myself, 'I can run a big company, and if I am working that hard, I should be seeing more of the profits in my own hands.' The problem always was, what to do?"
Joseph was confident of his own success. "It's not the product that will be different; there are products for everybody already. It is the way of selling. Essentially, the method of marketing tours has been unchanged companies either sell directly to groups or through travel agents." His strategy was to reach consumers directly.
To start up your own tour company, there are five key areas to consider, according to Raymond M. Cortell, whose early tour operations experience came from his father's tour company Europacar (which mushroomed into the Cortell Group and was family owned and operated until it was swallowed up by a high technology company) and who has launched several new ventures. The five areas are (1) product, (2) customer target, (3) promotion, (4) distinction, and (5) pricing.
- Product: Consider the destinations chosen; suppliers selected; type of travel, such as cruises, educational tours, or fly/drive trips; and class of product, such as deluxe or budget.
- Customer target: Tailor the product to a demographic characteristic such as income or geographic location (a trip to Hong Kong can be a weekend shopping spree to a West Coast traveler but a two week exotic Orient adventure to someone from Boston). Consider the "psychographic" characteristics of potential customers (are they, for example, retired, yuppie, or single).
- Promotion: Plan not only the theme and execution but also the dollar amount in relation to size and frequency of the program. Plan the method, such as advertising, direct mail, or personal sales calls.
- Distribution: Get the product out to consumers. Even consider items like the physical aspects of the brochure (4 by 9 inch versus 8 by 11 inch, for example) and the kinds of distribution channels to be used, such as travel agents, clubs, or consumer direct marketing.
- Pricing: Position the product in relation to both the psycho graphic characteristics as well as the competition. The idea is to maximize profit without crossing the "price breakpoint," at which you price yourself out of the market. Pricing is critical to marketing strategy because it is one of the key decision factors consumers use to choose a tour product. The difference in price must be substantial enough to capture the target market's attention and motivate a shift in sales, while still leaving enough margins to make a profit. You must be able to sustain the price over a period of time.
You can also get tripped up with distribution. More importantly, with so many companies failing, agents are skittish about linking up with an unknown, unproven supplier. And the cost of advertising directly to the consumer in order to drive customers to the agent can be prohibitive.
Tour operators are experimenting with alternate forms of distribution, such as computer based shop at home services like CompuServe and Prodigy (a joint venture of IBM and Sears). Cortell himself is developing a company (TravelFax) that is aimed at reducing operators' cost of distributing brochures to agents by using fax linked to a computer database.
Newcomers can surmount many of the obstacles by focusing in on specific niches special interests where the main purpose of the trip is not the destination but a particular activity or interest. Specialty markets are more defined, easy to reach (through clubs and specialty publications), and more committed to travel.
'The specialty traveler is willing to pay more for the special features of a tailored itinerary," said Ann H. Waigand, who publishes The Educated Traveler Newsletter.
