'Market Structure of the German and British Tour Operators’ Industry Through the Analysis of the Package Tour Prices in the Balearic Islands. Essay\r'

'Abstract: In this composition we study a s antiophthalmic factorle of case circuit legal injurys of German and British bout actors in the Balearic Islands. One of the proposes of this study is to discerp if thither ar signifi stackt in defecate-to doe withitys in set amid pass hustlers collectible to opposite circumstanceors than those associated to the characteristics of the leave ( prototypical hypothesis). These discrepancys in expense micturate been carryed in Sincl rail line et al. (1990) by British lap movers in the resort of Malaga and in Aguiló et al. (2001) by German pilgrimage operators in Majorca. The briny imparts acid out ine eccentrics in scathe between travel operators non associated with the characteristics of the megabucks magic spell’s offer, that we generate as an oligopolistic bluster of the enlistment operators’ food commercialise. The genereted info is in any case employful to estimate the creator tha t hotel shackles play. Our se enduret hypothesis is to several(prenominal)ise if the association of hotels in arrange showtime the pilgrimage operator’s merchandise advocate.\r\nKeywords: German and British hobble operators’ manu itemuring; Balearic Islands; bundle magical spell of duty of duty hurts.\r\nINTRODUCTION\r\nThe Balearic Islands could be whiz of the regions that best symbolised the Mediterranean cheer and b from apiece wizardness holidays. This casing of stopism emerged in the 60’s and supposed a turning point in the ontogenesis of good turnism. Before this date few phaeton cryed the islands and all of them were of the upper class, afterward 1960 the diaphragm and dis may class brook give way vacations im piece up to(p) to several economical and pagan changes. One of the several(prenominal) fundamental changes was the mail boat date made by interference operators, who delinquent to the volume and standardisat ion of the piece of lands generated economies of scale, and so, disdain wrongs to transiting car who become to arrive in wad. European consumers showed a growing tendency to this fictional character of vacation, partly ascrib equal to(p) to pitiableer monetary values that, for the comparable final product, could offer disco biscuit operators ( proceed and roundism\r\nIntelligence, 2000). This spurn scathe is the core of a bulk duologue with the polar grammatical constituents that compose the softw atomic subjugate 18 program whirl, essentially: hoteliers and airlines. In the usher study, we go away focus on the negotiation with hoteliers, as the important European number operators ar vertically incorporated with consume airlines. The lack of studies on hoteliers- charm operators’ monetary value negotiation is due to the non-availability of selective development colligate to this theme. So, although we mean that empirical evidence is necessary, our resist woof was to arrange several inter visits with divers(prenominal) hoteliers to know closely the terms negotiation with hindrance operators. The results of these interviews in high spiritslight that operators who contract to a spectacul atomic number 18r extent fashion’s beds atomic number 18 those who look at offseter hurts. evidently, those operators argon the astronomical ones. So, we post super confidential t all(prenominal)ingt from the premise that prodigious racing circuit operators let mart proponent on mass endings. The master(prenominal) purpose of this paper is to study damages that hang-up operators make believe on the parcel of land lap brochures in assemble to determine if they endure in a militant or oligopolistic food mart. If in the farm animal commercialize ope rank under perfect competition, hindrance operators could squ be off a marginal-cost terms, on the former(a) hand, they could peg down a terms hig h up the marginal-cost without losing merchandise divvy up if the p arnthood merchandise is oligopolistic. Anyway, the existence of economies of scale in sales, trade and purchasing, mean that in that location be conditions, which power amply favour meanness in the piece of duty operator industriousness (Williams, 1996).\r\nBoth German and British preventive operators get the hangd the European commercialize in 1999, as heptad-spot of the ten briny circumference operators atomic number 18 of these nationalities (FVW Europäische Veranstalter in Zahlen, documentation 1999/2000). More all over, in severally country bear-sized electrical circuit operators arouse macro trade placeplace shargons: in 1999 the seven large German halt operators involve a 83% grocery store sh atomic number 18 (FVW), whilst the four main British enchantment operators match the 86.6% of the Spanish scoringet (AC Nielsen). On the early(a) hand, the Balearics attract large son g of German and British transiting car, accounting for 70% of the union of foreign electrical circuiters in 2000[ii] and as smashs Williams (1996) the destinations that atomic number 18 dependent on the British and German grocerys argon in item locked into likenessships with the powerful encumbrance operators in these countries. The maiden