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

Abstract In this stem we view a sample of encase limp worths of German and British hindrance streetwalkers in the Balearic Islands. One of the proposes of this study is to analyse if there ar crucial differences in expense between check promoters callable to different factors than those associated to the characteristics of the flip ( number unmatched hypodissertation). These differences in worth sw acknowledge for been showed in Sinclair et al. (1990) by British check operators in the resort of Malaga and in Aguil et al. (2001) by German check operators in Majorca. The briny results speckle out differences in expense between hindrance operators non associated with the characteristics of the big bucks disco biscuits stretch out, that we interpret as an oligopolistic feature of the twist operators commercialise. The genereted data is also useful to forecast the use that hotel bondage play. Our wink hypothesis is to contrast if the knowledge of hotels in range of a functions offset the play operators securities industryplace precedent.Keywords German and British excursion operators industry Balearic Islands piece of land magical spell prices. groundworkThe Balearic Islands could be one of the regions that best symbolised the Mediterranean sun and b all(prenominal) spends. This graphic symbol of arrestistry emerged in the 60s and supposed a ricking draw a bead on in the evolution of pieceism. Before this date a couple of(prenominal) encumbranceist get winded the islands and all of them were of the upper class, afterwards 1960 the middle and lower class ass afford vacations collect to several(prenominal) economical and cultural exchanges. One of the intimately burning(prenominal) changes was the serving ecstasy made by whirl operators, who collect to the volume and standardisation of the packages generated economies of scale, and so, lower prices to holidaymaker who be pay off to arrive in circle. Eu ropean consumers showed a growing tendency to this role of vacation, partly due to lower prices that, for the corresponding final product, could offer patch operators ( go away and tourismIntelligence, 2000). This lower price is the result of a bulk dialogue with the different elements that constitute the package tour, essentially hoteliers and airlines. In the present story, we will focus on the talks with hoteliers, as the main European tour operators argon vertically integrated with charter airlines. The lack of studies on hoteliers-tour operators price negotiation is due to the non-availability of data cogitate to this theme. So, although we consider that empirical evince is necessary, our last choice was to arrange several interviews with different hoteliers to know or so the price negotiation with tour operators. The results of these interviews highlight that operators who contract more directions beds atomic number 18 those who get lower prices. Obviously, thos e operators are the lifesize ones. So, we mickle start from the premise that grownup tour operators relieve oneself mart power on mass finiss. The main purpose of this paper is to study prices that tour operators insure on the package tour brochures in ball club to determine if they last in a competitive or oligopolistic discoveretplace place. If in the decline market operates under perfect competition, tour operators could fix a marginal-cost price, on the former(a) hand, they could fix a price above the marginal-cost without losing market share if the origin market is oligopolistic. Anyway, the existence of economies of scale in exchanges, marketing and purchasing, mean that there are conditions, which strongly prefer tightness in the tour operator industry (Williams, 1996).Both German and British tour operators reign the European market in 1999, as seven of the ten main tour operators are of these nationalities (FVW Europische Veranstalter in Zahlen, documentation 1999/2000). Moreover, in from each one country tremendous tour operators turn out great market shares in 1999 the seven large(p)r German tour operators care up a 83% market share (FVW), whilst the iv main British tour operators control the 86.6% of the Spanish market (AC Nielsen). On the other hand, the Balearics attract large numbers of German and British tourist, accounting for 70% of the total of foreign tourists in 2000ii and as exposes Williams (1996) the refinements that are dependent on the British and German markets are in fact locked into relativeships with the powerful tour operators in these countries. The root propose (hypothesis 1) of this paper is to contrast the market power of these companies when selling the Balearic Islands. By the way, the hotel imprisonment in the Balearic Islands, as an association of hotels, can negotiate lower prices with tour operators than an individual hotel, and thus, can offset the power of tour operators in the Islands. This is the last point (hypothesis 2) that we want to analyse in the paper. Dunning and McQueen (1982) argued that there are third conditions for the emergence of international hotel chains 1) where there are net ownership advantages 2) where there are locational endowments 3) to assign market transactions. In mass tourism the authors argued that the first deuce conditions do non exist, as the tourism product being sold is largely indifferent to branding and location factor endowment. We do not thing that mass tourism and hotel chains may not be held concurrently, as most Balearic hotels chains pass water internationalise and nearlywhat of them are between the most important in the world. Resuming, in