Theoretical aspects of integration

Integration is a combination of technologically homogeneous productions (horizontal integration) or productions, forming a unified technological chain, from processing raw materials and ending with the release of finished products (vertical integration). In tourism, as in other industries, there are different ways of integration from the takeover of a competitor to the acquisition of its controlling interest. Cross-ownership of the shares of different companies, consolidation of efforts in the field of management, conclusion of contracts on a consortium are widely practiced.

They make integration more flexible and therefore get the dominant importance in the tourist industry. With this is connected one more feature of integration in tourism. The tourist company has more economic advantages due to economies of scale, if it is expanded not by increasing production at its sole enterprise, but creating a chain of economic units. This approach simultaneously meets the needs of customers. First, these chains "pull" the spatially separated regions that generate tourist flows, and the destinations that receive them. Secondly, it is better to produce a whole tourist product in parts, which corresponds to its comprehensive perception by consumers, than to concentrate efforts on rendering one type of tourist services.

Integration has several varieties. The earliest form in tourism, which has not lost its relevance today, is horizontal integration. She owes her appearance to the first hotel chains. Tourist enterprises, located on the same stage of the technological process, i.e. producing the same products or providing similar services, are combined in order to obtain economies of scale, increase the volume of supplies or sales, restrict or eliminate competition. Each enterprise individually either feels a lack of capital, productive capacity and marketing resources for further independent activity, or is afraid to take risks, or sees in the alliance with other enterprises considerable benefits for themselves. The economic advantages that large enterprises receive have become apparent with the transformation of tourism into a mass phenomenon of the present. Along with the growing demand for travel, a wave of horizontal associations was rising. On air transport, horizontal integration is dictated more by the desire of airlines to retain customers in sharply competitive air transport markets than to achieve economies of scale. It takes simple forms: partnership, the exchange of identification codes between airlines, joint advertising activities. Absorption by one carrier of another is less common, since it is associated with a large capital outlay.

Horizontal integration contributes to the more efficient use of aircraft fleets (mainly to reduce vehicle downtime through joint operation), significantly increases the number of route combinations, provides access to new marketing channels, in particular, expands the use of global computer reservation systems. The foregoing basically refers to the hotel industry and other sectors of tourism, where efficiency is understood as establishing control over consumer demand in order to bring it into line with a fixed offer. Hotel and accommodation chains benefit from centralized management and joint marketing efforts, including the creation of common marketing services.

Unlike air travel and hotel business, tour operator and travel agency activity is characterized by low capital intensity, therefore among intermediary’s horizontal integration processes often take place in the form of mergers or through the acquisition of controlling stakes. The overwhelming majority of large tour operators and travel agencies thus created remain within national borders, and only a few form wide international chains.

Horizontal integration in tourism should be distinguished from the vertical one. The greatest effect it brings in the sphere of distribution. As a result of integration, vertical marketing systems are created that challenge traditional sales channels. In the usual commodity-distribution chain, each link is a separate independent enterprise, striving to secure the maximum possible profit, even to the detriment of the structure as a whole. When moving to a vertical marketing system, existing actors (producers, wholesalers and retailers) do not change, but they act as a single organism. In this case, one of the members of the channel has the economic power to ensure their cooperation. The dominant force within a vertical marketing system can be either a producer, or a wholesaler or retailer.

Vertical marketing systems have emerged as a means of controlling the behavior of the marketing channel and preventing conflicts between its individual members pursuing their own goals. They are economical in terms of their size, have great market power and exclude duplication of effort. Vertically integrated marketing channels are widely used in tourism.

The initiative of their creation often comes from large tour operators who open their own agent offices, or from suppliers of tourist services. Airlines are showing increased activity here. They penetrate into adjacent areas, pushing the scope of the supply chain in the "direct" direction, to the consumer market (buying a tour operator or travel agency), or "backwards" to sources of raw materials (buying food for air passengers). Ultimately, airlines concentrate in their hands the management of the entire technological process of production and sales of tourist products.

The introduction of air carriers in the field of tourism companies is a characteristic feature of the modern stage of the development of the travel industry. Along with the tour operator and travel agencies, air carriers penetrate the accommodation sector, including in the processes of complementary integration. Since the 1970s, almost all the world's leading airlines are engaged in the hotel business. United Airlines and American Airlines, Lufthansa and KLM, British Airways and CAC, Swissair and Alitalia invest in the construction and acquisition of operating hotels, initiating the creation of hotel chains.

A similar policy is pursued by enterprises of other sectors of the tourism industry. Hotel companies penetrate the catering sector. Tour operators purchase hotels and motels to guarantee the placement of their customers, using this fact as a strong argument in favor of the packages they offer. Tourist groups often unite with motor transport enterprises in order to increase the reliability of land transfers and the implementation of excursion programs. They can also create entertainment objects to attract consumers.

Economic integration - the process of economic interaction between countries, leading to a rapprochement of economic mechanisms, taking the form of interstate agreements and coordinately regulated by interstate bodies.

Integration processes lead to the development of economic regionalism, as a result of which certain groups of countries create more favorable conditions for trade, and in some cases also for inter-regional movement of factors of production than for other countries. Despite obvious protectionist features, economic regionalism is not considered a negative factor until it worsens the conditions for trade with the rest of the world. Prerequisites for economic integration are comparability of the level of market development of the participating countries, their geographical proximity, the commonality of the problems facing them, the desire to accelerate market reforms and not stand aside from the ongoing integration processes.

Integration contributes to the following objectives:

• •    Taking advantage of economies of scale by expanding the size of the market, reducing transaction costs, etc.

• •    Creation of a more stable and predictable environment for mutual trade, as well as a favorable foreign policy environment, strengthening of mutual understanding and cooperation of the participating countries in political, military, social, cultural and other non-economic areas.

• •    Creation of a block of countries for participation in multilateral trade and other negotiations

• •    Promoting the structural reorganization of the economies of countries that carry out deep economic reforms, when they are connected to regional trade agreements with countries that are at a higher level of market development

• •    Maintaining young branches of the national industry, for which in this case there is a wider regional market