REC 280 MIDTERM 4.docx

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Department
Recreation and Leisure Studies
Course
REC 280
Professor
Stephen Smith
Semester
Winter

Description
Chapter 10 – Travel Services - Travel services comprise a major component of tourism’s sales force - Travel can be sold at wholesale level by tour operator or wholesaler, or at the retail level by a travel counsellor - Commission: pay the retail travel counsellor - Override: volume incentive for retail travel counsellor - Tour operators sell packages through retail travel counsellors and are restricted to selling travel arrangements that they have contracted for ahead of time - Travel counsellors are able to sell all types of travel anywhere - Over 41 000 Canadians work in this industry and are hithly educated - Beginning of tours can be traced back to early 17 century o Early noblemen from England arranged educational tours for their sons and heirs o Le grand tour designed to educate sons in the ways of a civilized world - First recognized packaged tour was developed by a minister (Thomas Cook) o Arranged transportation by rail, small picnic lunch, and entertainment for his followers and at the end of the day, he found he made profit o Formed first travel agency - Early tours individually designed and were affordable to the wealthy only - Tours are less expensive than booking transportation, lodging, and attractions separately but cost is a known figure from time of booking o Prepaid so traveller won’t worry about running out of money o Entrance to sights is guaranteed because admission fees have been prepaid, and sights have been chosen for their safety and appeal by travel professional - Tour wholesaler: traditionally went from one travel supplier to another, booking space for their tours o No money exchanged until an actual purchase took place o Most suppliers requested a pre-purchase by mid-1960s - Tour operator: became companies willing to invest in advance, purchasing all the components of a tour prior to packaging it o Ex. Sunquest: sells as wholesaler – selling individual products to retail agencies Sells as tour operator – selling complete tour packages, including services of destination representative - Consolidator: act as wholesalers or intermediaries between airlines and travel agencies and pay commission on tickets sold o Most airlines no longer pay commissions to travel agencies, so the consolidator becomes and additional source of agency revenue o Purchases a large amount of airline seats at a bulk price and sell seats at net price to travel agents, who pass the savings to customers o Ex. Aventours: one of Canada’s largest consolidators - 5 types of tour operators in Canada 1. Independent tour operator: category that includes large corporations such as American Express or individual operators such as Sunquest 2. Travel agency: packages tours and sells them to clients 3. In-house tour operator: owned and managed by a large company such as Air Canada 4. Strictly online tour operator: do not provide brochures or sales representatives, but appeal to travellers looking for savings and comfortable with online exchange 5. Focuses of clubs, associations, and incentive travel groups: packages must fit special needs of groups and may deal with special concerns - Inbound tour: brings guests from a foreign country to Canada, generating jobs and revenue for Canadians - Outbound tour: when Canadians travel outside and their tourism dollars are being spent in a foreign country - Tour: the services on a tourist’s itinerary, usually consisting of, transportation, accommodation, transfers, and sightseeing in one or more countries, geographical regions, or cities - Two majors categories of tours o Independent tours: choose to create their own independent tour do so through travel agent and tour wholesaler  Choose between assorted components offered by tour wholesaler  Arrangements can be made at any time of the day or night, and websites guarantees flexibility for the purchaser o Packaged tours: may or may not have an escort and are sold to individuals as well as to groups  Internet provides customers with fully designed packages that may be booked at any time  Companies that sell this type of tour generally focus on one type of traveller: single traveller, the economy-minded traveller, or the higher value traveller - Budget-minded traveller: would choose from tour operators like Sunquest - Higher value traveller is willing to spend more on the trip and looks for quality sites and products to be supplied o Ex. Exodus Tours – British-based tour operator - Four steps to create a tour: o Tour idea: every tour has to be a new one  After its first venture, the tour can be offered time and time again if it was initially successful  New ideas require creativity and the ability to listen to what people want  Idea may come from a supplier who provides a super deal for accommodations if the operator books a trip to the supplier’s hotel  Market research required to determine whether there is a need or desire for the tour concept  Most tours developed around central theme or destination  Theme or destination is the skeletal plan, which the planner must flesh out by providing other interesting or exciting reason for people to take the tour o Negotiations: once destination and other attractions are chosen for inclusion in the tour, negotiation phase of planning begins o Costing and Pricing: costing is the process of determining the total cost of providing the tour for an anticipated number of customers  Pricing is the process of deciding the amount each customer should pay to cover costs, including