TOURISM MARKETING RPTS 331
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This 7 page Class Notes was uploaded by Jerrod Ortiz on Wednesday October 21, 2015. The Class Notes belongs to RPTS 331 at Texas A&M University taught by Staff in Fall. Since its upload, it has received 29 views. For similar materials see /class/226173/rpts-331-texas-a-m-university in Rec, Park & Tourism Sciences at Texas A&M University.
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Date Created: 10/21/15
TERMINOLOGY Breakeven Analysis a nancial technique used to examine the interrelationships between a company s sales costs and pro ts at various levels of output Contribution Margin the difference between price and variable cost per unit in breakeven analysis Fixed Costs costs that don t vary as the level of company s output varies Variable costs costs that vary in close relationship with changes in a company s level of output BREAKEVEN ANALYSIS Marketers and managers in current business environment must be equipped with analytical tools that will help them to succeed in managing their rms One of such tools in addition to price elasticity and other type of ratio analyses is breakeven analysis The breakeven analysis is a little misleading because this type of analysis is usually used to answer many other questions besides those dealing with breakeven output level of a company For example breakeven analysis BEA from thereon is also used to evaluate the nancial pro tability of a new company or new productservice lines Moreover it is a valuable tool for measuring the effects of changes in selling prices xed costs and variable costs on the output level that must be achieved before the business can realize operating pro ts We can develop breakeven analysis of a rm by either a graph or algebraic equations You will not be asked to develop BEA graphically however you may be asked to arrive to the formula by algebraic method Algebraic Method In order to determine a company s BE point wee need to set the total revenue and total cost functions equal to each other and solve the resulting equation for the BE volume As we know total revenue is equal to the selling price per unit times the output quantity TR P X Q Total cost is equal to xed plus variable costs where the variable cost is the product of the variable cost per unit times the output quantity TCFVXQ If we were to set the total revenue and total cost expressions equal to each other in other words setting TRTC0 and substitute the BE output Qbe for Q we would obtain TR TC Or 1Qbe F T VQbe Then a little math trick algebraic manipulations we will obtain PQbe 39 VQbe F P 7 V Qbe F Qb F P 7 V this is the formula we use to calculate BE point Accordingly the difference between the selling price per unit and the variable cost per unit P 7 V is sometimes referred as contribution margin This figure measures how much each unit of output contributes to meeting fixed costs and operating profits Therefore we can say that the BE output is equal to the fixed costs diVided by the contribution margin per unit EXAMPLE RPTS 33 l Amigos is a SpringBreak specialty tour operator that conducts tours to Yukatan Peninsula in Mexico It has the following financial structure Fixed Costs montly Rent 3500 Utility 800 TelefonFaX 500 Wages fulltime employees 6500 Company car 200 Advertising yellow pages 500 TOTAL 12000 Variable costs per tour Airline ticket 250 Accommodation 200 Tour guide wages per tour 50 Transfers 50 Food 100 Printing material TOTAL 700 Projected Selling Price 990 Using the above data Do the following a Determine Amigos breakeven point for a tour BE F P 7 V BE 12000 990 7 700 BE 4138 42 tour must be sold before it can start making pro t b Determine the number of tours must be sold in order to earn a pro t of 15000 c Determine total pro ts at the following sales levels e 30 f 85 d Assume next years variable tour expenses decrease by 20 due to favorable exchange rate and projected sales price increases by 10 Everything else remaining constant what would the new BE point be Please try to solve these problems on your own RPTS 331 500 Tourism Marketing Facilities amp Services Inventory Comments Strength 1 Guest Rooms Singles Suites with Parlors Weakness Twin singles Convertible Parlors Twin doubles St dios Single ampDouble Connecting Queens Others 39 7 Opportunity Kings Others 7 Improvements 2 Food ampBeverage Facilities Seat Comments Strength 1 2 3 4 Restaurant Coffee Shop Weakness SnackBar Lounge Bar Pub lt gt lt gt lt gt lt gt Opportunity Licensed Patio Improvements Other 3 Convention Meeting ampBanquet Facilities Comments Strength Seats Banquet 39Iheatre Other Room 7 7 lt gt gt lt gt Room 7 7 Weakness Room 7 7 lt gt lt gt lt gt Room 7 7 lt gt lt gt lt gt Room 7 7 lt gt lt gt lt gt Room 7 7 Opportunity Room 7 7 Improvements Room 7 7 lt gt lt gt lt gt Room 7 7 lt gt lt gt lt gt Room 7 lt gt lt gt lt gt 4 Recreational Facilities Provided onsite Comments Strength Indoor Outdoor ool Pool Whirlpool Hot tub WhirlpoolHot tub Saunast Golf course Tennis courts Tennis courts Weakness Exercise room Beach Games room Boat rentals Squash courts Boat Docks RacquetballHandball Courts Marina Dance Floor Alpine Skiing Jogging track Cross ountry skiing Opportunity Other 7 7 Other 7 7 mprovements Other7 7 Other7 7 5 Guest Services Comments Strength AirportLimo Free Parking Complementary