this paper we will examine the German and British tour operators industry through the synopsis of the package tour prices on the Balearic Islands and the roll that hotel chains play. The evidence that price could give is not enough, but a intestine approach to analyse the tour oper ators package tour industry. The paper is divided as follows in the attached section, we first review the literature concern to tour operators, then we describe the data used in the paper. After that, we show some descriptive results of the package tour prices, in order to identify the beguile of some relevant characteristics of the package tour on its price. Then, an analysis of fluctuation is done to evaluate the statistical significance of the shiftings detected as significant in determining the price of package tours and finally some observations on the package tour industry are offered before reaching an boilers suit conclusion.LITERATURE palingenesisThere are implicit statements between those who work on the tourism sector, that tour operators dominate mass destination markets and although there are numerous assertions of the wideness of tour operators, there has been little detailed enquiry on this topic. We intellection that the package tour industry analysis is stil l at its beginnings, despite its relevancy in most of the European markets. Several researchers aim discussed the structure of this industry, but the conclusions in some cases piddle turned out to be contradictory. Sheldon (1986) argues that the US package tour industry is polarised into a few large stable buckrams and many subatomic less stable firms, and reason that the industry is contestable. 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 inclined(predicate) 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 throw enormous buying power (monopsony) as well as considerable control of the distribution and sale of their product in the market place (monopoly power). The above papers are base in theoretic arguments. Evans and Stabler (1995) use descriptive statistics to argue that the UK industry is divisioned according to strategic groupings, where the large firms are oligopolistic and the small ones are competitive. Gratton and Richards (1997) introduce some empirical evidence on package tour prices and tour operators market shares. They conclude that the UK package tour industry is contestable, whilst the German is a stable oligopoly.Davies 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 size. On the other hand, there are some papers that study the tour operators industry in destination places rather than in the origin markets Taylor (1995) analyses the package tour price competitiveness in several Mediterranean destinations and concludes that the Spanish hotels are price acceptant, and em phasises the high tour operators negotiation power. Sinclair et al. (1990) examine the package tour prices in Malaga and conclude that there are significant differences in prices between UK tour operators. Aguil 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. Furthermore, due to the antimonopoly legislation, some concentrations between tour operators pose been analysed by The Monopolies and Mergers relegating (the British authority on mergers and concentrations) and the European explosive charge (the European authority on mergers and concentrations). In 1988 The Monopolies and Mergers Commission investigated the learning of Horizon transit by Thomson Travel Group and reported that the British tour operators market was competitive. They demonstrated thatwith the followings facts the price competitiveness of the market, low profitability, re latively easy entry by spic-and-span firm to the tour ope valuation industry and higher(prenominal)(prenominal)(prenominal) prices in Germany and other European countries. On the other hand, in 1999 the European Commission investigated and blocked the acquisition of inaugural pickaxe by bloodtours alluding to several features that indicated a prevailing vista on the British tour operators market. By the way, other acquisitions between tour operators of different nationalities investigated by the European Commission use up been expected not to operate a slangst the competition (Airtours/Frosch spellistik and TUI/Thomson). At this point, we consider that the European Commission do not investigated the market power that this macro European tour operators can have in a nearly future on some destinations, as the Balearic Islands, where almost 20% of the tourist are carried by Thomson and TUI, nowadays belonging to the same touristic group.THE DATAThe data used in this paper is fro m 28 German and 20 British tour operators summer 2000 brochuresiii. The brochures describe in detail the characteristics of each offer (hotel category, proximity to beaches, liquid pool, etc) and give an overall price, not giving a price to each element of the offer. Many of the characteristics described in the brochures are related to the hotel star valuationiv, regulated by law. thus far it should be stress that the star rating dont constitute 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 room, pass judgment of get on, proximity to a population centre, picturesque surroundings, lift, child forethought, playground, air condition, TV, SAT, garden, entertainment, no smoking areas, swimming pool, tennis, bicycles, sports, sauna, gym, golf, room sea view, mini hindrance, proximity to a intrinsic area, proximity to beaches, total rooms and floors of the hot el and grievous bodily harm 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 get on with, zone, etc) and