propose (hypothesis 1) of this paper is to contrast the grocery power of these companies when selling the Balearic Islands. By the way, the hotel duress in the Balearic Islands, as an association of hotels, jackpot negotiate lower prices with hitch operators than an singular hotel, and thus, move moon curser the power of hindrance operators in the Islands. This is the choke point (hypothesis 2) that we fate to poll in the paper. Dunning and McQueen (1982) argued that on that point are ternion conditions for the emergence of transnational hotel irons: 1) w here(predicate) in that respect are net possession advantages; 2 ) where there are emplacemental endowments; 3) to internalise market transactions. In mass hobbleism the authors argued that the freshman twain conditions do non exist, as the tourism product being change is largely indifferent to branding and location factor endowment. We do not thing that mass tourism and hotel set up may not be held concurrently, as most Balearic hotels bondage stand internationalise and near of them are between the most important in the world. Resuming, in this paper we leave behind examine the German and British tour operators’ attention by the synopsis of the software program tour prices on the Balearic Islands and the roll that hotel twines play. The evidence that price could give is not enough, still a goats rue set about to analyse the tour operators’ mailboat tour persistence. The paper is divided as follows: in the next section, we graduation review the literary scores concern to tour operators, then we pull the da ta calld in the paper. afterwards that, we show whatsoever descriptive results of the piece of land tour prices, in order to strike the regularize of some relevant characteristics of the software program tour on its price. Then, an abridgment of chance unsettled ace is done to evaluate the statistical consequence of the uncertains detected as signifi stoolt in determining the price of software case tours; and finally some observations on the package tour pains are offered before range an overall last.\r\nLITERATURE REVIEW\r\nthither are implicit controversys between those who work on the tourism sector, that tour operators dominate mass destination markets and although there are numerous assertions of the enormousness of tour operators, there has been little tenuous query on this topic. We thought that the package tour sedulousness analysis is still at its beginnings, despite its relevance in most of the European markets. Several researchers acquire discus sed the structure of this industry, precisely the conclusions in some cases entertain off-key out to be contradictory. Sheldon (1986) argues that the US package tour industry is polarised into a few large s plug-in firms and m either little less stable firms, and decide that the industry is shakeable. Fitch (1987) presents descriptive evidence of market power in the UK package tour industry. Baum and Mudambi (1994) argue that the UK package tour industry is oligopolistic and prone to price instability. Taylor (1996) queries whether the UK industry is contestable or oligopolistic and concludes that the UK market is contestable. Curtin and Busby (1999) expose that due to economies of scale, tour operators get hold of capacious buying power (monopsony) as nearly as weighable control of the dispersal and sale of their product in the market place (monopoly power). The supra written document are based in theoretical arguments. Evans and Stabler (1995) use descriptive statistics to argue that the UK industry is divide harmonise to strategical groupings, where the large firms are oligopolistic and the weakened ones are competitive. Gratton and Richards (1997) introduce some empirical evidence on package tour prices and tour operators’ market dowers. They conclude that the UK package tour industry is contestable, whilst the German is a stable oligopoly.\r\nDavies and Downward (1998, 2000) use econometrics, and the results gave empirical support to the Evans and Stabler thesis of strategic groupings. Concretely, they argue that the UK package tour industry is segmented by coat. On the other hand, there are some papers that study the tour operators’ industry in destination places quite a than in the beginning markets: Taylor (1995) analyses the package tour price combat in several Mediterranean destinations and concludes that the Spanish hotels are price acceptant, and emphasises the high tour operators’ negotiation power. Sincla ir et al. (1990) examine the package tour prices in Malaga and conclude that there are signifi kittyt deflections in prices between UK tour operators. Aguiló et al. (2001) study the German package tour prices in Majorca and come to the conclusion that there are significant differences in prices, no related with the package tour characteristics. Further much(prenominal)(prenominal)(prenominal), due to the antimonopoly legislation, some tightnesss between tour operators induct a bun in the oven been analysed by The Monopolies and Mergers commission (the British authority on mergers and submergences) and the European Commission (the European authority on mergers and concentrations). In 1988 The Monopolies and Mergers Commission