Travel Industry Operations: Wholesaling & Retailing Notes PDF

Travel Industry Operations Wholesaling Retailing 1  The travel distribution system links the suppliers of travel products and services to the end customers. They are viewed as ‘middlemen’....

Travel Industry Operations Wholesaling Retailing 1  The travel distribution system links the suppliers of travel products and services to the end customers. They are viewed as ‘middlemen’. 2  The two basic purposes of distribution in tourism can be summarised as follows: 1. TO FACILITATE AVAILABILTIY OF SERVICE: Because of the uniqueness of tourism products (they are intangible, cannot be stored and are located far from consumers), the distribution channel provides availability. 2. TO FACILITATE ACCESSIBILITY: Through the various levels of distribution, the products and services can be bought at a point away from the actual service. 3  The main function is to extend the number of points of sale or access away from the location at which services are performed.  Secondary function: To facilitate the purchase of products in advance of their production.  They also assist customers to choose products and services 4  Direct Distribution has three levels: 1. Principal—Customer (on principal’s premises). The principal sells to the customer on his or her premises. This is typical of attractions, cafes, museums, guesthouses and taxis. 2. Principal—Customer (at home). The principal sells to the customer at home. This includes all forms of direct response marketing and the Internet. 3. Principal—Own retail outlet—Customer. The principal owns the distribution system. The principal sells to the customer on his or her own premises. This is typical of car-rental companies, railways and airlines. 5 Indirect distribution also has three levels 1. Principal--Independent retail outlet—Customer. The principal sells to the customer through an independent retailer on the retailer’s premises. 2. Principal– Tour Wholesaler—Independent retail outlet—Customer. The principal (for example, a hotel or airline) negotiates an allocation of services (accommodation or airline seats) to another principal (a tour wholesaler) who sells (tour packages) to the customer through an independent retail outlet (a travel agent). 3.Principal– Speciality Channeller—Tour Wholesaler—Independent retail Outlet--Customer. The principal negotiates a bulk allocation of production to a speciality channeller (an incentive house) who negotiates with a tour wholesaler who sells to the customer through an independent retail outlet. This is typical of hotels and airlines serving specific needs. 6  Four Components 1. Suppliers (or producers or principals) - may be defined as any producer or principal who has products or services to sell 2. Global Distribution Systems - distribute reservation and information services to sales outlets around the world. 3. Travel Intermediaries-Intermediaries may be described as any third party or organisation between the producer and consumer that facilitates purchase, the transfer of the service to the buyer as well as sales revenue to the producer. 4. Customers or Clients- Customers may be defined as people who have the need for, want and are able and willing to buy a product or service. 7  According to Biederman (20000 the tour operator sector, which is alive and well. This sector is uniquely well positioned to take advantage of the guaranteed rise in tourist volumes from developing countries like China, India, Brazil, Mexico, and others but will also be providing products for the millions of former baby boomers who will shortly be known as senior citizens in developed countries.  Given the low barriers to entry into this sector, there is the suggestion that getting in sooner rather than later may be advantageous to would-be entrepreneurs 8 Role and responsibilities of tour wholesaler The tour wholesaler buys different components of the tourism product, such as transportation, accommodation and sightseeing, from suppliers to create packages that are sold via the travel agent to the consumer. The travel agent has traditionally been the dominant sales channel for the airline and tour operating companies. 9  The agent middlemen negotiate on behalf of the service provider or principal but do not take charge of the services The product is normally intangible (a service) and cannot be stored and physically packaged.  There are no problems with storage but tourism services are immediately perishable, and must be sold each and every day, otherwise revenue will be lost.  Distribution includes unique intermediaries with unique characteristics who have a strong influence on travellers’ purchase decision. 10  A distribution channel is the vehicle utilized to make a product or service available to the consumer. In hospitality, a successful channel management strategy consists of selling inventory at the highest possible rates, while pushing reservations through the lowest cost channels.  Those are challenging tasks, which require an understanding of the wide array of distribution options available, their sales models, and how they interact. 11  The tourism and travel industry is comprised of a complex, informal global network of independent businesses which form the ‘travel distribution chain’. This network allows both domestic and international consumers to research, book and pay for tourism-based product. 