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600 transportation pricing
transportation pricing
Many transport carriers rely on `cost plus' methods
in which a carrier finds the unit expense for a
particular journey and adds a mark-up to provide
for a profit. Alternatively, many carriers use a
marginal costing approach which is concerned
with the contribution �selling price minus marginal
or variable cost) earned from each unit of sale. In
both cases, the pricing approach is tempered by
market conditions.
Fixed costs or overheads are wholly inescapable
in the short-run, such as administration, marketing
and reservations, leases on buildings and cost
of utilities. These are paid even when the carrier
has empty seats. The level of fixed costs may also
be route-related as with crew salaries and expenses,
fuel, maintenance, payments to regulatory bodies
�air traffic control, customs and excise) and
terminal operators who provide terminal facilities.
Variable costs are normally linked to the number of
passengers carried, such as with meals, baggage
handling and ticketing.
However, pricing is not as simple as that since
not all services will be full, and generally carriers
who offer scheduled �published) services operate
them no matter how many passengers wish to
undertake the journey. Carriers need to determine
how many seats on a service they could expect to
sell in order to reach a breakeven point. In order to
do this an airline, for example, will examine
historic booking profiles to determine expected
load factors.
Passenger load factors can be maximised by
strategically releasing seats available at promotional
fares into the reservation system,
especially for leisure tourists. Normally business
people require flexibility in their itineraries, but
such flexibility comes with a price attached. The
lower the price of a ticket, the less flexibility a
passenger has in relation to refunds, changes and
duration of stay.
On high-density routes competition will be
greater, forcing down prices and in effect forcing
up service levels. Carriers need to remain competitive
by matching the prices of their rivals, offering
special deals, loyalty schemes �see frequent flyer
programmes), or adding value to their services
to attract customers. Predatory pricing, or the
undercutting of competitors to an unsustainable
level, has been used previously to drive rivals out of
the marketplace. High usage of equipment will
reduce unit expenses and many carriers will try to
maximise such use. However, this can mean that in
the event of equipment breakdown a substitute
vehicle may not always be available.
THRINE Â HELY, UK
transportation service quality see quality;
transportation service
travel
Travel involves movement from place to place.
This is a fundamental aspect of tourism, and in its
absence there would be no tourism. Improvements
in the ease of travel have greatly increased the
magnitude of tourism and have influenced the
forms which it takes. In fact, many forms of travel,
such as walking, canoeing, rafting, horse-riding,
skiing, driving for pleasure and snowmobiling, are
tourism activities in their own right.
Although sometimes used synonymously with
tourism, travel is a broader concept. There is a
diversity of types of travellers, such as migrants or
exchange students, not all of whom may be tourists.
Both travel and tourism involve the movement of
people between origins and destinations along
connecting routes. However, depending upon the
distance travelled, whether borders are crossed,
length of stay at the destination and motivations,
travellers may or may not be considered to
be tourists. Furthermore, the application of such
criteria may vary from situation to situation,
making the distinction between travellers and
tourists imprecise.
There may also be temporal and qualitative
differences in the meanings ascribed to travel and
tourism. Thus, there is a tendency for some to refer
to people moving individually and in small groups,
and in periods prior to mass tourism, as
travellers in contrast to the more ubiquitous and
larger scale of modern tourism. At the extreme,
tourism is used as a disparaging term ascribed to