Theory of TourismTheory of Tourism(TM101)(TM101)

““Lecture 5Lecture 5””

Organizations in the Organizations in the Distribution ProcessDistribution Process

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Introduction• The tourism channel of distribution is an operating structure

system, or various combinations of organizations through which a producer of travel describes, sells, or confirms travel arrangements to the buyer.

• Tourism produces mainly services that are intangible

• Their products flow to the ultimate consumer through wholesalers, distributors, and middlemen.

• The most efficient method is to market through:1. Travel agencies 2. Internet 3. Tour Operators

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Agent• Travel, whether for business or pleasure, requires arrangements.

• The traveler usually faces a variety of choices regarding transportation and accommodations; and if the trip is for pleasure, there are a variety of choices regarding destinations, attractions, and activities.

• The traveler may gather information on prices, value, schedules, characteristics of the destination, and available activities directly investing considerable amount of time on the Internet, or possibly money on long-distance telephone calls, to complete the trip arrangements.

• Alternatively, the traveler may use the services of a travel agency, obtaining all these arrangements for a fee.

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What Is a Travel Agent? • A travel agency (intermediaries) is a middleman, a business or person

selling the travel industry individual parts or a combination of the parts to the consumer.

• In marketing, a travel agent is an agent middleman, acting on behalf of the client, arrangements with suppliers of travel (airlines, hotels, tour operators), and re charging commission from the suppliers and/ or fee from the client.

• In legal terms, a travel agency is an agent specifically for Transportation companies. The agency operates as a legally appointed agent, representing the principal in a certain geographic area. The agency functions as (bringing buyer and seller together) for the other suppliers. such as hotels rentals, ground operators, and tour companies.

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What Is a Travel Agent? (Cont’d)

• A travel agent is thus an expert, knowledgeable in schedules, routing, lodging, currency, prices, regulations, destinations, and all other aspects of travel and travel opportunities.

• In short, the Travel Agent is a specialist who saves client both time and money.

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The Changing World of the Travel Agent

• The travel industry has struggled through tough times in recent years because of September 11, SARS, terrorism, and war.

• As of May 2004, there were 21,552 accredited agency. Agents sold $83.5 billion worth of air travel in 2000 (which was a record travel year), but this dropped by 16 percent to $69.9 billion in 2001, another 8 percent to $64.1 billion in 2002, and another 4 percent to $61.8 billion in 2003.

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The Changing World of the Travel Agent (Cont’d)

Very touchable factors contributed to this decline. • The first was shrinking airline commissions.• So, after decades of offering travel agents a standard commission of 10

percent or more, many of the larger carriers in the United States stopped paying base commissions to travel agents.

• To compensate the loss of commissions, agents had to develop new sources of income. The most readily available source was service fees.

• Agents have also turned to selling non-airline tickets such as cruises and tour packages, and shifted to an emphasis on leisure travel.

• Service fees put agents at a price disadvantage that provides an incentive for the customer to deal directly with the airline, and reduces the agents' share of the distribution pie

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The Changing World of the Travel Agent (Cont’d)

• A second major factor is the Internet, which has impacted travel Agent behaviour.

• The Internet has changed the way commerce is conducted. • Many businesses use the Internet as a way to bypass product

and service intermediaries and deal directly with consumers.• The airlines have been a leader in aggressively using e-

commerce. • The Internet and e-tickets became a natural combination as

airlines added online booking in 1996. • Soon airlines realized they could reduce distribution costs and

have direct contact with consumers.

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The Travel Agent versus the Internet

• Consumers now have a choice.

• They can make their own bookings on the Internet, or they can use the services of the travel agent.

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The Travel Agent1. Because of the expertise of travel agents, customers may save time

that cover more than the cost of service fees.

2. Agents have superior knowledge of the industry and are aware of various alternatives that provide lower fares that the average consumer is unaware of.

3. Agents are more likely to know enough to check alternative airports and departure times.

4. Agents can have specialized Web search tools, as well as their CRS that make searching more efficient tor low fares

5. travel agents continue to manage the customer serving as an alert system, trouble shooter, and customer advocate problems occur.

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Internet1. The Internet can be a powerful tool.

2. It can increase the scope and reach of a consumer's efforts and allow a person to check hundreds of options or research destinations in depth.

3. To make the Internet work effectively, a person has to understand where to look and what questions to ask, otherwise hours can be wasted surfing the Web and ultimately produce unsatisfactory results. This is where a travel agent can make a world of difference.

4. The Internet can be a valuable resource, but can it be human being who will provide personalized service to help a client in number of alternatives.

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The Future of Travel Agents• Because of the Internet, commission caps, commission cuts,

commission eliminations, and the changing world of travel, popular questions being raised today are:

– Will there be a travel agent in the future?