of other facts, concretely transport cost, length and conviction of the socio-economic class. As in Aguil et al. (2001) we consider, from the point of view of price competitiveness, the influence on prices of products 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 scarce prices for the first week of August 2000 (high season) and with departure from Dsseldorf and Gatwick.The high season was chosen because that time of the year (May-October) is when more tourists visit the Balearic Islands. Nearly the 50% of the tourist that visit the Islands concentrate in the months of June, July and Augustv. The selection of the first week of August was arbitrary. The choice of Dsseldorf 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 touristvi. Comparisons between nationalities are workable because a charter races mean price from Gatwick or from Dsseldorf 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 statement is based in the fact that 8921 tour operators offers associated with 693 hotels were analysed, plot 713 hotels is the official number of registered hotels in the Balearic Islands. Furtehrmore, the fact that nearly 90% of hotel rooms are contracted by tour operators in the Balearic Islands allow us the inference of the results to the industry. abbreviation OF THE PACKAGE TOUR PRICESOur 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 role that hotel chains play in the last of package tour prices .We first realize a descriptive analysis, to accommodate on with an analysis of variance. Thus, allow us to discriminate the effect that tour operators and hotel chains have on prices, estimating if there are differences and the smorgasbord of differences.Descriptive analysisTour operatorsThe 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 compare prices between tour operators if the offers are homogenous. Hotel star rating, fictitious character 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 double room with half board in a tether stars hotel. Figure 1 and 2 present the box-plots of the price in this market segment for each tour operator for each nationalityvii. In figure 1, it can be seen that, Niag Reisens, FTIs and order Blaues Meers median price is in a range clear above the rest, while SLR and ger Tours, and TUI and C&N present similar distributions. Insert Figure 1 about hereIn the case of British tour operators, figure 2 shows that the positions of the price distributions have a clear order Airtours price distribution is above the rest, then go Thomas Cook and Virgin and finally, Cosmos, First Choice and Thomson are third in the ranking. Insert Figure 2 about hereA sleepless reading of this information allows the inference of factors other than hotel star rating, vitrine of board and number of beds in a room in price determination. Although other fact ors determining price are considered in the analysis of variance, these results point to a differential effect associated with the tour operator. Once we have highlighted the differentiation effect of tour operators, we carry on with its analysis. We dont have to forget that tour operators are intermediaries between the hotel industry and the holidays consumers. Its control efficiency of the market in a zone or in a demand segment could be reflected twain in hotels, through a low price negotiation, and with customs, oblation higher prices in the brochures. The first one, regrettably, can be estimated trough the data, but we can explain the possibilities that tour operators have when they establish the package tour price. If they have market power in destinations (we assume that large ones have) will reach lower prices per room. At this point, in general terms, tour operators have cardinal alternatives. First, theycan 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 attentiveness 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 degree 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 calculated 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, regarding the total number of offers in this segment. A 10.9% value for this variable to Neckermanns three stars hotel and half board offers, mean that the 10.9% of the package tours offers in three stars hotels and half board are realise by this tour operator. A dispersion graph between this variable and the mean pric e by hotel star rating and type of board are shown in figure 3 for British tour operators and in figure 4 for German. Insert Figure 3 about hereThe dispersion graph shows a positive relation between Product concentration degree and the average price by star rating and type of board of British tour operators offers. The Pearson coefficient (0.384) confirms that the relation is significantive and positive. Insert Figure 4 about hereThe same results are buzz offed 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 both nationalities is that as the Product concentration degree 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 devil 1) There are differences in price among international companies. 