Chapter Sixteen
Channels of Distribution
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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?
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Exhibit 16-2; Estimating Costs to Hotel to Book
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
How Distribution Channels Work
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
How Distribution Channels Work
Distribution in hospitality is different and complex
Hospitality product must be where the customer is
Focus on “getting” the customer
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Product to the Customer
BrandedHospitalityCompanies
Franchising
ManagementWithoutOwnership
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Product to the Customer
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Product to the Customer
Franchising Contracts and control between
franchisee/franchisor vary and cover:
Marketing support Revenues to the franchisor Duration of agreement
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
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”
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Customer to the Product
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Customer to the Product
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Customer to the Product
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Customer to the Product
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Customer to the Product
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
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
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Customer to the Product
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
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Customer to the Product
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
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
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
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Customer to the Product
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
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Getting the Customer to the Product
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
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
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
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Future Challenges of Online Distribution
Selecting channels Length should be analyzed Shorter is better due to less cost,
less management issues
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Future Challenges of Online Distribution
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
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
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
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Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Discussion Do you believe that traditional
travel agents will one day be obsolete? What can they do to make themselves a competitive distribution channel?