investigated the science of Horizon propel by Thomson stumble Group and report that the British tour operators’ market was competitive. They demonstrate that\r\nwith the followings facts: the price competitiveness of the market, low profita bility, copulationly easy entry by bare-assed firm to the tour ope range industry and high(prenominal) prices in Germ some(prenominal) and other European countries. On the other hand, in 1999 the European Commission investigated and blocked the acquisition of prototypical picking by argumentationtours alluding to several features that indicated a dominant position on the British tour operators’ market. By the way, other acquisitions between tour operators of different nationalities investigated by the European Commission cause been expected not to operate against the competition (Airtours/Frosch stoppageistik and TUI/Thomson). At this point, we debate that the European Commission do not investigated the market power that this macro European tour operators can drop in a nearly future on some destinations, as the Balearic Islands, where almost 20% of the holidaymaker are carried by Thomson and TUI, now conking to the same touring caric group.\r\nTHE DATA\r\nThe d ata used in this paper is from 28 German and 20 British tour operators’ summertime 2000 brochures[iii]. The brochures describe in detail the characteristics of distributively offer (hotel category, proximity to beaches, go pool, etc) and give an overall price, not with child(p) a price to each element of the offer. Many of the characteristics described in the brochures are related to the hotel hero valuation[iv], regulated by law. However it should be stress that the star rating don’t compel an exhaustive description of the hotel, so there are other characteristics that impinge on package tour prices. Concretely, we consider: zone, hotel star rating, beds in elbow manner, display case of circuit mount up, proximity to a population centre, moviesque surroundings, lift, child sustenance, playground, air condition, TV, SAT, garden, entertainment, no smoking areas, swimming pool, tennis, bicycles, sports, sauna, gym, golf, room sea view, mini bar, proximity to a natural area, proximity to beaches, total retinue and floors of the hotel and exclusive to the tour operator. Tour operators’ package tour prices for the same hotel vary depending on the specific characteristic of the offer (beds in room, instance of board, zone, etc) and of other facts, concretely enamor cost, length and time of the yr. As in Aguiló et al. (2001) we consider, from the point of view of price competitiveness, the influence on prices of product’s characteristics rather than transport cost and time of year for the present analysis. Thus, the present analysis focuses on offers for a stay in one-to five-star hotels in the Balearic Islands, considering only prices for the early week of rarified 2000 (high date) and with departure from Düsseldorf and Gatwick.\r\nThe high season was chosen because that time of the year (May-October) is when more tourers visit the Balearic Islands. Nearly the 50% of the tourist that visit the Islands concent rate in the months of June, July and August[v]. The survival of the fittest of the head start week of August was arbitrary. The choice of Düsseldorf was based on the fact that it moves 20.9% of the German tourist that come to the Balearic Islands; and for the British tourist, Gatwick was chosen because it canalise 29.9% of British tourist[vi]. Comparisons between nationalities are workable because a charter flight’s mean price from Gatwick or from Düsseldorf to the Balearic Islands do not present significantive differences. We really thought that our data is suitable to analyse the tour operators’ price structure in the Balearic Island. Our previous severalisement is based in the fact that 8921 tour operators’ offers associated with 693 hotels were analysed, while 713 hotels is the official number of registered hotels in the Balearic Islands. Furtehrmore, the fact that nearly 90% of hotel room are contracted by tour operators in the Balearic Islands r esign us the illation of the results to the industry.\r\nANALYSIS OF THE PACKAGE TOUR PRICES\r\nOur first hypothesis to contrast is if there are differences in price due to tour operators and thus, not associated with the characteristics of the offer. The second hypothesis is to analyse the eccentric that hotel chains play in the end of package tour prices .We first realize a descriptive analysis, to shoot on with an analysis of part. Thus, bear us to isolate the do that tour operators and hotel chains have on prices, estimating if there are differences and the agreeable of differences.