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Insider's look: why does defining "package" matter?

by Tom Johansmeyer (RSS feed) on Jul 8th 2009 at 3:00PM

For the average traveler, definitions don't matter much. You figure out the type of trip you want to take, whip out your credit card and do the deed. It's really pretty damned simple. But, for every purchase you make, there are countless eyes watching. Nothing nefarious is going on; it's all actually quite innocent. When you think about how many people rely on your willingness to open your credit card – and how the travel market as a whole is being beat to hell this year – it makes perfect sense that the industry will watch, analyze and try to find new and interesting ways to get you to lay out some cash for travel.

For the business, definitions are incredibly important. When they look at where the money is going, how a particular trip is defined allows these insiders to communicate, develop strategies and invest in different excursions. If one guy says, "Packages are hot," and another doesn't define packages the same way, limited resources will be wasted. When money is pissed away, there isn't as much available for discounts and other promotions. So, nailing down the lingo actually helps you in the end.

What's at stake in all this? Well, according to travel industry research firm PhoCusWright, just over $18 billion. Yeah, it's in bold for a reason. This is a hefty chunk of the total U.S. travel market, but it's also among the most difficult to understand. There are nuances that mess with the vocabulary. I spent some time as a strategy analyst covering this industry, and sorting out the details is an absolute nightmare.

So, if you're at all interested in the business of travel, take a look after the jump at the different flavors of "package." I know there have to be a couple of geeks like me out there who find this stuff fascinating.

Okay, you made it past the jump! You're one of the devoted. So, let's get into the weeds. PhoCusWright has a solid definition of package: "a travel reservation containing at least two of the three major travel components (flight, accommodation, car rental) where there was a single booking and payment transaction."

This isn't exactly brain surgery, until you think about the different ways that you can pull this formula together. There may be other components, including transfers, day tours, activities, meals and travel insurance. Is an all-inclusive a package? According to this definition, it is. But, you're really just booking the resort, rather than using a service to pull together the different parts from several vendors. It can get muddy fast.

A package (or, "vacation package") may include: flight, accommodation, rental car or transfer, day tours or activities, meals and travel insurance.

A charter, on the other hand, is "a flight where the tour operator takes risk on the inventory (or owns the plane) and, usually, sells the seats as part of a package."

This, of course, differs from "escorted tours," which "usually include more travel components and have fixed departure dates."

If you're looking for a definition of "FIT," go for the most recent. It used to translate to "foreign independent travel," which consisted of "leisure trips abroad without an escort or fixed package structure." This has changed, however, and now refers to "flexible independent travel." The parts may look like a package, but the itinerary is built specifically for the traveler.

And then, there's group travel. This consists of both packages and FITs for groups of leisure travelers, with "group" starting at nine people. But, it can vary.

Got a handle on all this? Let's make it worse.

There are also a number of package providers. "Total vacation packagers" (TVP) is used for all tour operators – but not the online packaging conducted by the major online bookers (like Orbitz). A tour operator provides all kinds of packaged travel, with "escorted operators" a subset that focuses on specialty programs that can become pretty complicated. Online packagers aggregate and sell (duh) online, and wholesalers bundle and resell different products as packages, even if there's no common theme.

Click here if you're in the biz and would benefit from buying the full report.

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Reader Comments (Page 1 of 1)

Joe Buhler Jul 8th 2009 3:52PM

Tom, that's just about the most entertaining way I've seen the business I've been spending my career in described. No wonder Joe & Jane Traveler don't understand how it all works, and why should they, as long as they had a wonderful trip and got what they expected.

What your post and the study highlight, however, is how complex the inner workings of this huge industry and the global business relationships are that make it at all possible to deliver all the services necessary for that quality vacation experience and why sometimes things can go wrong along the way when not everyone fulfills their responsibilities. Actually, pretty amazing how well it functions overall.

Douglas Quinby Jul 8th 2009 5:06PM

Nice explanation of a complex topic -- you outdid me (report author).

Just can 'tresist adding a couple of twists for fun. Packaged travel used to be the domain of tour operators and "vacation travel." But the online travel agencies changed that with the "book together and save" idea. So you can buy and benefit from a package whether you're vacationing on a beach in Cancun, visiting Aunt Sally in Omaha, or traveling for work even. So "packaged travel" is potentially about a lot more than "vacation packages." And consumers often buy a "package" from an OTA, and don't even realize that it is, in fact, a package.

Then things get really interesting if we open up the conversation to include basically any itinerary where more than one major travel component is involved, regardless of how the component was purchased or at what point in the process (when). So, for example, flight on Delta.com and hotel on Priceline. Or even if the two or three components were purchased from the same source, but a few weeks, days or even minutes apart. Suddenly the market opportunity doubles or, more likely, triples. (We'll have to leave that for the next report, though).