2) As the control of a market segment by a to ur operator increases, it can fix higher prices. Hotel chainsThe association of hotels in chains is seen, among other factors, as an intention to offset the European tour operators growing market power(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 harmony with ttoo which takes three categories 1) the hotel doesnt belong to a hotel chain, 2) the hotel belongs to a hotel chain and it have some kind of agreement with tour operators and 3) the hotel belongs to a hotel chain and it have any agreement with tour operators. Once we have buzz offed 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 abide by that offers in hotels that belong to hotel chains are more expensive than those related to offers in hotels that dont 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 hold over 1 misbegotten price for German package toursMean price No chain stove without agreement range of a function with agreement (92985) (93257) (90827) No chain -272 2157 (0.7) (0.254) Chain without agreement 2430 (0.06) put back 2 Mean price for British package toursMean price No chain Chain without agreement Chain with agreement (149896) (148909) (139707) No chain 986 10189 (0.7)(0.03) Chain without agreement 9202 (0.01) remands 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 truly explicit and present the same pattern in both nationalities, offers in hotels that belongs to hotel chains with agreements with tou r operators have lower average prices than those that dont have agreements or dont 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 saltation of the 5% significance, the price average difference between hotel with agreements and those that dont belong to a hotel chain is not significantive. On the other hand, there are non significantive average price differences between hotels that dont 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 occupancy rates than higher prices, that can mean lower occupancy 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 hotels a ssociated with tour operators will also presumably be able to object 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 survey unexpected, but relevant as the package tour prices fixed in the brochures, reveal that what involve negotiation power is not the hotel chains per se, but the association with tour operators.Analysis of varianceThe analysis of variance will allow us to compare the importance that different characteristics of the offer have on the overall price, as well asdifferential effects linked to the tour operator and hotel chains. The first one was detected in preliminary works as Sinclair et al. (1990) and Aguil et al. (2001), while the second one is a new attribution to this field. Its seems appropriate to consider, given the previous results, as determinants of the package tour price the hote l star rating, the type of board and the number of beds in the room. Although the main characteristics of the package tour are covered by this variables, the brochures learn in detailed each offer and this information is available in our data to improve the analysis. virtually of this can be superfluous, in terms of its relationship to the category of the hotel 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 say about the final price of a package tour. With this specification, the signification of tour operator cant be put down to characteristics of the offer not completely covered by the hotel star rating. The variable used to analyse the differences was the price of the package tour specified in the brochure. set back 3 f or British and in table 4 for German show the results of an analysis of variance of the variables that turn out to be significant.Table 3 Analysis of variance of the variable price of British package tour. Dependent Variable price Source DF F-ratio PrF Model 44 281.67 0.000 Residual 2297 Total 2341 R jog=0.841 Variables DF F-ratio PrF Intercept 1 5157.82 0.000 Beds in room 2 291.38 0.000 Hotel star rating 4 210.05 0.000 Type of board 3118.78 0.000 Tour operator 14 89.09 0.000 Zone 10 35.64 0.000 Product concentration degree 1 20.61 0.000 amount 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 Proximity to a natural area 1 44.20 0.000 Swimming pool 1 37.23 0.000 Sauna 1 64.95 0.000 Golf 1 18.98 0.000 Table 4 Analysis of variance of the variable price of German package tour. Dependent Variable price Source DF F-rati o PrF Model 58 323.94 0.000 Residual 6467 Total 6525 R square=0.742 Variables DF F-ratio PrF Interseccin 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 Room sea view 1 187.33 0.000 Air condition 1 10.82 0.001 Mini bar 1 78.96 0.000 Sat 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 As can be ascertained 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 great control of a market segment by a tour operator in the Balearic Islands allow it to exert a gre at market power fixing higher prices and thus, reveal the oligopolistic features of this market. The identity of tour operator appears for both nationalities significantive. Aguil 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 fictional character of the go offered by the tour operator. The second explanation 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 advertising campaigns or the inability of smaller companies to take advantage of the economies of scale that the large ones enjoy. The first explanation of Aguil et al. (2001) refers to variables as flight schedules, degree of attention, and so on. In our sample this factors has been taken into account. So, the rest of explanations given by authors to this fact reveal, in a wide ran ge, an oligopolistic feature of this market, especially among large tour operators, that permit them to have different strategies one another. Obviously the specific dodging 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.Table 5 Tour operators estimated parametersPhoenix -10370 Thomson-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 Club Blaues Meer 1166 Frosch Touristik 5070 Niag Reisen 6346 ger Tours 9518 German 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 medium Dertour, FTI and ITS and small Alltours, Club Blaues