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

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

Chapter 12

Travel ITravel Intermediariesntermediaries - - MiddlemenMiddlemen

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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.

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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

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Figure 12.1 Structure of distribution channels

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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

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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

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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

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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

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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

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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

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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

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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)?

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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

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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

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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

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

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

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

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

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

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Table 12.5 Major global travel conglomerates

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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

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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

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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

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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

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

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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.

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Tour Operators

Reasons to Buy Tour Package

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

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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

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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

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Price structure of a14-night inclusive tour

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

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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

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