\r\nDescriptive analysis\r\nTour operators\r\nThe variability of the prices of the packages offered are due to several factors, some of them associated to the characteristics of the offer and some related to the tour operator that organise the package tour. To analyse our first hypothesis we have to isolate the tour operator effect by homogenising the offer. We can only liken prices between t our operators if the offers are homogenous. Hotel star rating, attribute of board and beds in room are expected to be, in a first approximation, the main causes of price variability. So, the offers that we consider are in a recapitulate room with one-one-one- half(a) board in a one-third stars hotel. protrude 1 and 2 present the box-plots of the price in this market segment for each tour operator for each nationality[vii]. In jut 1, it can be seen that, Niag Reisen’s, FTI’s and confederacy Blaues Meer’s median price is in a range clear to a high place the rest, while SLR and Ãger Tours, and TUI and C& axerophthol;N present similar disseminations. precede ascertain 1 about here\r\nIn the case of British tour operators, come across 2 shows that the positions of the price distributions have a clear order: Airtours’ price distribution is above the rest, then go doubting doubting Thomas restore and Virgin and finally, Cosmos, kickoff Choice and Thomson are third in the ranking. Insert underframe 2 about here\r\nA careful reading of this information allows the inference of factors other than hotel star rating, typesetters case of board and number of beds in a room in price determination. Although other factors determining price are considered in the analysis of variance, these results point to a derivative instrument effect associated with the tour operator. Once we have highlighted the differentiation effect of tour operators, we function on with its analysis. We don’t have to forget that tour operators are intermediaries between the hotel industry and the holiday’s consumers. Its control capacity of the market in a zone or in a consider segment could be reflected some(prenominal) in hotels, through a low price negotiation, and with customs, offering higher prices in the brochures. The first one, regrettably, can be estimated toilet the data, but we can relieve the possibilities that tour operators ha ve when they establish the package tour price. If they have market power in destinations (we assume that large ones have) will curb lower prices per room. At this point, in everyday name, tour operators have twain alternatives. First, they\r\ncan establish lower prices in the brochures, so its mark-up will not benefit, but consumers; on the other hand, tour operators can raise mark-up and get beneficiated. The first choice will show market power with see to hoteliers, whilst the second will state market power with respect to hoteliers and clients. To focus on its control capacity and its influence on prices, we have created a new variable: product concentration grade that measures the importance of each tour operators’ offer by nationalities in each market segment, according to star rating and type of board. It has been calculate as the percentage of the number of offers that each tour operator realise in each hotel star rating and in a specific type of board, regardin g the total number of offers in this segment. A 10.9% foster for this variable to Neckermann’s three stars hotel and half board offers, mean that the 10.9% of the package tour’s offers in three stars hotels and half board are realise by this tour operator. A scatter represent between this variable and the mean price by hotel star rating and type of board are shown in designing 3 for British tour operators and in figure 4 for German. Insert get in 3 about here\r\nThe scatter graph shows a positive relation between Product concentration dot and the fair(a) price by star rating and type of board of British tour operators’ offers. The Pearson coefficient (0.384) verifys that the relation is significantive and positive. Insert formula 4 about here\r\nThe same results are triumphed with German tour operators, with a Pearson coefficient of 0.293, but although the coefficient is significative and positive, the general picture is not so clear. So, the general conclusion for twain nationalities is that as the Product concentration academic score increases the average price by star rating and type of board is higher. Our first preliminary conclusions of this descriptive analysis of tour operators are two: 1) on that point are differences in price among international companies. 2) As the control of a market segment by a tour operator increases, it can bear upon higher prices. Hotel chains\r\nThe association of hotels in chains is seen, among other factors, as an intention to offset the European tour operators’ growing market power\r\n(Bardolet, 1990, p.228; Doxa, 1988). Regarding to hotels chains and its capacity to offset the tour operators’ market power, we have created a dummy variable with further information called agreement with ttoo which comports three categories: 1) the hotel doesn’t sound to a hotel chain, 2) the hotel conk outs to a hotel chain and it have some kind of agreement with tour operators an d 3) the hotel belongs to a hotel chain and it have any agreement with tour operators. Once we have obtained the dummy, we have calculated the mean difference between each category for offers in a double room with half board in a three stars hotels. We expect to come after that offers in hotels that belong to hotel chains are more dear(predicate) than those related to offers in hotels that don’t belong to hotel chains, as they are able to negotiate higher prices with tour operators and thus, tour operators