A brief discussion on price-cutting competition in the travel agency industry
[Abstract] As an emerging industry, the travel agency industry has experienced some abnormal phenomena in marketing competition due to its own characteristics and immature internal mechanisms. , the most prominent of which is price-cutting competition. This article proposes a series of non-price competition strategies based on analyzing the causes and harmfulness of price-cutting competition.
[Keywords] Travel agency industry; price-cutting competition; non-price competition
In the fierce market competition, marketing competition is a necessary means for enterprises to win market competition. Competition in marketing is essentially a conflict between enterprises in market operations in order to obtain more economic benefits based on products and with the basic goal of winning customers. This kind of conflict is often reflected in the price of goods, and price has become an important means of market competition. In order to gain more market share, companies often engage in marketing competition around price. The so-called price-cutting competition refers to competition in which companies simply reduce prices and give profits in order to improve product trading conditions and increase product sales.
1. Price-cutting competition in the travel agency industry in recent years
As an emerging industry, my country’s travel agency industry has begun to take shape after the development since the reform and opening up. Industrial scale and shape. Before 1978, there were only two travel agencies in my country that mainly focused on political reception - China International Travel Service and China Travel Service. They were not enough to constitute an industry, and they did not have an economic nature. In 1980, China Youth Travel Agency was established, which started the monopoly operation of my country's travel agency industry. In 1984, the National Tourism Administration decentralized tourism outreach rights. In 1988, the number of travel agencies in my country soared to 1,573, completely breaking the industry monopoly. Since then, more and more people are realizing the attractive development prospects of the travel agency industry. Due to the low barriers to entry in the travel agency industry, and more importantly, before the introduction of the new "Travel Agency Management Regulations" in 1996, the number of travel agencies was less than 5,000, which was not particularly large. The market was in a state of short supply and the competition was not too fierce. Laws and regulations are not perfect enough. Therefore, travel agencies have relatively high profit margins and have become a well-known "high-profit" industry. Lured by its high profits, a wave of "private travel agencies" has set off across the country, and travel agencies have become a hot spot for investment in various industries.
In recent years, the number of travel agencies has continued to increase, and the competition in the tourism market has become increasingly fierce. In order to compete for market share, price reduction is the main or even the only means to compete for customers. Some travel agencies use low prices to attract tourists and attack competitors, and their competitors retaliate with lower prices. As a result, the prices of travel agency products in the tourism market are getting lower and lower, and various travel agencies are cutting prices. The misunderstanding of price-cutting competition has caused the travel agency industry to be in a vicious cycle of disorderly competition. Regardless of domestic tourism or international tourism, the phenomenon of price-cutting competition is very common, and there are even "zero tour fees" and "negative tour fees". In the winter of 2002, the Shanghai tourism market suddenly experienced a strong "Hainan Double Flight" price reduction trend. Since mid-December, its prices have continuously exceeded the 1,600 yuan, 1,500 yuan, and 1,400 yuan mark, and even fell below the industry recognized bottom line of 1,300 yuan. . You must know that a one-way ticket to Hainan costs 1,520 yuan. It was later adjusted, but it still hovers between 1,360 and 1,400 yuan. The reason for this price war is that the number of passengers dropped sharply in the off-season. In order to maintain market share, airlines increased market promotion efforts. Some powerful travel agencies in Shanghai took advantage of the special "charter flight" policy to obtain air tickets at the lowest "charter flight price". At the same time, they reached unanimous agreements with hotels, fleets, scenic spots, and travel agencies in Hainan, and all parties shared profits, which led to this round of Unprecedented "low price" war and Hainan tourism boom. Since entering 2006, price-cutting competition still occurs from time to time. In early May, an international travel agency in Wuhan launched four low-cost two-way travel routes, which attracted people's attention and left other travel agencies in the cold for a while. In order to regain the lost market, several major domestic airlines quickly formed an "alliance" with other outbound agencies in Wuhan.
With the support of several major airlines, many travel agencies in Jiangcheng quickly launched relevant routes at lower prices, and the price war in Wuhan's tourism market began. At the beginning of June, the travel agency once again launched a price reduction card - the price of double flight tours to Guilin, Zhangjiajie, five cities in East China and other cities dropped by more than 400 yuan, and the price of double flight tours to Shenyang and Dalian was even reduced by 1,000 yuan. In response, other outbound travel agencies in Hubei Province have once again lowered the quotations of several travel routes to a level that is more than ten yuan to hundreds of yuan lower.