– Will travel agents survive the elimination of airline commissions?

– Will the Internet result in the termination of the travel agent?

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The advantage of Travel Agents (Cont’d)

• The travel industry cannot get along without travel agents, and they will continue to save clients time and money far into the future, even with the fees they will be required to charge.

• Travel agents are still the leading distributors of travel products and services.

• Agents (including online) book a majority of all air travel, 25 percent of Hotel reservations, 95 percent of all cruise reservations, 40 percent of rental car, 90 percent of tour packages.

• Agents are the best professionals to sort through nearly a hundred thousand daily changes in airfares alone.

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• They will continue to be the preferred choice of international travelers because of the complexity associated with planning travel.

• Travel agents are creating their own Web sites. While the Internet is a threat, it also represents an opportunity to reach a much larger audience.

• Fees are gaining acceptance by both agents and their clients.

• The consumer will continue to rely on agents for trip information, planning, and booking because they offer valuable professional services that save time and money.

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The advantage of Travel Agents (Cont’d)

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Who uses travel agents?

• Approximately one out of every three leisure travellers use travel agents,

• four out of ten for airline and hotel users.

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The advantage of Internet• In today's marketplace it is necessary to talk about the Internet

as a channel of distribution.

• It makes direct selling from the supplier to the consumer more positive than ever before. There have always been direct sales in travel from suppliers consumers via suppliers' offices or the telephone.

• We have witnessed the coming of computer central reservation systems (CRS), faxes, smart cards, videos, CD-ROMS, and impact they have had on the travel distribution process.

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The advantage of Internet (Cont’d)

• However, the newest technology entrant is attracting more attention and has more potential than of predecessors. It's the Internet.

• As an evolving communications and booking, the Internet is delivering on its vast potential because travel is an information based product.

• The Internet, that vast network of computer networks around world, confronts us with a stream of data.

• The Web gives consumers the information and power to plan book their own travel.

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The advantage of Internet (Cont’d)

• The Web also gives travel agents and tour operators the opportunity to have their own sites and greatly expands their reach.

• The Web suppliers (airlines, hotels, rental car companies, cruise lines, attractions) a direct sales channel that can reduce distribution costs by having the consumer do the booking, thereby eliminating travel agency commissions and computer reservation system fees.

• The Internet is both an information source and a transaction source.

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The advantage of Internet (Cont’d)

• It has the advantage that it can be used by virtually everyone in tourism industry from the largest operator to the smallest.

• The airline and lodging have excellent Web sites, as do smaller-scale businesses such as bed and breakfasts, tour operators, travel agents, tourism organizations, and even restaurants.

• These travel suppliers have a new promotion tool to work with and one that promises cost savings.

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Electronic Commerce

• The term e-commerce refers to the selling of goods and services via the Internet.

• Many studies indicate that travel is being swept into the Web economy.

• Tourism related services are now the king of Internet sales.

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Limitations Despite its great potential, the e-comerce has limitations.

1. It produces an overwhelming amount of information more than the consumer can digest.

2. Nothing is worse than seeing outdated on the Web. Speed and ease of use still need to be improved.

3. Pop-up annoying.

4. Consumers have two major concerns about the Web. • One is privacy, • The other is the security of the site.

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The Tour Operator• The tour operator (also called tour wholesaler) puts together a

tour and all of its components for a departure date to a specific destination, and sells it through his or her own company, through retail outlets, and/or through approved retail travel agencies.

• tour operator can offer vacation packages to the travelling public at prices lower than an individual traveler can arrange because tour operator can buy services such as transportation, hotel rooms, sightseeing services, airport transfers, and meals in large quantities at discounted prices.

• It has expanded substantially since the 1960s, largely because air carriers wanted to fill the increasing numbers of aircraft seats.

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Speciality Channels:• Specialty intermediaries include such organizations as incentive travel

firms, business meeting and convention planners, corporate travel offices, association executives hotel representatives, travel consultants, and supplier sales offices.

• While specialty intermediaries are a small force in distribution compared to travel agencies, they have considerable power to influence when, where, and how people travel.

• Such groups can represent either buyers or sellers, receiving either a commission or a salary from their employer. Specialty intermediaries are experts in their particular aspect of travel.

• As tourism becomes more specialized, these types of channelers will become increasingly important.

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Automated Distribution • Using telephone lines, the satellite ticket printer (STP) enables

a travel agency to print tickets electronically in an office of a Corporation that the agency serves, thus eliminating the cost of delivering tickets.

• Automated ticketing machines (ATMs) are owned by air lines and located in major airports for passenger convenience.

• The customer inserts a credit card into the machine, which provides flight information, makes a reservation, and prints a ticket and boarding pass.

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