Organizations in the Distribution System

1. Organizations in the Distribution System

2. Functions of Intermediaries • Provide info about tourism products • Contact current & potential customers • Make reservations & other arrangements • Assemble services to meet customer needs • Prepare tix & make confirmations • Provide databases on customer behavior • Reduce cost of acquiring new customers • Market excess or distressed inventories • Take risks by buying (or reserving) products & then reselling them to individuals or groups

3. One-Level Distribution Channels • Simplest – straightforward, direct access to suppliers (Customer/Tourist – Supplier) • No intermediaries; the more people involved, the more chance for problems • Easy to deal directly with many suppliers: • Suppliers like direct –no commissions to pay

4. Internet Technology • Internet enables potential tourists to surf websites of destinations & suppliers • Take virtual tours of attractions & properties • Compare prices & products • Make reservations, select airline seats, etc. • Has increased ease of one-level distribution channels, i.e. airline tix

5. 2-Level Distribution Channels • More complex – now 3 moving parts • Customer (tourist) – travel agent – supplier • Has intermediary (middleman) – travel agent • Using travel agent has many advantages for both customers & suppliers

6. Travel Agencies • Travel agent = person • Travel agency = company • Provide important info & sales links • Links between: tourists & tourism suppliers • Using TA, one of most common (popular) ways to buy tourism products\services • Many tourists now use Internet travel agencies: Travelocity, Expedia, & Orbitz • But also: Impersonal, inhuman, & in cyberland

7. Commission Payments • Travel agencies receive payment in form of commissions (% of sales) from suppliers • TA act as sales offices (branch offices) for countless tourism suppliers • But no moneychanges hands until sales made • TA must work & sell products to make money

8. Changes to Travel Agencies • TAs no longer paid to process transactions • Airlines lost huge, experienced sales force • TAs developed new sources of revenue

9. Internet vs. Travel Agents • Consumers have choice in buying travel products • Internet is DC of choice for airline tix • Increases scope & reach of options • Open 24/7 • But requires more work & knowledge by consumers • TA have expertise & human touch • Can save clients time, money, & energy • Can manage entire trip & its details

10. Travel Agencies • Via websites & emails TA compete with each other regardless of their physical location • Do not own products they sell, so they have little or no inventory or cost of goods sold • As commissions dwindle, markups increase • Large volume agencies often earn override commissions (above the normal percentage) • Destinations experts; make recommendations

11. Global Distribution Systems • Majority of TA business is done via GDS • GDS provide extensive data on suppliers: • Schedules • Rates & fares • Space availability • GDS can also: • Make reservations • Print itineraries, tix, & invoices

12. Computer Reservation Systems • TA are linked on-line via one or more computer reservation systems (CRS) built & operated by airlines • Among them are: • Amadeus • Sabre • Galileo • Worldspan 3. CRS make airline reservations, & serve as databases for tourism suppliers

13. TA: 9 Types & Characteristics 1. Independent: 2. Agency chains (wholly owned): 3. Agency chains (franchised): 4. Consortium-affiliated agencies: 5. Specialty agencies: 6. Corporate Travel Agencies: 7. Corporate travel departments: 8. Home-based agencies: 9. Internet agencies:

14. 3-Level Distribution Channels • Most complex level • Adds another intermediary that facilitates: • Tour operators • CVB 3. Tourist – travel agent – TO/CVB - supplier • Tour Operators do not get commissions • TO markup prices of products they resell • Elements of Tour Packages

15. Common Tour Packages • Independent tour: • Hosted tour: • Escorted tour: • FIT (foreign independent travel): • DIT (domestic independent travel):

16. Independent Tour • Un-hosted tour • Least structured package • Tourist sets own itinerary • Itinerary: schedule of times & places to visit

17. Hosted Tour • Includes tourism supplier elements provided in an independent tour & maybe even more • But also services of local host • Host gives advice and makes special arrangements for you

18. Escorted Tour • Most structured type of tour with most complete set of supplier elements • “All-inclusive” tour provides almost everything, i.e. meals • Begins/ends on fixed dates

19. FIT (Foreign Independent Travel) • Customized tour • Outbound to foreign countries • Includes some tourism supplier elements, depending on tourist’s requests • Often more expensive

20. DIT(Domestic Independent Travel) • Similar to FIT • Except travels within your home country

21. 5 Reasons to Buy Tour Package 1. Convenience: 2. One-stop shopping: 3. Cost savings: 4. Special treatment: 5. Worry-free:

22. Tour Operators • TO: business organizations engaged in planning, arranging, marketing, & operating vacation packages • AKA: tour wholesalers, tour companies • TO work with all sectors of tourism industry • They perform many functions:

23. Tour Operators Risks • TO are unregulated • No entry requirements for: • Very susceptible to perishability • Must commit to place, products, & prices in advance

24. Tour Operators Risks • Currency fluctuations: • Natural disasters: • Changing consumer tastes: • Security & Safety Concerns:

25. Receptive Service Operators • RSO are part of tourism distribution channel • AKA receptive tour operator, ground handler & inbound operator • RSO: a local company that specializes in handling needs of groups traveling to it destination

26. Consolidators & Travel Clubs • Are combinations of wholesalers & retailers • They perform a unique function within tourism distribution channels • Consolidators buy excess inventory of air tix, then resell them at reduced prices via TA or directly to travelers

27. Meeting Planners • AKA: event planners & convention planners • MP are intermediaries in meetings industry • MP are employed primarily by: • Corporations • Associations 4. Main function: detailed planning of business & corporate meetings, educational meetings, association meetings, conventions, trade shows, sales meetings, executive retreats, tournaments, reunions, incentive travel, etc.

28. Meeting Planners’ Decisions • How many people will attend • Where to host the meeting (which destination) • Types of transportation needed • F&B functions needed • Support services needed • Facilities, equipment, & supplies needed • Ancillary activities

29. Dual Distribution • Suppliers often use more than one distribution channel in their marketing efforts • This is called dual distribution

30. Tourist Information Sources • Travelers need info before, during, & after a trip about tourism product benefits, prices, & availability • Marketing communications provides this via: • Advertising, public relations, & personal selling • Information is available from national tourist offices (NTOs), convention & visitor bureaus (CVBs), and chambers of commerce • These sources have tool-free phone numbers, websites, & welcome centers/TICs

31. Familiarization Trips • AKA “fam trip”, “fam tour”, “inspection tour”, “educational tour” • For tourism intermediaries & journalists • To educate them on destination & supplier products & services • They visit destination attractions & suppliers • Goal: increased business from target markets • Uses in-kind contributions from suppliers, so cost is minimal to all concerned – great ROI! • Organizer: NTO, airline, resort, tour operator,..

32. Personal Selling • Creates customer satisfaction • Cultivates customer relationships • Missionary sales people: call on travel agencies, etc., to provide brochures, solicit business, answer questions, and educate about company products • Effective salespeople are: • Likeable • Dependable • Honest