The value chain approach has become a key tool in analysing economic transactions between rich and poor countries. Package tourism forms a major part of international tourism. This paper argues that package tours are modular products, i.e. a bundle of parts delivered by various suppliers. The value chain approach can therefore be used to analyse the relationship between the actors in the country of origin and in the destination country. This discussion focuses on the extent to which the particular form of "relational" governance of the chain and the institutional frame, mainly determined by state policy, enable regions and firms to upgrade in tourism.