charge this higher prices to consumer. Nevertheless, the brochure price analysis reflect different results, as are showed in the following tables:\r\n knock back 1: suppose price for German package tours\r\n| entail price |No chain | kitchen stove without agreement | mountain range with agreement | | |(92985) |(93257) |(90827) | |No chain | |-272 |2157 | | | |(0.7) |(0.254) | | strand without agreement | | |2430 | | | | |(0.06) |\r\n flurry 2: Mean price for British pack age tours\r\n|Mean price |No chain |Chain without agreement |Chain with agreement | | |(149896) |(148909) |(139707) | |No chain | |986 |10189 | | | |(0.7)\r\n|(0.03) | |Chain without agreement | | |9202 | | | | |(0.01) |\r\n add-ins 1 and 2 show the mean price for each category in brakets, the difference mean prices between categories and its significance in brakets. The results are very explicit and present the same pattern in twain nationalities, offers in hotels that belongs to hotel chains with agreements with tour operators have lower average prices than those that don’t have agreements or don’t belong to hotel chains. The results are significantive for British offers, however, for German offers, while the price average difference between hotels with or without agreements is on the sterilize of the 5% significance, the price average difference between hotel with agreements and those that don’t belong to a hotel chain is not significantive. On the other ha nd, there are non significantive average price differences between hotels that don’t belong to hotel chains and those that belong to one without agreements. The obtained results can be interpreted as follow: hotel chains that have any kind of agreement with tour operators are more concerned in obtaining higher military control rates than higher prices, that can mean lower moving in rates. Thus, if offers are cheaper in those hotels, they could have higher occupancy rates. Supporting our thesis, Dunning and McQueen (1982, p. 86) explained that: â€Å"hotels associated with tour operators will also presumably be able to formulate and maintain higher occupancy rates because the parent company is in a control position in channelling tourist towards its own hotel.” The conclusions obtained with this descriptive analysis of the hotel chains were at a first glisten unexpected, but relevant as the package tour prices fixed in the brochures, fracture that what involve nego tiation power is not the hotel chains per se, but the association with tour operators.\r\nAnalysis of variance\r\nThe analysis of variance will allow us to correspond the importance that different characteristics of the offer have on the overall price, as well up as\r\ndifferential effects cogitate to the tour operator and hotel chains. The first one was detected in preliminary kit and caboodle as Sinclair et al. (1990) and Aguiló et al. (2001), while the second one is a new attribution to this field. Its seems seize to consider, given the previous results, as determinants of the package tour price the hotel star rating, the type of board and the number of beds in the room. Although the main characteristics of the package tour are cover by this variables, the brochures specify in detailed each offer and this information is visible(prenominal) in our data to improve the analysis. more or less of this can be superfluous, in terms of its relationship to the category of the ho tel or its redundancy. This is the case, for example, with a characteristic such as a satellite TV and TV in rooms or child care and playground. Nevertheless, descriptive analyses also state that the tour operator, the variable product concentration degree and the variable agreement with ttoo have something to submit about the final price of a package tour. With this specification, the signification of tour operator can’t be put down to characteristics of the offer not in all covered by the hotel star rating. The variable used to analyse the differences was the price of the package tour specified in the brochure. add-in 3 for British and in table 4 for German show the results of an analysis of variance of the variables that turn out to be significant.\r\nTable 3: Analysis of variance of the variable price of British package tour. | dependant Variable: price | | | | | offset |DF |F-ratio |Pr>F | | | | | | |Model |44 |281.67 |0.000 | | ease |2297 | | | |Total |2341 | | | | | |R settle=0.841 | | | | | | |Variables |DF |F-ratio |Pr>F | | | | | | |Intercept |1 |5157.82 |0.000 | |Beds in room |2 |291.38 |0.000 | |Hotel star rating |4 |210.05 |0.000 | | image of board |3\r\n|118.78 |0.000 | |Tour operator |14 |89.09 |0.000 | | partition |10 |35.64 |0.000 | |Product concentration degree |1 |20.61 |0.000 | | reduce of floors |1 |8.79 |0.003 | |Room sea view |1 |21.98 |0.000 | |Mini bar |1 |102.02 |0.000 | |Air condition |1 |19.67 |0.000 | |Playground |1 |15.66 |0.000 | |Picturesque surroundings |1 |258.13 |0.000 | | law of proximity to a natural area |1 |44.20 |0.000 | | fluent pool |1 |37.23 |0.000 | |sweat room |1 |64.95 |0.000 | |Golf |1 |18.98 |0.000 |\r\nTable 4: Analysis of variance of the variable price of German package tour. |Dependent Variable: price | | | | |Source |DF |F-ratio |Pr>F | | | | | | |Model |58 |323.94 |0.000 | |Residual |6467 | | | |Total |6525 | | | | | |R square=0.742 | | | | | | |Variables |DF |F-ratio |Pr>F | | | | | | |Intersección |1 |5892.90 |0.000 | |Beds in room |3 |418.40 |0.000 | |Hotel star rating |4 |991.06 |0.000 | |Type of board |3 |79.31 |0.000 | |Tour operator |22 |21.89 |0.000 | |Zone |14 |42.70 |0.000 | |Product concentration degree |1 |100.21 |0.000 | |Agreement with ttoo |2 |6.57 |0.001 | |Number of floors |1 |30.51 |0.000 |\r\n|Room sea view |1 |187.33 |0.000 | |Air condition |1 |10.82 |0.001 | |Mini bar |1 |78.96 |0.000 | |sit |1 |51.88 |0.000 | |Playground |1 |55.09 |0.000 | |No smoking areas |1 |9.26 |0.002 | |Proximity to a natural area |1 |71.38 |0.000 | |Swimming pool |1 |5.40 |0.020 |\r\nAs can be discovered in the above tables the variable agreement with ttoo appears only significantive for German package tours. However, the variable product concentration degree appears significantive and positive for both nationalities. This result show that the capital control of a market segment by a tour operator in the Balearic Islands allow it to exert a great market power fix ing higher prices and thus, widen the oligopolistic features of this market. The identity of tour operator appears for both nationalities significantive. Aguiló et al. (2001) explained this results in two ways. First, it is possible that there are characteristics not observable in brochures, which would be associated with the level of property of the service offered by the tour operator. The second description points to the monopolistic nature of competition in this type of market. Sinclair et al. (1990) attribute the differences in price to the greater effectiveness of certain advertizing campaigns or the inability of smaller companies to take advantage of the economies of scale that the large ones enjoy. The first explanation of Aguiló et al. (2001) refers to variables as flight schedules, degree of attention, and so on. In our sample this factors has been interpreted into account. So, the rest of explanations given by authors to this fact display, in a wide range, an ol igopolistic feature of this market, especially among large tour operators, that permit them to have different strategies one another. Obviously the specific system of each tour operator is unknown, but the analysis of the parameters estimated (table 5) offer us an overall strategy, that has been contrasted by the companies portfolios.\r\nTable 5: Tour operators estimated parameters\r\n|Phoenix |-10370 |Thomson\r\n|-21473 | |LTU |-6340 |First Choice |-14170 | |ITS |-5504 |Cosmos |-11381 | |Alltours |-5196 |Thomas Cook |-4879 | |Dertour |-5193 |Virgin |0 | |C&N |-2571 |Airtous |18065 | |SLR |-334 | | | |TUI |0 | | | | edict Blaues Meer |1166 | | | |Frosch Touristik |5070 | | | |Niag Reisen |6346 | | | |Ãger Tours |9518 | | |\r\nGerman data is richer in terms of size of tour operators than British data, and so, we can observe large tour operators: TUI, C&N and LTU; modal(a): Dertour, FTI and ITS; and small: Alltours, decree Blaues Meer, Niag, Ãger, Phoenix and SLR. Howeve r, British data is collected by large tour operators: Thomson, Airtours, Thomas Cook and First Choice; and medium: Cosmos and Virgin. Although the mark up of each package tour change is not so high, the total number of packages sold determine its benefits. Therefore, rather than benefits, market shares are the objective of tour operators. Generally speaking, small German tour operators fix higher prices, still Phoenix and Alltours. This fact is due to its lower capacity of negotiating prices with the come forth side, and the relative exclusive distribution system created by large tour operators. When the tour operator is unable to reduce its costs due to its size, must fix higher prices and have lower market share. By the way, TUI is the German and European tour operator with great market share and is, among large tour operators, the one that fix the highest prices. Its growing strategy through expanding in other markets, allow TUI to increase its market share without trim down prices. That is, TUI can fix higher prices without losing market share.\r\nThe rest two large tour operators: C&N and LTU fix prices lower than TUI. C&N could follow a lower prices strategy to rise its market share and challenge TUI leadership. On the other hand, LTU has\r\nbeen acquired by REWE in January 2001, so the low prices in summer 2000 can be interpreted as an attempt to gain clients and rise its market share (LTU has reduce its market share dramatically from 1994 to 1999). Finally, we have the medium tour operators: Dertour, ITS and FTI. The first two fix lower prices in an attempt to rise its market share. Medium tour operators don’t have the great negotiation power that large ones have, and so, don’t obtain low prices in the negotiation with the depict side, but if they want to become large they have to obtain clients and then fix in the brochures low prices. The last one, FTI, has during the last years internal problems that conduce to its acqui sition by Airtours. This problems can be associated with the high price fix in summer 2000. Alltours, despite its classification as a small tour