Coffee Valet Parking Babysitting Executive Floors Bilingual staff Executive Lounges Weakness oom Servrce Wakeup calls D en Massage Bell staff Dry Cleaning BeautyBarber shop Turndown Service Shoe cleaning Free Paper Opportunity Of ce center Other 7 Improvements Other7 Other7 Figure 57 Services analysis worksheet RPTS 331500 Tourism Marketing Step 1 Decide on research questions WHO Who are the customers WHAT What needs are they trying to satisfy WHERE Where do the customers live and world Where do they buy WHEN When do they buy HOW How do they buy HOW MANY How many customers are there HOW DO How do they feel about our organization and about primary competitors I l tnnnnn tep 2 Collect amp analyze secondary information What information do we have on customers in our own organization s records What information have other organizations gathered on these customers Do we need to do any further or new primary research tep 3 Design primary research data collection method and forms Which research method should be used to collect data experimental observational survey or focus groups Which specific research techniques should be used e g mail telephone personal interview or inhouse selfcompletion survey What questions and other materials should be included on data collection forms How should data collection forms be administered and analyzed Step 4 Design sample and collect primary information Who are the research subjects e g inhouse customers corporate travel managers travel agents or householders How many research subjects are there What sample selection method and sample size should be used Step 5 Analyze and interpret primary information What procedures should be used for coding editing and entering or tabulating the data Which statistical analysis techniques and programs should be used to analyze the data What are the results and how should we interpret these result Step 6 Draw conclusions and make recommendations What types of conclusions can we draw from the results What types of recommendations can we make What form of report or reports are required l mr I I mr H ir H H ir H i l I l I l Figure 58 Steps in the research process of a market potential analysis of past and potential customers RPTS 331500 Tourism Marketing WHO 1 Who are our past customers Target Market Demographic profiles Purposes of trips Lifestylepsychographic profiles Party or group Sizes Number of previous visits or uses of our business WHAT 2 What needs have past customers tried to satisfy Needs Benefits sought Servicespurchased Dollar volumes purchased WHERE 3 Where do past customers live and work Place of residence Location before use Place ofwork Location after use WHEN 4 When have past customers bought Day part daily weekly monthly Weekday vs weekend Length of stay or visit HOW 4 How have past customers bought Travel agents tour operators and other intermediaries used Sources of information Decisionmakers and influencers Reservations methods used Routestransportation used OW MANY 6 How many past customers do we have Total number of customers Number of customers by market segment Number of repeat customers m Custom er counts by day part day week month and year HOWDO 7 How do past customers feel about our organization and about primary competitors How well are we meeting their needs How can we improve to better serve their needs Will they recommend us to others What is different about the way we do business that customers like What image do they have of us How well are competitors meeting their needs What problems have they had with competitors Would they recommend competitors to others What is different about the way competitors Do business that customers like How are competitors different from us Figure 59 Market potential analysis worksheet past customers RPTS 331500 Tourism Marketing WHO 1 Who are our potential customers Market segments Demographic profiles Purposes of trips Lifestylepsychographic profiles Party or group Sizes Frequency of visitsuses of business like us WHAT 2 What needs are potential customers trying to satisfy Needs Benefits sought Services purchased Expendituresspending WHERE 3 Where do potential customers live and work Place of residence Location before use Place ofwork Location after use WHEN 4 When do potential customers buy Day part daily weekly monthly Weekday vs weekend Length of stay or visit HOW 4 How do potential customers buy Use of travel agents tour operators and other intermediaries Sources of inform ation Decisionmakers and influencers Reservations methods used Routestransportation used HOW MANY 6 How many potential customers are there Total number of potential customers Number of potential customers by market segment HOWDO 7 How do potential customers feel about our organization and about primary competitors How well can we meet potential customers needs What is different about the way we do business that potential customers may like What image do potential customers have of us How well are competitors meeting potential customers needs What problems have potential customers had with competitors Would potential customers recommend competitors to others What is different about the way competitors do business that customers like How are com etitors different from us Figure 510 Market potential analysis worksheet potential customers
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