Meer, Niag, ger, Phoenix and SLR. However, British data is composed by large tour operators Thomson, Airtours, Thomas Cook and First Choice and medium Cosmos and Virgin. Although the mark up of each package tour sold 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, except Phoenix and Alltours. This fact is due to its lower capacity of negotiating prices with the supply 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 reducing prices. That is, TUI can fix higher prices without losing market share.The 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 hasbeen 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 dont have the great negotiation power that large ones have, and so, dont obtain low prices in the negotiation with the supply 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 acquisition by Airtours. This problems can be associated with the high price fix in summer 2000. Alltours, despite its categorisation as a small tou r 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 behave 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 supply side and obtain the lowest prices in the negoti ation, 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 theory 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 delimitate to be positive. ThuspicAt this point, we consider that the introduction of an aggregate measure of the competitive conduct in the tour operator industry is a great deal (See Papatheodorou, 2001), but we go further list that tour operators perform in two related but different scenarios destination and origin countries. In the Balearics Islands tour operators are the demand side and the hoteliers are the supply side. Tour operators are price sensitive, 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 descend where to expend their holidays 1) Type 1 consumers dont 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 really 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 ones can rise its mark up, whilst the second ones obtain a loyal tourism. Although, the mass market tour operators industry as a self-coloured is characterised by small margins, this differentia tion 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% independently 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 attend of a type 1 consumer if the reason of visiting the Balearics is the price, so we have to carry on investigation the reasons for the visits. Aguil 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 hot el quality (13.4%), transfer facilities (7.4%) and price (6.7%).British 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 find by another perspective, specifically, by the number of people 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. footing 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 atmosphere (22.5%) is more important for Germans than for British people (12.6% and 15.5% respectively). Furthermore, Cladera (2002) an alyses 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 spending 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.CONCLUSIONSThis paper has had two main objectives 1) Examine the influence on the package tour prices of the identity of the tour operator. 2) Determine the role that hotel chains play on the dete rmination 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 togain 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 each 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 detrime nt of consumers and destinations. Relative 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.ANNEXFigure 1 Package tour prices for offers in a double room with half board in a three stars hotel by German tour operatorsFigure 2 Package tour price for offers in a double room with half board in a three stars hotel by British tour operatorsFigure 3 British tour operators dispersion graph b y star rating and type of boardFigure 4 German tour operators dispersion graph by star rating and type of boardBIBLIOGRAPHYAGUIL, P.M, J. ALEGRE y A. RIERA (2001) Determinants of the Price of German Tourist Packages on the island of Mallorca. touristry Economics, vol.7, issue 1, pp.59-74. BARDOLET, E. (1990) Demanda Turstica y Marketing Turstico. Papeles de Economa Espaola, vol. Baleares, pp. 219-230. BAUM, T. y R. MUDAMBI (1994) A Ricardian analysis of the fully inclusive Tour Industry. 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Wallingford CAB International.END NOTESi Los tres profesores son miembros del Departament dEconomia i Empresa de la Universitat de les Illes Balears. ii Govern de les Illes Balears (2000) El turisme a les Illes Balears, dades informatives, any 2000. iii Terramar, Spanien und Portugal Neckermann, Young and Sport 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, Jet 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 Schnen Ferien TUI Schnen Ferien lighten World ger Tours,Sommer 2000 Club Blaues Meer Reisen, Mallorca Shauinseland Reisen, Belearen Niag Reisen, Mallorca Phoenix, Flugreisen Sommer 2000 Airtours, summer insolate Archers Direct, Summer Sun Price Beaters Cosmos, Summer Sun JMC, Summer Sun JMC, Select JMC, Essentials Club 18-30 Skytours Thomson, Summer Sun Thomson, Small and Friendly Thomson a la fare 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 operate and facilities that the hotel offers. v Conselleria de Turisme (2000)vi Govern de les Illes Balears (1999) El turisme a les Illes Balears, dades informatives, any 1999. vii In each of the boxes, the central lineindicates 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 times the inter-quartile range, aiding the detection o f observed extremes (marked as circles).