markup, operating expenses, and profit  Direct cost of each component must be determined and then indirect costs (i.e. promotion, tour planner’s salary) are added  Correct costing requires accurate assessment of certain variables, usually projected based on past experience and projected load factors  Several factors will affect price to consumer 1. Meal Costs: tour operator can significantly lower cost of tour if traveller pays for each meal 2. Accommodation Type: level of accommodation affects price of tour – economy tour book less expensive motels, deluxe tours are booked with finest hotels with good locations 3. Length of stay in principal cities: deluxe tours spend more time at a principal destination because it should be relaxing  Free time allows individuals to pursue specific interests, explore destination, shop or relax 4. Sightseeing: built-in sightseeing increases tour cost 5. Attractions: cost of tour is higher when admission fees are included in tour price but inclusion saves traveller money because of group discounts negotiated with the attraction manager o Promotion: without good promotion, even the best tour product may find itself without customers - Two main types of tour categories 1. Independent tours: travel counsellors and tour operators can arrange independent tours, but customers may create their own vacation packages by using one of the many online tour companies o Travel agencies know the reputation of the chosen tour company, destination’s political or environmental atmosphere and can accurately provide information on documents and pre-trip medical advice that should be sought o Customers can determine departure and return dates as well as budget o Vary in flexibility and complexity o Independent tours may use more than one tour wholesaler in the creation of the package, and a distinct disadvantage of taking and independent tour is that you are on your own 2. Group Tours: club or society that wished to take a trip o Traveller used to have to be a member of the group to take part o Main difference between group tour and independent tour is the cost o Group tours usually based on given number of participants and may be cancelled or delayed if required number of spaces for departure date has not been sold o Ground/land package: include land arrangements for the purchaser but do not include airfare in the price o All-inclusive: have a specific combination of features, usually including transportation, accommodation, meals, attractions, special events, and service charges  Fully escorted tours: have a tour director travelling with group; tour director is responsible for participants’ safety and enjoyment  Step-on guide: have special training and deep knowledge of and love for their city, region, or site; presentation is more responsive to the needs of the group and gives reliable answers to their questions  Partially Hosted tour: group travels from destination to destination as a group, without company representative; a tour director from the city greets them and stays with them throughout the stay  Unescorted tour: group has itinerary and travels without any company representative - Tours may be defined by destination and by their focus on a specific country, region, or city - Tours defined by purposed are varied; examples: o Examples: adventure tours, religious tours, ethnic tours, educational tours, soft adventure tours, sports and recreational tours, ecotourism tours, special interest tours - Special needs tours: organized for groups of people with special medical problems - Incentive tours: created for a company as a reward for employees who have done outstanding work; considered gifts and are not taxable - Tours can also be defined by their duration; newest trend is a 3-day weekend tour o Fits into changing lifestyle of North Americans, who are taking shorter, more frequent road trips - Tour wholesalers provide a commission to the travel agency for each tour sold o Travel counsellors work for wholesaler but are responsible for helping potential travellers choose the right tour for them - Validity dates: tour brochures indicate when a tour is available at the stated price, including departure date from gateway city for international or charter tours o Counsellors should know these dates, as tour prices may change depending on season - Gateway city: point from which the flight will leave or where the client can join the tour o Travel counsellor needs to get the client to the gateway city on time for departure - Itinerary and Amenities: counsellors need to read all the fine print of the brochure to tell clients what to expect - Price: tour prices vary depending on season, modes of transportation used, length of stay, type of accommodation, number of meals provided, sightseeing and other activities that are pre-booked, and additional service charges o Travel counsellor must inform client of items included in the price, items that are optional at an additional charge, surcharges, and items that must be paid for by the customer - Name of the tour operator: client and travel counsellor need to know name of operator or wholesaler for further reference o In some provinces, it is a requirement to name the tour operator o When problems occur, travel counsellor should investigate in order to prevent recurrence - Travel counsellors and travellers are concerned about safety - Travel counsellor is responsible for relaying accurate and reliable information to the prospective traveller - Tour operators are regulated by many different organizations o Tour operator must obtain approval from National Transportation Agency before promoting and operating the tour if there is air