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									     Tourism Economics

Chapter 6: Economics of Other Tourism

               TRM 490

         Dr. Zongqing Zhou
  Chapter 6: Economics of Other
       Tourism Sectors              (1)

• Overview
  – A multibillion dollar business
  – Controlled by Major Rental Companies: Hertz,
    Avis, Budget, and National
  – Has financial or ownership relationship with all
    three major US auto companies
  – Hertz, Avis, Budget, and National control
    about 80% of the US market in terms of
    number of locations (see figure 6-1 for
   Chapter 6: Economics of Other
         Tourism Sectors
• Revenue and profit sources
   – Difference between prices (30% or more discount) paid for cars
     and prices the cars are sold for after being used by customers
      • Some auto manufacturers own parts of rental car company (Ford-
        Budget rental car; GM-National rental car and Avis; Chrysler-Thrifty,
      • A chance to showcase new cars
      • Car typically sold at under 20,000 miles to ensure maximum profits
   – Factors affecting car rental economics
      • General economy (rising and falling as economy moves up or down
   – Major costs
      • Purchase or lease of automobiles
      • Cost of borrowing money
      • Labor costs
   – Measurement of a company’s perfermance
      • Fleet utilization (see Fig 6-2, p. 115)
Chapter 6: Economics of Other
      Tourism Sectors

– Cruise Line Economics
   •   Rapid growth since the fly/cruise introduced in 1971
   •   The fastest growing business in the travel industry
   •   Carnival cruise lines is the biggest and most profitable
   •   See the latest development in the industry here
– Costs
   • Once the breakeven point is reached, marginal cost of an
     additional passenger is low
   • Food cost does increase as number of passenger increases,
     but labor costs for service personnel increases very little
   • Wages and salaries remain fixed, tipped employees’ income
     increases at no cost to the ship.

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