Let’s be honest – the tour operator business is highly competitive as companies try to get a large share of the international and domestic markets they operate in. In order to better navigate the landscape, you need to understand where you stand in that market.
We all know that a tour operator is one who packages key components (or all) of a trip, markets it, sells it to a traveler or tourist, and handles the entire tour operation.
But do you know exactly which type of tour operator you are?
Having clarity on this question will help you identify key partners to work with (like DMOs or hotels) and make better business decisions overall. As a result, you’ll be able to curate better tour packages and run your entire tour operation smoothly, efficiently and successfully.
This is why we’ll cover the different types of tour operators below (plus – we’ve attached a handy infographic at the end for your reference).
So, let’s get to it – which type of tour operator are you?
Types of Tour Operators
There are five main categories of tour operators that you could fall into: inbound tour operators, outbound tour operators, domestic tour operators, receptive tour operators, and ground tour operators. Let’s find out which one of these five you fall into.
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Inbound Tour Operators (AKA Incoming Tour Operators)
Inbound tour operators bring tourists into a country as a group or via individual tour packages. They handle all arrangements in the host country; and the types of tours they curate are specifically for non-residents touring the country.
Let’s look at an example.
If a group of Italian tourists want to explore Germany, then the tour operator in Germany who handles all the arrangements for the tour is known as an inbound tour operator. So, inbound tour operators are locally based and offer tours that cover their own country.
Most inbound tour operators hire local travel agencies for things like airport pick-up and drop-off; form partnerships with local hotels and businesses; and have key partnerships with other types of tour operators (who help them run tours on the ground).
Outbound Tour Operators
Unlike inbound tour operators, outbound tour operators work within their countries to take travelers to other countries. They are tour operators who market their tours for international destinations, either for business or leisure travel.
Let’s say, for example, that a group of Canadian tourists are planning a trip to Italy. Then the tour company in Canada that handles all the ticket reservations and hotel bookings is the outbound tour operator.
To further simplify things, outbound tour operators design and package tours for tourists in their home country to visit an international destination.
Now, most outbound tour operators choose to specialize in specific destinations: either a destination that is “trending” or one in which they have particular expertise and distribution partners. They often work with other tour and activity providers in the destination when designing their travel packages.
Domestic Tour Operators
Domestic tour operators are those that put together inclusive tour packages and sell them to domestic travelers. In other words, they are tour operators who provide travel packages and tours within a tourist’s native country.
Domestic tours usually involve residents of a specific country traveling within that country. They can visit national parks, scenic areas, hospitality tours, city tours, train tours, etc. Since there are many options that tourists can choose from, domestic tour operators often combine several tourist components into an inclusive package that they can sell to travelers within the boundary of the country.
Domestic tour operators form key partnerships with other tour and activity providers in order to attain a larger share of the domestic tourism market.
Receptive Tour Operators (RTOs)
Receptive Tour Operators (RTOs) provide tourism products to tour operators in other markets (as a business-to-business relationship).
Specifically, RTOs sell tourism products, whether they are sold in a tour package or alone, to tour operators and/or travel agents. They are essentially wholesalers and they don’t sell directly to the public.
So how do they make money?
They add a percentage rate (or fee) to the final price that the tour operator is selling the product or service for. When a travel agent buys the tour product, they incur the RTO’s fee in the final price. In that sense, RTOs do not charge commission. They simply market the tourism product and add their fee to the final product price.
Another key characteristic of RTOs is that they are experts in the region they operate in; and know much more than just the hotels and types of tourism activities that are offered in the region. As such, RTOs to help other tour operators identify things like hotels, services and design itineraries in regions they are not familiar with.
Ground Tour Operators
Ground tour operators operate domestically. They are however different from domestic tour operators in that they organize tours for incoming tourists on behalf of an inbound tour operator (and sometimes, outbound tour operators).
Let’s look at an example to better understand the role they play.
Italy will be the destination in this example. So, here’s how it works:
An inbound tour operator designs and promotes beach holidays, adventure, and heritage tours in different parts of Italy. Problem: the inbound tour operator doesn’t have offices across Italy. The inbound tour operator also doesn’t have close contacts or partnerships with suppliers and key agents in certain parts of the country. So, they consult with ground tour operators.
It is the ground operator that will handle the incoming tourists at those various destinations around Italy. They oversee land arrangements; negotiate with and contract local vendors; coordinate arrivals and departures; plan and put together local tour packages; escort tourists; provide market data; and cost and price tour packages. Overall, it is their duty to ensure that the entire trip goes smoothly based on the package tours and agreements.
You may know ground tour operators as “handling agencies” because they organize tours for incoming tourists on behalf of overseas tour operators.
Back to the question we asked at the very beginning: which type of tour operator are you? Now that you’re better informed to answer that question, you can also start thinking about ways to improve your distribution and marketing channels based on that answer.
The next step is to figure out who your key partners are and strike up deals to propel your business forward.
You might also like:
- How to Start a Tour Company with (Almost) No Money
- How to Conduct Market Research for Tour and Activity Companies
- How To Start a Walking Tour Business
- 4 Questions to Help You Design the Perfect Tour