or rail component o Tour operators are licensed by the individual province, and the interests of the purchaser are protected by provincial consumer affairs departments - Tour operators are required to have a special type of insurance policy called “performance bond” – guarantees payment to all parties (clients, travel agencies, and suppliers) in case of financial difficulties - IATA plays an important role in creation of international tours – requires that every IATA- approved tour have the following components: o Air transportation on an IATA carrier o Accommodations for the duration of the tour o At least one additional feature (sightseeing, an activity, or transfers) - IATA tour brochures also need to contain specific pieces of information o What is and is not included in the package o Deposit and payment schedules o Travel documents needed (passport, visas, health card) o Cancellation and refund policies o Tour operator’s limited responsibilities and liability Advantages of Taking a Packaged Tour - Tours are more popular because they offer one-stop shopping - Customers can glimpse the facilities available at their destination - If they choose a reputable firm, they can be assured that the tour’s components will be of high quality - Customer knows that tickets and accommodations have been reserved and all details of the trip have been taken care of o Allows immediate access to sites and events - Volume buying saves money – travellers need extra money only for shopping - Most use direct flights, and ground transportation waits upon arrival - Tours ensure a trip with fellow travellers who have similar interests and needs Disadvantage of Taking a Packaged Tour - Dissatisfactions occur if tour operator doesn’t provide what has been promised in the brochure (quality product) - Travel counsellors and clients are dependent on the operator’s integrity and financial stability - Tours are inflexible and time is not your own - When the tour moves, you have to move as well - Travel agency has a broad array of items for sale - Customers interested in purchasing something (trip) will shop at their favourite travel agency - Agency arranges for travel services with suppliers such as airlines, cruise ships, bus companies, railroads, car rental firms, hotels, tour operators, and sightseeing operators o Serves as important link between the traveller and the suppliers - Travel counsellors are knowledgeable and persuasive about the products they sell – makes them invaluable to travel suppliers - Agencies are firmly established as the principal distribution system for travel suppliers and provide most efficient way for consumer to sort out the increasing array of travel options - Small agencies: have annual sales of $1,000,000 or less and generally employ one to three travel counsellors o Much business is through word of mouth, and personal service provides them with a small but loyal customer base - Medium-sized agencies: employ staff of 8-10 travel counsellors o Rely on word of mouth but also invests in local promotion and advertising o Often focus on business and pleasure travel - Large agencies: sold out to larger, more stable firms or have become part of a merger o Agencies have departments that specialize in travel market segments (corporate market or group tours) o Can often compete more effectively because they can afford top-of-the-line equipment and larger marketing budget - Full-Service Agency: handling vacation and business travel; equipped to serve all categories of traveller needs o Typically 60/40: 60% leisure travel and 40% business travel or vice versa o Combination provides more consistent customer base – business travel may be busy when vacation travel is slow o Larger agencies usually have divisions and counsellors that specialize in categories of travel such as business, international, domestic tours, or cruises o Customers feel comfortable going to one full-service agency for all travel needs - Corporate Travel Agency: specializes with business travel o Corporate agencies do not identify themselves as travel agencies because emphasis of their service differs o Nature of client’s business dictates when and where the travel occurs o Counsellor responsible for finding best priced airfare, convenient hotel, and car rental o Business travellers often call requesting services for the next day  Most corporate agencies charge either a management fee or a per-ticket fee and change fee o Corporate businesses with lots of business from a major client will establish a branch in the workplace to deal solely with that client’s needs o Travel counsellors working directly for a corporation typically get higher salaries and better company benefits than agency employees - Specialty Agency: people needed to fill a tour do not live in one geographic area o Agencies may be certified cruise specialists  Represent full line of cruise products and agents have had additional training on various cruise ships and on how to sell a cruise package  Specialist will know if the ship the client is looking at provides a product suitable for certain travellers o Agencies specialize in arranging exotic trips to places inaccessible to everyday traveller  Travel can be arranged for both hard adventurer (prefers primitive accommodations), and soft adventurer (wants comfort of fine hotel and restaurant each evening) o Senior travel may require knowledge of places with special accessibilities  To be successful, tours should be designed to spend less time travelling and more time at attractions and destinations o Clients with disabilities make up a large untapped market  Need to find proper accommodations, right