Travel agencies’ profit margins are getting lower and lower in the whirlpool of price-cutting competition. According to relevant statistics, the average profit margin of travel agencies nationwide was less than 3 in 2000. By 2002, the entire industry was experiencing losses. Until now, the travel agency industry is still a "low-profit" industry.
2. Reasons for price-cutting competition in the travel agency industry
1. The supply of travel agency products exceeds demand. There are more than 13,000 travel agencies, large and small, in my country. Although the number of travel agencies per capita is not large, consumer demand is not large. Moreover, travel agencies are mainly concentrated in economically developed coastal areas, and the regional distribution is extremely uneven. Therefore, relative to the tourism market, the number of travel agencies is still relatively large. This is directly related to the cost of the travel agency industry. The fixed costs of a travel agency are relatively low. It does not cost much to rent a store, provide faxes and telephones, and hire a few employees. However, the variable costs as the main cost body are directly proportional to the business volume. , although you can make a fortune when the business volume is large, you can barely support it when the business is sluggish. This makes many weak travel agencies just maintain bleak operations, and the market rules have lost their due power. Because of this, product supply exceeds demand, which is the direct cause of price-cutting competition.
2. Seasonality and non-storability of travel agency products. Since the sales of travel agency products are obviously divided into low and peak seasons, and because travel agency products mainly meet customer needs through services, travel agency products that combine tourism resources, facilities and services can only exist when tourists purchase and consume them. That is, it cannot be stored, which means that the opportunity cannot be missed and the time will never come again. Therefore, when the opportunity came, everyone rushed to it. Almost all travel agencies responded with various price reductions, and the response was far beyond the scope of normal seasonal discounts. This was the trigger of price reduction competition.
3. The products of travel agencies are repetitive and similar. Many travel agencies in our country have not done enough in product development and lack high-quality products. Most of the products are commercial products, and there are only a few familiar tourist routes that everyone is selling. This is mainly due to the lack of entry mechanisms such as trademark rights and patent rights for travel agency products. When a travel agency develops a marketable product, many small and medium-sized travel agencies immediately rush to imitate it. This is the fundamental reason for price-cutting competition.
4. The quality and level of travel agency managers are low. At present, some managers of many medium and small travel agencies, especially middle-level management cadres, do not have a deep understanding of the connotation of marketing competition in the market economy and cannot master high-level competitive strategies. They can only adopt simple price-cutting competition strategies.
5. The scale is beginning to take shape and order is chaotic. After years of hard work, the industry management of travel agencies has initially achieved scale. However, due to the certain gap between macro-control, rules and regulations, and penalties compared with developed countries, the market order of my country's travel agencies is still in a relatively chaotic stage. This is an external reason for price-cutting competition, and it is also an area beyond the reach of travel agencies.
3. The negative impact of price-cutting competition on the travel agency industry
In a sense, price-cutting competition is conducive to purifying the current situation of many, small, scattered, chaotic and weak travel agency markets. , creating a number of large enterprises. This kind of price-cutting competition can also bring certain benefits to tourists.
However, as an economic entity with independent accounting and responsibility for its own profits and losses, it is impossible for travel agencies to truly achieve "zero tour fees". In order to maintain profits while reducing prices, we can only adopt the method of "lowering prices first, then reducing services", that is, lowering catering standards, reducing tourist attractions, compressing travel time, increasing shopping times, etc., or relying on various rebates and head fees To act as profit margins, some companies even deduct travel insurance premiums to increase revenue. Some powerful travel agencies can also make certain profits from charter flights, while small travel agencies can only rely mainly on shopping.
