The Distribution Process

Distribution Channels

• An operating structure, system, or linkage of various combinations of organizations through which a producer of travel products describes, sells, or confirms travel arrangements to the buyer

The Travel Trade IndustryThe Travel Trade• Made up of travel agents, tour

operators, also referred to as intermediaries or middlemen and the tour guides.

• The sector that provides the travelling public with advice on destinations to go to and facilitates the reservation or purchase of different travel services.

One-Level (Direct) Distribution Channels

• Simplest form of distribution, no intermediary between supplier and customer

• Most tourism suppliers utilize one-level distribution channels

• Purchase directly from the supplier• World Wide Web is increasing the direct availability of

information and purchase• Airlines encouraging the use of the Web and

ticketless travel

Two-Level Distribution Channels

• Intermediary between tourism supplier and tourist• Most common form of tourism supplier• Travel agencies are the department stores of the travel

industry• Improving service delivery through cooperative systems

– Global distribution system (GDS)– Computer reservation system (CRS)– Airlines Reporting Corporation (ARC)

Three-Level Distribution Channels

• Add another level of intermediary such as tour operators to low-level channel

• Some travel agencies have entered tour packaging business

• Tours– A package of two or more tourism services priced together– Four primary forms of tours

• Independent• Foreign/domestic independent• Hosted• Escorted

Three-Level Distribution Channels

• Tour Operators– Purchase tourism services in bulk and then mark up the

price and resell in packaged form– Plan, prepare, market and often operate vacation tours– Also termed tour packager or tour wholesaler– Many financial risks in the tour packaging business– Receptive service operator is local company that handles

group’s needs while in its location

Three-Level Distribution Channels

• Consolidators and Travel Clubs– Consolidators buy excess airline capacity and resell at

discounted prices– Travel clubs perform similar function for their members plus

offer discounts on other tourism services• Meeting Planners

– Professionals employed by corporations, associations, etc. to organize all the details entailed in meetings

– Meeting planner must balance meeting costs with meeting attendee desires

The Travel Trade IndustryTravel Agencies• Can be compared to a department store selling travel

needs.• A place or establishment where people can secure

information, expert counselling and make arrangements for travel by air, sea or land to any point in the world.

What is a Travel Agency?

“A travel and tour agency is an entity engaged in the business of extending to individuals or groups, travel services and assistance to include documentation, ticketing, booking for transportation and/or accommodation; arrangements, handling and/or conduct or tours within or outside the Philippines whether or not for a fee, commission or any form of monetary consideration.”

- Article 243 of the Tourism Code of 1980

What is a Travel Agency?Traditional view:

- A commercial enterprise where a traveller can secure information and expertise, get impartial counselling, and make arrangements to travel by air, sea or land to any point in the world

What is a Travel Agency• Acts as an agent for

different suppliers or providers of products and services.

What is a Travel Agency

• A middleman between the vendor and the vendee.

Vendor(supplier)

Middleman(Travel Agent)

Vendee(travelling

Public)

What is a Travel Agency• In a traditional perspective, travel agencies earn by

commissions and through price- mark ups called “Net-plus”

What is a Travel Agency• With the advent of new technology, travel agencies

harnesses the links, expertise and professional service orientation of the travel organization and turns it into a vendor and principal selling travel services and solutions

• Also known as: the Travel Management Company

What is a Travel Agency

• The Travel Management Company (TMC) acts as a partner to both the vendor and the vendee.

• TMC’s are Proactive.

What is a Travel Agency

• A commercial enterprise where a traveller may secure information, receive travel advice and make arrangements to travel by land, air or sea to any point in the world for a professional fee.

• Travel Agencies now earn through a professional fee called the “Cost plus”.

What is a Travel Agency

Vendee (travelling

public)

Travel Management

Company

Vendor (Supplier)

Travel Agents v. The Internet• With the advent of the internet, the consumer now has

more choices in terms of products. • However given the expansion of products they can get,

the question here is how can they make the internet work effectively for them?

Functions of a Travel Management Company

• Provide Information and Expertise• Recommend Destinations, products and services best suited to the

needs of the client• Provide assistance in securing travel documents.• Process Travel arrangements• Assist in case of refunds and cancellations.

The Travel Management Company

Travel Management Companies earn through the following:• Through a negotiated professional and handling fee• Commissions or Mark-ups• Service fees for ancillary services• Production Incentives and rebates from suppliers.

Characteristics of a TMC

• Retailer• Counsellor• Derives income from a pre-determined

fixed commission dictated by suppliers or a professional fee negotiated with client

• Charges fees for ancillary services.

Consolidators• Travel Agencies that sell airline tickets at sizeable

discounts. • Have contacts with one or more airlines to distribute

discount tickets. Airlines work with them to fill up what would be empty seats.

• Can act strictly as wholesalers or can sell directly to the public

Tour Operators• Companies that contract and purchase separate travel

components and assembles them into one package.• Provides the packages sold by travel agents.• Their businesses is characterized by a relative ease of

entry, high velocity cash flow, low return on sales and the potential for high return on equity.

Tour Operators

Types of Wholesale business:– Independent tour wholesaler– Airline working in close cooperation with a

tour wholesailing business– Retail travel agent who packages tours for its

clients– Operators of bus tours

The Tourism Industry

TRAVEL AGENTS TOUR OPERATORRetailers Wholesalers. Deals with travel

agents (retailers)Acts as consultants or advisers to the traveller.

Acts as middlemen between the suppliers and the vendors.

Revenues are fixed and pre determined by suppliers

Have variable but limited revenues income and profit margins

Charges fees for documentation and ancillary services

Sells optional products and services and makes use of deposits

Agents of the Suppliers Capitalize on Cost-savers

Specialty Channelers• Includes organizations like:

– Incentive travel firms,– Business meeting and convention planners, – Corporate travel offices, – Association executives, – Hotel representatives, – Travel consultants and;– Supplier sales office.

Specialty Channelers• Any intermediary between a provider of a travel product

and the ultimate consumer of that product used to refer to companies that specialize in a particular type of travel, for example meetings and incentive travel.

• Experts in their particular aspect of travel (niche)