restaurants, and easily accessible attractions or events o Ethnic agencies focus on creating connections between immigrants or children of immigrants of their countries of origin - Private ownership: most common in early days of travel agencies o Independently owned agencies must work hard to thrive in competitive travel world o Serve local clientele and provide high level of service to meet needs of clientele - Chain agencies: operate under one corporate ownership and one management policy o Larger volume of business allows more vigorous promotion, more buying power, and higher net profit than what is available to independents o Employees often receive better fringe benefits and more training, and have greater opportunities to focus on special skills or to rise in the management structure - Franchises: not introduced until 1980s but have become popular o Rigidly controlled and have difficulty filling special needs of local clientele o Employees receive good training and have good job opportunities - Consortiums: smaller travel agencies formed (cooperative) o Similar to hotel referral systems o Agency keeps its independence and personal identity but joins with other independents to get large-scale advertising campaigns, better purchasing power, and a brand name o Each member pays initial membership fee and continuing services fee o Central office arranges advertising and promotional activities, negotiates supplier agreements, and administers the affairs of the organization - Travel agencies form important distribution channel for all tourism products o Most suppliers of tourism products pay agency a commission on every sale of airline tickets o Agencies receive commissions from consolidators, cruise lines, tour operators, car rental agencies, and railways o Small portion of revenue is generated from sale of insurance policies or travel accessories o Additional revenue from “override commissions” – commissions paid at higher rate once an agency reaches a set sales total over given period of time o Increase provides additional incentive to sell the supplier’s products - Several factors are changing the way agencies earn revenue o After deregulation, major airlines first reduced amount of commission they would pay on each ticket sold, and then eliminated commissions entirely – to replace loss, agencies charge customers service fee o Internet is a competitor for travel agencies – providing interactive sales sites allow clients to book directly with supplier o New self-ticketing devices allow travellers to book and ticket themselves on flights, including check-in  Kiosks provide fast alternative to using travel counsellor o Expenses like booking a bed and breakfast, long distance calls or faxes, or passport applications are charged to the client - Conference appointment: need this form of permission to conduct business before travel agency can begin full operations o Two major conference appointments required: 1. Air Transport Association of Canada (ATAC) represents commercial aviation in Canada o Handles Canadian Travel Agency program and deals with interline standards, ticketing, and passenger and baggage processing 2. International Air Transport Association (IATA) regulates sale of international airline tickets - To apply for ATAC and IATA certification, travel agency must be open and operating o Must have cash to purchase tickets directly from airlines of must have agreement with accredited agency to do ticketing on its behalf o New agencies must have at least 2 full time employees – a qualified management person and a qualified ticketing agent o Location must be visible to public and clearly identified as a travel agency o Must have sufficient financial banking to ensure continued operation and must maintain financial records according to BSP accounting procedures - Canadian Institute of Travel Counsellors (CITC): works with travel trade focusing on training and instructional materials, ensuring professional standards are met o Created code of ethics that members agree to follow o CTHRC developed new program for national certification of travel counsellors and managers based on required skills, knowledge, and attitudes - Travel agencies promote tourism products of other suppliers and are not considered to be a product themselves – they are a channel of distribution (place where tourism products sold) - Pricing is not in the control of travel agencies since products are already packaged and priced o They try to restore profits by adding service charges - Promotion: tour companies promote their products by supplying tour operators with brochures and displays o Have sales representatives drop by to discuss products and provide sales to help agents o Travel agencies need to promote both products and their own services to remain competitive - Marketing reflects philosophy of travel agency o Customer profiles: used to sharpen focus of travel agencies; undertake formal or informal research on customer’s needs - Sales agents need to know product well to describe advantages and disadvantages to clients and need to be able to close the sale - Success or failure of travel agency depends on competence of travel counsellors and effectiveness of personal selling techniques - Incentive travel: originally designed as prize for employee performance o Creates winning situation for all parties involved o The corporation wins with more sales, increased employee productivity, less absenteeism, and better safety records o Employees win by being treated to exclusive trip o Incentive travel company wins by increasing sales and profits - Trip increases employee’s status among peers and family members