"Businesses that cannot access the Internet are at risk of bankruptcy," this was the warning issued by British Prime Minister Tony Blair when he visited Cambridge technology companies. Maybe these words may seem a bit alarmist now, but in the 21st century based on information technology, they will become an indisputable fact. In particular, long-distance, multi-batch, small-amount transactions such as the travel agency industry require the advantages of high speed, high accuracy and low operating costs of e-commerce. At present, many travel agencies in our country still stick to one fax and two telephones to do business. They are still flipping business advertisements and sending fax quotations. Their management has not fully realized the huge impact of the Internet on travel agencies, so they do not spend too much time. Spend more energy on network construction. The Chinese tourism market in the new century requires travel agencies to efficiently and accurately meet the needs of tourists from China and around the world. Travel agencies must provide consultation, ticket sales, group grouping, and travel for tourists scattered thousands of miles away in just a few minutes. Waiting for services, without computers, the operation of travel agencies will become empty talk. The computerization and networking of travel agencies' business methods have been put on the important agenda, regardless of food, accommodation, transportation, travel, shopping, entertainment, large, medium and small travel agencies, or even small sales agencies of two or three people. Computerization and networking should be regarded as an urgent need to build basic facilities. If the Internet marketing strategy is applied to the travel agency industry, it will definitely save promotion costs, reduce sales intermediaries, expand market coverage, enhance the depth and influence of the brand, improve work efficiency, and expand profit margins.
In recent years, Shanghai Spring and Autumn International Travel Service's domestic tourism performance has ranked first among its peers in the country for four consecutive years. This is inseparable from its establishment of a nationwide computer network. So far, Chunqiu International Travel Service has connected computers and jointly operated in more than 140 cities across the country, and more than 20 of them have property rights. In the future, Chinese travel agencies will develop faster with the help of Internet technology.
4. Brand marketing strategy. After years of development, my country's travel agency industry has developed a number of well-known travel agencies such as China Travel Service, China National Travel Service, China Youth Travel Service, Spring and Autumn, and Kanghui. However, there is still a clear gap compared with international famous travel agencies such as American Express, Japan Transportation Co., Ltd., and Thomas Cook of the United Kingdom. Under the condition of oversupply in the market, the market behaves as a buyer's market, and customers are in an active position and have more choices. When the differences between products become smaller and smaller, whether a customer purchases a certain product depends crucially on the customer's trust in the product. What is important is that the customer has a brand "preference" mentality, that is, brand loyalty. Under the new situation, competition is becoming more and more intense and complex. World-famous travel agencies will flood into the country one after another, posing a great threat to China's travel agency industry and forming new challenges. Brand is a resource. Whoever gets ahead can occupy and use this resource, thus occupying the market.
5. Relationship marketing strategy. There are obvious "relationship characteristics" in the operation process of travel agencies. The introduction of relationship marketing strategies will make travel agencies pay attention to contacts and connections with related parties, and be committed to the long-term continuous improvement of corporate image, and on the basis of the introduction of CI (corporate image recognition) , import CS (customer satisfaction). Guangzhou's famous international travel agency "Guangzhi" took the lead in introducing CI among travel agencies nationwide in May 1994. Together with CS based on customer satisfaction, it has effectively improved various rules and regulations, unified standardized management, and paid close attention to the key links of tourism services - —Tour guide, providing customers with high-quality services and achieving great success, is called the "Guangzhou Tour" effect by the media. In September 1998, "Guangzhi" further organized its customers and established the "Guangzhi Elderly Travel Club". In less than two years, it was quickly recognized by the elderly comrades for its excellent travel routes and considerate services, and the number of club members continued to increase. Put travel agencies on the road to success. The National Tourism Administration pointed out that "it is necessary to carry out preferential price promotion activities in order to activate the tourism market, but it must be of high quality and good price, and the quality and price must be consistent, and malicious price cuts below the cost price cannot be carried out. Various associations should organize travel agencies, hotels and attractions, etc. Key enterprises must jointly agree on and abide by reasonable market prices, form overall promotions, disclose them to the public, and accept the supervision of public opinion and work style evaluation departments."
In short, the role of non-price competition in the competition of modern travel agencies has been very prominent. We must get rid of the dilemma of price-cutting competition, establish and improve the market mechanism on the basis of improving the competitive experience of marketers, use the advantages of non-price competition, and grasp the advantages of modern travel agencies. Based on the development trend of marketing competition, we must formulate non-price competition strategies for travel agencies, so as to ensure the healthy and smooth development of my country's travel agency industry in the fierce market competition.
References:
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[3] Liang Zhi. Travel Agency Management [M]. Beijing: Tourism Education Press, 2003 .
[4] Wang Maolan, Sun Ping. Travel agency management [M]. Jinan: Shandong University Press, 2005.