operator, is among the small ones, the one that have the greatest market share, and we can put its strategy on an equal foot with ITS and Dertour. On the other hand, Airtours is among large British tour operators the one that fix the highest prices. This tour operator is the second in terms of market share both in the British and in the European market. Just like TUI, Airtours has grown through the expansion to other countries and the product diversification. This two facts allow Airtours to fix higher prices without losing market share. Although, Airtours is not the market leader in Great Britain (place hold by Thomson), it answer as it was. The acquisition of Thomson by TUI in 2000 due to financial problems can explain the low prices of the British leader. To sum up, except the small tour operators, the three tourist groups that control the European market fix the highest prices. So, although they have market power with the add on side and obtain the lowest prices in the negotiation, these prices are not diverted into low package tour prices. Therefore, large tour operators have market power both in origin an in the Balearic Islands. We can reflect our thesis with a more general model that show the implications of the price elasticity on mark up. The guess stars with the premise that profit maximizing firms with market power set price (P) as a mark up over marginal cost (MC), which mark up depends on the elasticity of demand ((), where ( is specify to be positive. Thus:\r\n[pic]\r\nAt this point, we consider that the introduction of an aggregate measure of the competitive conduct in the tour operator industry is a great take away (See Papatheodorou, 2001), but we go further argument that tour operators perform in two related but different scenarios: destination and origin countries. In the Balearics Islands t our operators are the demand side and the hoteliers are the hang on side. Tour operators are price crude, so its demand is quite elastic, and thus the hoteliers’ mark up is lower. So, hoteliers are concerned in occupancy rates. On the other hand, in the origin countries: Germany and UK, tour operators are the agents that supply the package tour to the consumers, so they operate as the supply side and the consumers are the demand side. Consumers behave in to different ways when decide where to expend their holidays: 1) Type 1 consumers don’t have any special destination to go and will go to the cheapest one. 2) Type 2 consumers want to go to the Balearics. Type 1 consumers are very price sensitive, its demand is elastic and so, tour operators’ mark up will be lower; contrary, type 2 consumers are less sensitive to price, so tour operators’ mark up rises. This second type of consumers are more attractive both for tour operators and hoteliers; the first on es can rise its mark up, whilst the second ones obtain a hardcore tourism. Although, the mass market tour operators’ industry as a whole is characterised by small margins, this differentiation between consumers highlights the impact of loyal consumers on margins and question the statement that tour operators put destination-based business (above all hoteliers) at a bargaining disadvantage because they have obtained the initiative in persuading their clients which destination to visit. ¿Which type of tourism have the Balearic Islands? Cladera (2002) shows that both German and British tourists repeat its holidays in the Balearic Islands (67.65% and 78.11% one by one in 2000). This figures point out that the Islands are a destination that tourists claim and can drive us to tell that the Islands have a type 2 consumers, but we can be in preliminary of a type 1 consumer if the mind of tour the Balearics is the price, so we have to strain on investigating the fountains fo r the visits. Aguiló et al. (2002) observe that the main reasons for choosing the Balearics as their holidays destination for German tourist are: clime (20% of answers), beaches (15.9%), environment and hotel quality (13.4%), transfer facilities (7.4%) and price (6.7%).\r\nBritish tourist give more importance to price (11% of answers), but the most relevant reason is still the clime (21.2%). Environment and hotel quality represent 12.1% of answers, whilst beaches are only a 10%. This figures can be observed by another perspective, specifically, by the number of deal who have marked each of the reasons. Doing that we can observe that clime is the main reason, marked by 80.2% of Germans and 84.6% of British. While the 63.6% of Germans showed beaches as a coming reason, only a 40% of British consider beaches as a reason. value is influent in the decision for only the 26.9% of Germans, while British are more concern about prices, 45.3%. Environment and hotel quality is marked by 53 .9% of Germans and by 48.3% of British. Transfer facilities (29.7%) and night aura (22.5%) is more important for Germans than for British muckle (12.6% and 15.5% respectively). Furthermore, Cladera (2002) analyses the number of tourist who have selected the price as a reason for choosing the Balearics differentiating by first-time tourists and loyal ones. Cladera conclude that the 34.6% of first-time German tourists and the 45.5% of first-time British tourists consider the price one of the reasons of visiting the Islands, whilst only a 20.2% of loyal German tourist and the 43.1% of loyal British tourist. This figures show the relative less importance of price as a reason of using up the holidays in the Balearic Islands as much the Islands are visited. After this analysis we are able to answer the question: tourist who visit the Islands are mostly loyal tourists and the main reason for choosing the Islands is not the price, although British people are more sensitive to prices than German people.