and provides opportunity to go places and experience things never dreamed possible o Motivates extra effort and winning employee feels good and continues to work hard o Companies show they believe in people by using incentive travel - Destinations are actively involved in persuading incentive planners that theirs is the perfect destination and offer inspection tours to make their point - Manager in an incentive house or specialty incentive travel agency approaches marketing manager of a company and suggests how incentive travel could help solve corporation’s problem - Society of Incentive and Travel Executives (SITE) publishes newsletter and conducts training programs and seminars on how to succeed in incentive travel Lecture 10 (March 20) - Travel agents and tour operators are the smallest of all industries and have about 5000 in Canada and 800 tour operators - Use travel agents for international travel and cruise ships (a lot of people from Ontario and Quebec participate in these kinds of travels) - NWT, ON, and BC each have over 5% of travel agents as their tourism business (aka people like to get out of these provinces) - Tour wholesalers and tour operators are DIFFERENT - Operators or agents put together something from the wholesaler so they can sell it to you at a higher price - Consolidator: buys blocks that travel agents think they will have a hard time selling at a certain rate so that they will give it at a discount and give it to the consolidator to sell to others - Receptive operator: receive people who come into the country (meet people at some point – ex. airport and will take them around) - Outbound operator: someone operating in Canada; have packages for Canadians to send to Canadians to China, Europe, etc. - Becoming a travel agent is a choice by immigrants o Most immigrant communities will have travel agents with connections and will provide services - Travel services will have more minority groups – they are able to speak the language of their clients - All are in school and well educated – need to have specialized knowledge of transportation law, knowing how to work with other people, etc.) - Small businesses with 4-6 employees and tend to be mainly females in the field - Work patterns are full time, full year - Age distributions are mature so that the agents have more experience - Travel distribution: Packaging, distribution, and sales of travel products to consumers o Either directly from supplier to consumer or through one or more intermediaries - “Twin engines”: travel agencies and tour operators/wholesalers - In North America, travel agents and tour operators are distinct business models o Not the case in other countries o Travel agents offer retail sales (transportation, hotels, cruise) o Tour wholesalers sell through travel agents (travel agent helps - Tour operators act as both retailer and wholesaler - Consolidator: buys tickets from airlines in bulk or has a contract with airlines and sells discounted airfares - Travel agencies have 5000 establishments with total sales over $1.7 billion in 2011 o Profit margins squeezed by rising costs and competition o 20% of all tourism sales go through agencies but the number is dropping - Agency’s income is traditionally commission based (approx. 10-15%) o Airlines reducing commissions/eliminating them o Organized tour commissions – 34% revenues - Service fees becoming more common (consultation and non-commission sales) - Travel agents have experience with specific destinations, resorts, airlines, etc. o Can be a life saver on a trip when/if things go wrong o Are consolidators or have close ties with consolidators o Saves time searching for options - Tour operators/wholesalers o 800 establishments with total sales of $8 billion o 25% of firms produce 90% of sales and top 10 produce 45% of revenues o Average of 32 employees per establishment o 80% associated with transportation - Online Travel Agencies (OTA): rapidly emerging as dominant force o 80% of Canadian households are online o Planning sources:  Traditional travel  Internet only – 59% agencies – 8%  Neither (word of mouth,  Travel agent + Internet – experience, print) – 9% 24% o Substantial growth but now flattening o Initially for content – to plan and purchase o Now more for comparison shopping and not necessarily book online o OTAs are more popular than hotel sites o Ex. Travelocity: created by Sabre, an American Airlines CRS  Second largest OTA, 6th largest US travel agency  Numerous sister sites and affiliates in Europe  Early viral marketing strategy – use travelling gnome prank and now basis for TV ads  “Merchant model” lists all hotel rooms available with 2000 hotel partners  Hotels tend to like it most because gets immediate payment for rooms sold  Strives to ensure all costs are reflected in advertised price o Ex. Orbitz: created by consortium of airline to battle Travelocity  Now owned by Travelport  3 largest OTA  Launch cost $100 million  Deeper inventory of web fares – heavily discounted tickets promoted on carriers’ own web sites  Close ties with carriers have raised accusations of unfair competition  Only OTA that offers customer care – weather, gate changes, airport congestion o Ex. Expedia: created by Microsoft by eventually spun-off as independent  “Merchant model” (third party web sites to sell hotel rooms or inventory)  Consigns products provided by GDSs: Amadeus and Sabre for airlines, Pegasus and Worldspan for hotels  Key is to negotiate satisfactory agreement with providers  Inventory is limited – doesn’t list all inventory that providers have  Doesn’t disclose all taxes and fees so might be able to get better deals by contacting