chapter sixteen channels of distribution. © 2008 pearson education, upper saddle river, nj 07458....

Chapter Sixteen

Channels of Distribution

© 2008 Pearson Education, Upper Saddle River, NJ 07458.

All Rights Reserved.2

Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw

How Distribution Channels Work

Distribution involves two questions:

How do I get my product to the customer?

How do I get the customer to my product?




Exhibit 16-2; Estimating Costs to Hotel to Book





Distribution channels are important A group of organizations, independent

or not, that are involved in the process of making a product or service available for use or consumption

Goal is to get the product where the customer is now or is going to be in the future





Distribution in hospitality is different and complex

Hospitality product must be where the customer is

Focus on “getting” the customer




Getting the Product to the Customer

BrandedHospitalityCompanies

Franchising

ManagementWithoutOwnership





Branded hospitality companies May own all, part or none of the actual asset All carry a brand name and adhere to strict

standards Importance

Allow for franchising and higher revenues Gain management contracts Gain access to capital Brands bring desired familiarity to the customer




Getting the Product to the Customer Franchising

Commonly used in hospitality to: Increase the distribution network Increase revenue Obtain geographical presence Access the company’s industry

experience and marketing tools Also common in non-hospitality

firms





Franchising Contracts and control between

franchisee/franchisor vary and cover:

Marketing support Revenues to the franchisor Duration of agreement




Getting the Product to the Customer Management without ownership Many hotels today manage

without ownership Increases distribution without the

financial cost and risk Also known as a “management

contract”




Getting the Customer to the Product

Reservation services

Representation firms

Consortia Incentive travel

organizations Corporate travel

management

Global distribution systems (GDS)

Traditional off-line travel agents

Central reservation systems (CRS)

Internet channels Websites




Getting the Customer to the Product Reservation services

Used by hotels to market themselves independently

Only connects them to the channels of distribution

SynXis or Pegasus Links directly to GDS or Internet

without needing brand affiliation





Representation firms A channel of distribution that brings a hotel

to the marketplace Market the hotel and sales for independent hotels

that do not have sales or reservation networks Termed “soft brands”

Represent both the representation firm and their own independent brand

Maintain independence with representation but also have access to marketing programs




Getting the Customer to the Product Representation firms offer:

Standards for membership Connectivity to electronic channels

of distribution Sales initiatives Marketing programs Participation in trade shows





Consortia A loosely knit group of independently owned

and managed properties (e.g. hotels or travel agencies) with different names, a joint marketing distribution purpose, and a common consortium designation

Purpose is to open a channel of distribution by maximizing combined marketing resources and reducing expenses for individual properties





Incentive travel organizations (incentive houses)

A company that specializes in handling incentive reward travel which rewards top-performing employees

Need for new and exciting destinations and for the trip to be perfectly executed

Thoroughly review the destination and facilities, sell it to the company and sell it to the employee





Corporate travel departments and travel management companies

Services range from a travel director who creates policies and contracts with travel suppliers to a full, in-house travel agency

Referred to as the corporate or managed business traveler

Goal is to balance the need of employee and employer





Global distribution systems (GDS) A computerized reservation system

that connects the travel agent to hotels, airlines, cruise lines, care rentals, and other services

Additional fees are added at each point in booking

To avoid this, many companies are now directly marketing to customers




Getting the Customer to the Product Traditional offline travel agents

Intermediary who assists travelers in making arrangements for a fee

Travel agents can also form consortia

Belief that they may shrink with growth of internet





Central reservation systems (CRS) Computerized reservation system of a

hospitality company that allows customers to make reservations without having to contact the company directly

All major hotel chains worldwide now communicate from their CRS and GDS directly to the individual hotels

Seamless connectivity allows two-way inventory management





Internet channels Now reaching 80% of US households,

the internet’s influence on hospitality is growing

Internet has evolved: Provides information Simplifies transactions Improving technology with complex

interactions taking place




Getting the Customer to the Product Internet Channels

Early on was the advent of the online travel agent

September 11th and the increase of online discounted booking

The merchant model Third party site negotiated net rates for

hotels and marked price up for market sale

To compete, hotel brands began to offer their own sites




Getting the Customer to the Product Websites

Is the hospitality modern day equivalent of the rack brochure

Should reflect the personality of the hotel with visuals

Focus on the needs of the customer Website will vary based on market segment Many fail to provide visitors with information

needed to make a purchase decision





Websites Two audiences

Potential customer Search engine

Functionality best practices Reservation area should be at the front of the page Email acquisition section should be on the home

page Site should convey the best value to the customer

and keep them interested Security has to be conveyed





Website-generated market research data Computer servers track visitors and record

surfing and clicking behavior First page visited Last page visited Navigation sequences Referring site Average number of pages visited Time on site

Low cost tool




Future Challenges of Online Distribution

The internet has fundamentally changed travel and hospitality distribution

Challenges The consideration set for travel options has expanded Price transparency and consistency Need to manage transaction costs Reallocation of marketing dollars “Onward distribution” Rise of third parties that are going after the group

market Increase in packaging





Selecting channels Length should be analyzed Shorter is better due to less cost,

less management issues





Market Opportunities in China Barriers to e-commerce in China

Cash based nature of Chinese society Little experience or trust in online

transactions Doubt the reliability of information

provided online




Evaluation of Channels Tracking of statistics to better

negotiate contracts in the future Understand the break-even point

of a channel Must be marketing driven with

good channel management to ensure customer satisfaction




Discussion Do you believe that traditional

travel agents will one day be obsolete? What can they do to make themselves a competitive distribution channel?

chapter sixteen channels of distribution. © 2008 pearson education, upper saddle river, nj 07458....

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