12  Travel distributors allow you to broaden your customer base far beyond the reach of your own limited marketing budget.  They are particularly important to the inbound tourism industry as overseas consumers still rely heavily on the advice of local travel experts when planning their holiday, particularly in long haul and emerging markets. 13  Travel distributors can also provide insights and advice on target markets and suggest changes or improvements to your product that will help you meet the needs of your consumers. The travel distribution system covers all the channels through which an international traveller can buy your 14 Other than approaching you directly, international and domestic travellers may book your product via:  Local travel agents  Tour wholesalers/ operators that market directly to consumers (direct sellers)  Inbound tour operators  Meeting planners, and  Online – through travel portals or individual Internet booking engines. 15  Travel intermediaries can be divided into wholesalers and retailers.  The tour wholesaler buys different components of the tourism product, such as transportation, accommodation and sightseeing, from suppliers to create packages that are sold via the travel agent to the consumer. 16  The travel agent has traditionally been the dominant sales channel for the airline and tour operating companies. 17  According to Lewis and Chambers (1999), tour operators are considered to be wholesalers and they differ from the previous channels in that they take nominal possession, or secure an allotment, of the suppliers inventory to sell to the public. 18  Wholesalers, also called consolidators, can often negotiate for deeply discounted rates because they buy large volumes or have access to a surplus inventory of deeply discounted tickets and hotel rooms that they are free to sell at slightly marked-up prices. 19  Their advance purchase agreements for hotel rooms also mean that consolidators are often able to provide inventory when other resources list products as sold out. 20  The wholesalers obtain rates and availability directly from the supplier and create packages with different accommodation and transportation options, such as airlines, cruise lines, railroads, car rentals, and bus companies, which are sold directly to the consumer or through travel agents. 21 Examples of wholesalers are:  America West  GoGo Tours  Mark Travel  Tour operators offer discounted packages, which may include meals and tours, and may specialize in certain markets or destinations. Motorcoach tours are typical tour operator products. The Japanese Tourist Bureau (JTB) is an example of a tour 22  Package tours organised by entrepreneurs such as Thomas Cook. Thomas Cook was called a saint by the Archbishop of Canterbury. Cook was an Thomas Cook is considered to be an imaginative innovator as he organized group tours by rail early in 19th century England and set himself up as the first major tour operator. While pursuing his own self-interest and was in the right place at the right time when railroads were invented. Major Tour Operators in 2010  TUI Travel  Thomas Cook Group  Monarch and Cosmo  Expedia  Virgin Atlantic Source: BTEC National Travel & Tourism 2010 Specification 23 1. Inbound 2. Outbound 3. Domestic 4. Niche tour operators Inbound Tour Operators  Tour operators who deal and handle directly inbound foreign tourists, provide them various services on their arrival and departure such as transfer, accommodation, transportation, sightseeing, entertainment, currency, insurance services etc. are known as inbound tour operators.  These tour operators formulate tour package individually or in collaboration with foreign tour operators 24 outbound, These categories of operators are specialized in promoting and designing multi-national tours especially foreign countries. The outbound tour operator sells a package tour to an individual or a group of people of his own country to another country or a number of countries for a specific pre-decided period. The outbound tour operator arranges travel documents, transportation to a central point where the tour starts and contracts with inbound tour operators/ground operators to provide accommodation, transportation, local sightseeing and other services as needed throughout the tour. Domestic, Today, the domestic market has witnessed attractive growth rates as large players in the travel industry are aggressively entering and promoting this market. Leading tour operators usually focus on the international market where margins are higher but now, in addition, they are floating new packages to create a niche in this segment to tap the vast potential in the domestic market. Even leading hotel chains are also receiving healthier response in this context. In the UK, USA, Japan, India, China and Hong Kong many tour operators are specialized in domestic holiday packages. Generally, domestic tour operators operate within the boundary of home country and cater the diverse needs of individual and group travellers. 