provider directly o Ex. Priceline: does not directly provide travel services  Traditionally you named price and would learn name of supplier only after committing to purchase with no refund  Still available but now more traditional model (able to view price and supplier options)  Operates numerous other brands for different market segments - Travel Industry Council of Ontario (TICO): not for profit corporation – charges membership/registration fees o Administers industry-funded compensation fund o Tour operator: Packages at least 2 travel services (ex. flight, hotel accommodation) and sells it for one price  Doesn’t have to be traditional tour operator/agent o Can help mediate complaints against travel service providers o Compensation fund: financed by agencies/operators  All Ontario operators required to register with TICO and contribute to fund  Compensate customers who bought but did not receive travel services IF purchase through TICO registrant o Payments based on Ontario gross sales o Minimum working capital reserve requirements (based on volume of business) o Doesn’t sell travel services, cannot disclose complaints, cannot refer customers to travel agencies or tour operators o TICO registration implies agency/operator adheres to Travel Industry Act o Counsellors need to meet minimum education standards Chapter 11 – Tourism Services - Tourism services is the support group of workers o People n tourism services specialize in service needs of the industry rather than the needs of the visitor - Many tourism businesses are small and privately owned so they rely on tourism service industry for help in dealing with marketing and promotions, taxation, government regulations, safety, education, and staff training - Tourism services includes retail sales and media coverage, and the services of construction companies, financial institutions, and telecommunications and computer industries - Businesses that comprise tourism services ensure that the product offered is modern and competitive and that the tourism sector as a whole runs smoothly - Tourism services industry can be divided into 5 components, each handling a different tourism need: o Government agencies o Tourism associations and organizations o Marketing services o Research and consulting o Miscellaneous services Government Agencies - Industry Canada: responsible for overall well-being of tourism, including 2010 Olympic Games and Paralympics - Parks Canada: responsible for national museums, national parks, national heritage sites, heritage canal systems, and heritage river systems - Canada Border Services Agency (CBSA): checks people arriving at borders for proper documents and illegal goods, or for purchasing more products than allowed while on vacation - Foreign Affairs & International Trade Canada: provides foreign visitors with visas and Canadians with passports - Transport Canada: responsible for development and security of transportation systems - Canadian Heritage (CH): with majority of direct responsibility for national museums moved to parks Canada, CH is responsible for only some cultural/heritage events, as well as non- professional sports, excluding Olympic Games - Two Crown corporations that impact tourism in Canada o Canadian Tourism Commission (CTC) – responsible for marketing Canadian tourism to the world o National Capital Commission (NCC) – responsible for overseeing development of Canada’s Capital region - Provincial governments have ministries or departments similar to those in federal government - All provinces are hoping to engage in and encourage the following activities: o Promote travel opportunities and increase the number of visitors to the province: province advertise tourism products in many ways  Many set up booths at trade fairs to promote resorts, adventure activities, etc. o Encourage development of tourism sector through market research planning: all provinces use strategic planning to ensure that they are developing sustainable tourism products with a significant market base  Many programs focus on existing resources: cultural heritage, recreational activities, natural attractions, and historical sites o Work with the tourism sector in the province to continually improve the product: provincial governments recognize need for skilled workers and help fund tourism education councils  Provides training and certification programs for a wide variety of names  Courses cover quality service and good hospitality practices (how to handle customers in a friendly, professional, and informed manner) o Produce literature that promotes the 6 front-line components of the sector: provinces fund television commercials, travel videos, and CD-ROMs that market their regions  Most important time of the year for advertising province specialities is around February – April  Tend to focus advertising in markets close to province  Provinces have their own webpages and are investing in tourist information centers  Most province have a toll free number that provides advice for planning everything from weekend getaways to extended trips o Liaise with federal and municipal ministries: many tourism events require participation from all levels of government - Municipal governments promote tourism products by having tourism marketing departments o Some others may turn to private, non-profit associations like convention and visitors bureaus (CVBs) or local chambers of commerce - Chambers of Commerce and CVBs: has become involved in all aspects of tourism o Work with the city to promote local events and attract visitors o Advertise in newspapers and magazines, on
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