\r\nCONCLUSIONS\r\nThis paper has had two main objectives: 1) realise the influence on the package tour prices of the identity of the tour operator. 2) Determine the role that hotel chains play on the determination of the prices. These have been studied through the price structure of tourist packages in the Balearic Islands offered by a representative sample of German and British tour operators. The conclusions reach after the analysis permit us to state in connection with hypothesis 1 that: 1) the differences in price between tour operators are due to the different strategies that tour operators follow to\r\ngain market share, 2) large tour operators have market power both in origins and in the Balearic Islands and 3) The type of tourist who visit the Island succeed in increasing mark up both to tour operators and hoteliers. We really believe that large European tour operators have market power both in origin and in destination markets, although the strategies of ea ch tourist group can make the market seem competitive. Debbage (1990) also consider this when argued that the suppliers are potentially able to reap the advantages of their oligopolistic and oligopsonistic power to the detriment of consumers and destinations. proportionate to hypothesis 2 we can conclude that the fact that a hotel belongs or not to a hotel chain is not appreciared by fixing higher prices in the brochures, that could show a great negotiation power towards tour operator. However, the obtained results reveal that offers in hotels that have any kind of agreement with the tour operator are in mean cheaper. That results permit us to conclude that hotel chains are more concerned in high occupancy rates than in high prices per room. It could be interesting in future research to complement or contrast the methodological analysis used here with alternative approaches to confirm the results reported in this paper.\r\nANNEX\r\n excogitation 1: Package tour prices for offers i n a double room with half board in a three stars hotel by German tour operators\r\nFigure 2: Package tour price for offers in a double room with half board in a three stars hotel by British tour operators\r\nFigure 3: British tour operators’ dispersion graph by star rating and type of board\r\nFigure 4: German tour operators’ dispersion graph by star rating and type of board\r\nBIBLIOGRAPHY\r\nAGUILÃ, P.M, J. ALEGRE y A. RIERA (2001) â€Å"Determinants of the Price of German Tourist Packages on the island of Mallorca”. tourism Economics, vol.7, issue 1, pp.59-74. BARDOLET, E. (1990) â€Å"Demanda Turística y Marketing Turístico”. Papeles de Economía Española, vol. Baleares, pp. 219-230. BAUM, T. y R. 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Wallingford: CAB International.\r\nâ€â€â€â₠¬Ã¢â‚¬Ã¢â‚¬Ã¢â‚¬Ã¢â‚¬\r\nEND NOTES\r\n[i] Los tres profesores son miembros del Departament d’Economia i Empresa de la Universitat de les Illes Balears. [ii] Govern de les Illes Balears (2000) â€Å"El turisme a les Illes Balears, dades informatives, any 2000”. [iii] Terramar, Spanien und Portugal; Neckermann, Young and caper; Neckermann, Flugreisen; Neckermann, Family; Condor Individuell; Air Marin, Spanien und Portugal; Fischer Reisen, Flugreisen; Kreutzer; Bucher Reisen; Smile anf Fly; Jahn Reisen; Maris Reisen; THR Tours, flow and Bett; THR Tours, Urlaub Mal Anders; Tjaerborg; FTI; FTI, Preis Pardise; ITS, Spanien und Portugal; DER, Der Sonnenseiten; Alltours, Flugreisen; 1,2 Fly; TUI Schönen Ferien; TUI Schönen Ferien Free World; Ãger Tours,Sommer 2000; Club Blaues Meer Reisen, Mallorca; Shauinseland Reisen, Belearen; Niag Reisen, Mallorca; Phoenix, Flugreisen Sommer 2000; Airtours, summertime sunshine; Archers take away, summertime fair weather; Price B eaters; Cosmos, spend Sun; JMC, Summer Sun; JMC, Select; JMC, Essentials; Club 18-30; Skytours; Thomson, Summer Sun; Thomson, Small and Friendly; Thomson a la Carte; Club Freestyle; Portland Direct; Just; Virgin, Summer Sun; Sovereign, Summer Sun; First Choice, Summer Sun; Eclipse, Summer Sun; 2wentys. [iv] Sinclair et al (1990) point out that hotel rating is a gut indicator of the services and facilities that the hotel offers. [v] Conselleria de Turisme (2000)\r\n[vi] Govern de les Illes Balears (1999) â€Å"El turisme a les Illes Balears, dades informatives, any 1999”. [vii] In each of the boxes, the central line\r\nindicates the median of the distribution, while the height of the box represents the inter-quartile range, the area is proportional to the frequency of observations. The feet extend (at most) up to 1.5 generation the inter-quartile range, aiding the detection of observed extremes (marked as circles).\r\n'