25 Niche tour operators - Niche tour operators may specialize in destinations, e.g. Italy, activities and experiences, e.g. skiing 26 There are several stages in creating a tour packaging and they are as follows: market research; planning and scheduling; forecasting; contracting e.g. allocation, commitment, ad hoc, time series charters, split charters, ad hoc chartering, scheduled services, using air brokers; costing the holiday, timescales NB - *The main object of tour packaging research is to analyse and understand the key elements associated with a particular tourist market and destination. *costing means the total expenses incurred to change the shape of individual ingredients into a tour package. 27 Most tour packages consists of the following elements: 1. Accommodation 2. Transportation 3. Food & Beverage 4. Activities and Entertainment 5. advantage for travelers buying tour packages compared to independent travel Tour packages especially appeal to neophyte and older travelers who don’t mind traveling in a group and prefer not to have to worry about making travel and tourism arrangements themselves. 28 Tour Operators face many challenges. Some of which are as follows:  Doing business in a mature market  Global Recession  Availability of internet where customers may purchase their own travel products  People spending less for these services  Taxes and Capacities  New Regulation  Politically risky destinations are harder to sell 29 Retailing 30 According the Biederman, P. (2000) Not too long ago, traditional travel agencies occupied position central in travel and tourism as the main intermediary between suppliers and customers. That role has diminished considerably due to the rise of online travel agencies and supplier 800 call centers and in-house Web sites. However, the so-called brick and mortar, while down, are not yet through as important players in the industry. 31 A travel agent is a kind of retail business which is a buyer of tour operator, it sells travel- related products and services to customers on behalf of tour operators, airlines, hotels and other entities Further Reading:  http://www.ukessays.com/essays/tourism/u ks-tour-operator-industry-analysis-tourism- essay.php#ixzz3Dl5OBt6C 32 Role and responsibilities of retailer  A travel agency is considered to be a retail business that sells services to customers on behalf of suppliers. Travel Agency does the following:  Sells travel related products  Sells services such as airline seats, cruise lines, rentals, hotels rooms, sightseeing tours and holiday packages.  Sells combines combined packages  Makes travel arrangements for business travelers 33 Role and responsibilities of retailer  Some travel agents specialize in business and commercial travel only  Some travels agents expand to do services like completion of documents like passports renewals  Services to Holiday destinations are provided by Leisure travel agents  Services to commercial customers and consumers are provided by Business travel agents  Provide and important link between tour operators and customers  Travel Agencies range from small independents to large national chains 34 What is the role of the travel agent and how has it changed? “Travel agents work hard on behalf of the consumer. The role of a travel agent is to make a trip - whether for work or pleasure - a stress-free and memorable experience”. Travel agents personalize service, books tickets and search for affordable prices.. ASTA’s motto, "Without a Travel Agent, You're on Your Own," exemplifies the importance and way professional travel agents view their role in today's changing market.  The travel agent’s job has adapted to the changes in the information era and has grown. This reflect the change in the way of life and how travelers now think about travel.  ASTA travel agents recognize that consumers today have done their homework and are more knowledgeable about what they want. ASTA is American Society of Travel Agents Source: http://www.asta.org/about/content.cfm?ItemNumber=1985&navItemNumber=51 5 35  The travel agent community, through its trade association, the American Society of Travel Agents (ASTA), reacted angrily to the 1992 cuts and sued on anti-trust grounds for $725 million charging collusion among the airlines.  An out-of-court settlement gave the travel agents about $86 million to distribute to its injured members in September 1995 but it was that the collusion charge was nothing more than an example of follow-the-leader in pricing that was common to oligopolies like the airlines 36 According to Biederman (2000) when online agencies like Travelocity came on the scene in the 1990s, another blow was felt by the traditional brick and mortar agencies. The online agencies were accessible at the touch of a key while traditional agencies had to be visited in person or over the phone  Rather than expand its own reservations capability as the airlines and hotels have done, the cruise industry has maintained its traditionally close relationship with travel agencies. Most 60 cruise lines bookings still come through travel agencies. 37 What percentage of airline tickets, rental cars, cruises and hotel rooms are sold by travel agents? When it comes to booking travel, travel agents are experienced professionals. Travel agents sell: 85 percent of cruises 70 percent of all tours and packages 50 percent of all airline tickets 30 percent of all hotels 25 percent of all car rentals Source: 2008 PhoCusWright Travel Agency Distribution Landscape Report 38  Biederman, P. (2000) Travel and Tourism: An Industry Primer NYU School of Continuing & Professional Studies 39