slide 12.1 cooper et al: tourism: principles and practice, 3e pearson education limited 2005, ©...

Slide 12.1

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Chapter 12

Travel ITravel Intermediariesntermediaries - - MiddlemenMiddlemen

Slide 12.2

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

This Lecture will give you1. Familiarity with the nature and structures of

intermediation and the arguments for and against dis-intermediation of distribution channels in tourism;

2. An awareness of ‘online’ developments and the increasing consolidation and concentration of tourism intermediaries;

3. Familiarity with the operating characteristics, roles and functions of retail travel agents and tour operators;

4. An understanding of the process of distribution; and

5. An awareness of the financial constraints on the operation of intermediaries.

Slide 12.3

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Middlemen Middlemen are intermediaries between consumers and suppliers.

Customer (tourist) – middlemen – supplier

Using middlemen has many advantages for both customers & suppliers

Tourism industry has been traditionally characterised by its use of intermediaries.

  Intermediaries

Slide 12.4

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Figure 12.1 Structure of distribution channels

Slide 12.5

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Various middlemen that are included in the travel and tourism industry are;

• TTravel agencies,ravel agencies, Tour Operators Tour Operators• TTravel clubs, ravel clubs, • HHotel marketing and booking schemes, otel marketing and booking schemes,

incentive travel organizations, incentive travel organizations, • SSales representatives, ales representatives, • CComputerised reservation system (CRS), omputerised reservation system (CRS),

global distribution system (GDS) etc.global distribution system (GDS) etc.

  Intermediaries

Slide 12.6

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

  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  

Slide 12.7

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

  Functions of Intermediaries

• 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

Slide 12.8

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

The Nature of IntermediationThe Nature of Intermediation• BenefitsBenefits

– Producers are able to sell in bulk and so transfer risk to intermediaries

– Producers can reduce promotioncan reduce promotion costs by focusing on the travel trade, rather than consumer promotion, which is more expensive

– Consumers can avoid search and transactions costssearch and transactions costs– Consumers can benefit from the specialist knowledge of

intermediaries, their market power and the resulting lower cost of products

– Destinations can benefit from the marketing, and international marketing, network of many intermediaries

Slide 12.9

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

The Nature of IntermediationThe Nature of Intermediation

• DisadvantagesDisadvantages

–Use of intermediaries by producers will result in the loss of margins and their degree of marketing control and influence over the process of distribution

Slide 12.10

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

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

Slide 12.11

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Travel Agencies

• Via websites & e-mails 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  

Slide 12.12

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

The Role of the Retail Agent

• Travel counsellor

• Principal role is to supply the public with travel products and services (such as insurance and foreign exchange)

• Income is predominantly earned via commissions

• Retail location and choice of reservation systems are key decisions

• Impartiality (neutrality)?

Slide 12.13

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

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

Slide 12.14

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

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

Slide 12.15

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

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

Slide 12.16

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Table 12.1 Some developments and trends in the marketplace affecting travel agencies

Slide 12.17

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Table 12.2Table 12.2 Arguments for and against the dis-intermediation of travel agencies

Slide 12.18

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Table 12.2 Arguments for and against the dis-intermediation of travel agencies (cont’d)

Slide 12.19

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Table 12.3 Arguments for and against the dis-intermediation of tour operators

Slide 12.20

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Table 12.3 Arguments for and against the dis-intermediation of tour operators (cont’d)

Slide 12.21

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Table 12.5 Major global travel conglomerates

Slide 12.22

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Online Travel• Drivers of growth

– Growth of Internet usage and electronic commerce– Success of global distribution systems (GDSs)

• SabreSabre• WorldspanWorldspan• GalileoGalileo• AmadeusAmadeus

– Phenomenon of ‘no frills’ airlines– Role of commissions in ‘traditional’ channels of

distribution

Slide 12.23

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

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

Slide 12.24

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Computer Reservation Systems

• Travel Agencies are linked on-line via one or more computer reservation systems (CRS) built & operated by airlines

• CRS make airline reservations,& serve as databases for tourism suppliers

Slide 12.25

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Internet vs. Travel Agents 

• Consumers have choice in buying travel products

• Increases scope & reach of options • Open 24/7 • But requires more work & knowledge by

consumers • TravelAgencies have expertise & human touch • Can save clients time, money, & energy • Can manage entire trip & its details

Slide 12.26

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Figure 12.4 Conceptual model of the process and factors influencing agents’ destinations recommendations

Slide 12.27

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Tour Operators

• TO: business organizations engaged in planning, arranging, marketing, & operating vacation packages

• TO work with all sectors of tourism industry • They perform many functions: • Planning , Sales and reservations , Representatives

/guides • They organise and put together package trips and

holidays.

Slide 12.28

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Tour Operators

Reasons to Buy Tour Package 

1. Convenience2. One-stop shopping3. Cost savings4. Special treatment5. Worry-free

Slide 12.29

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Tour Operators 

Tour Operators Risks 

• TO are unregulated • Very susceptible to perishability • Must commit to place, products, & prices in

advance  • Currency fluctuations: • Natural disasters: • Changing consumer tastes: • Security & Safety Concerns

Slide 12.30

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

The Role of theTour Operator / Wholesaler

• Principal stages of the tour operating process

– ResearchResearch– Capacity planningCapacity planning– Financial evaluationFinancial evaluation– MarketingMarketing– AdministrationAdministration– Tour managementTour management

Slide 12.31

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Price structure of a14-night inclusive tour

Table 12.8 Price structure of a 14-night inclusive tourSource: Trade information

Slide 12.32

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

ConclusionConclusion

• Increasing consolidation, integration and concentration

• Pressure from ‘virtualvirtual’ players

• Changing patterns of booking behaviour

• Pressure on cost structures and commission rates

• New market entrants

• Branding