Download organizations in the distribution process

CHAPTER 7
ORGANIZATIONS IN THE DISTRIBUTION PROCESS
LEARNING OBJECTIVES

Become familiar with tourism distribution system organizations and their functions.

Understand the role of travel agents and their dominance in the distribution system.

Consider the impact of the Internet on the distribution system.

Examine the role of the tour wholesaler.

Recognize that a combination of all channels of distribution can be used by travel suppliers.
CHAPTER OUTLINE
Outline Summary
Points of Emphasis
How do channel organizations They consist of a structure or system through which a travel
work?
supplier sells its product rather than selling it directly to the
traveler via their own offices or the Internet. It is impractical for
suppliers to have sales offices in every market area. Travel
agencies are the principal distributors, but products can also be
sold through corporate travel offices or through tour companies or
associations such as an auto club. The supplier pays a commission
to most distributors for each product sold. The products are
intangible.
Travel agents
Are the dominant distributors – about 20,000 agencies in the U.S.
and they are found in most other countries as well. An agency is
an agent middleman acting on behalf of the client, making
arrangements with suppliers of travel – airlines, hotels, tour
operators, cruise lines – and receiving a commission from these
suppliers for each product sold except for airlines. A travel agent
is an expert counselor, advising the clients on travel concerns and
making itineraries. As some suppliers have reduced or eliminated
the commissions paid, most agents are charging fees.
Dimension of the travel
agency business
With the reduction and elimination in commissions paid by the
airlines the number of agencies is declining because small
agencies are closing their doors or consolidating with other
agencies so the dollar volume of agencies is still increasing.
Virtually all agencies are now automated. Independent and homebased travel sellers are increasing.
Types of arrangements made
As airline commissions fall or are eliminated, agencies are shifting
their mix and the future will see increases in cruises, tours, and
other non-air segments.
Travel agency organizations
The American Society of Travel Agents (ASTA) is the most
influential. A smaller group is the Association of Retail Travel
Agents (ARTA). On a global scale, organizations include the
Universal Federation of Travel Agents Association (UFTAA), and
the World Association of Travel Agents (WATA). In the U.S. The
Travel Institute, formerly the Institute of Certified Travel Agents
(ICTA) provides an educational and certification program leading
to the designation CTC, Certified Travel Counselor. Similar
educational organizations exist in other countries such as in
Canada and Great Britain.
Internet
It makes direct selling from the supplier to the consumer more
possible than ever before. It is a growing form of travel
distribution.
The tour wholesaler
Also called operator, a firm that puts together all tour components
usually transportation, accommodations meals, and some special
activity or special interest such as a wildlife photography tour.
Tour wholesaler organizations
The National Tour Association (NTA) is a primary group in North
America. NTA provides marketing assistance, educational
programs, governmental representation and communications for
its membership. Its premier event is the annual NTA Convention
and Tour and Travel Exchange, one of the largest travel industry
gatherings in North America. Another important group is the U.S.
Tour Operators Association (USTOA). They provide similar aids
as NTA but emphasize consumer protection and education and
strive for tour company professionalism. Most tour operators
belong to travel agency associations, and to national and regional
tourism promotion groups such as Travel Industry Association of
America and Pacific Asia Travel Association.
Specialty channelers
These distributors include incentive travel firms (see below),
meeting planners, corporate travel offices, association executives,
hotels reps, travel consultants, and travel supplier sales people.
They are a small force compared to travel agencies but are experts
in their special fields of travel.
Incentive travel firms
Companies that arrange special tours as rewards to individuals or
groups in all kinds of businesses which want to reward their staff
people for achieving a particular goal. Travel rewards can also be
given to a firm's distributors or customers. The leading firms in
this field are E.F. MacDonald and Maritz. The national trade
association is the Society of Incentive Travel Executives (SITE).
Corporate Travel
Departments
Many corporations have chosen to set up their own travel sections
rather than use a regular retail travel agency.
Hotel rep firms
Companies specialize in representing independent hotel properties
in given marketing areas, usually the large cities. Chain or system
firms such as Holiday Inns have their own sales reps.
Automated distribution
A Satellite Ticket Printer (STP) can print tickets in a corporate
office from the travel agency, using telephone lines. Automated
Ticketing Machines (ATM's) are owned by airlines and located in
major airports. The customer inserts a credit card into the machine
that then provides flight information, makes a reservation and
prints a ticket and boarding pass. The Internet provides the newest
source of automated distribution.
Choosing channels
The sales and marketing people in any travel supplier firm must
decide on what channels should be used for the best results. They
usually use a combination of travel agencies, tour wholesalers,
specialty channelers, or incentive travel firms depending on their
particular product. Usually this is determined after experience with
various combinations.
Trade Fairs and Shows
1. ITB Berlin. 2. World Travel Market 3. Milano Bourse
Brings buyers and sellers together to conduct business in a very efficient manner, provides an ideal forum
for establishing new customer contacts, attracts high level professionals with decision making power,
provides publicity opportunities, and provides educational opportunities.
Activity
Site Name: Expedia Travel
URL: http://expedia.msn.com/daily/home/default.hts
Background Information: This site features comprehensive destination information, timely and relevant
travel news, expert advice, the lowdown on deals, and much more.
Site Name: Travelocity
URL: http://www.travelocity.com
Background Information: Travelocity, powered by the SABRE system, provides reservations
capabilities for over 420 airlines, 40,000 hotels, and more than 50 car rental companies.
Site Name: Orbitz
URL: http://www.orbitz.com
Background Information: Orbitz is an on-line agency owned by Travelport. It is a major competitor to
Expedia and Travelocity.
1. Explain briefly why travel suppliers need distributors.
It is impractical for any supplier to have sales offices in every city in the U.S. of 5,000 or more
people. Thus, some outside organization such as a retail travel agency can represent the supplier in
any particular community and be paid a commission for each travel product sold. As there are over
20,000 agencies in the country, there is good coverage of all markets.
2. How do travel products differ from agricultural or manufactured ones?
Travel products such as a hotel room, cruise cabin, or airplane seat cannot be stored or inventoried for
later sale. If the room, cabin, or seat is not rented when ready, the revenue from it is lost forever.
Thus, it is very important to have as many sales outlets as possible.
3. List at least three (3) main types of tourism channelers or distributors.
1.
2.
3.
4.
travel agencies.
wholesalers or tour operators.
tour packagers such as meetings/convention planners.
specialty channelers such as incentive travel firms, corporate travel offices, association
executives, travel consultants.
4. Describe in some detail just what a travel agent does.
Arranges individual travel itineraries for air, rail, cruise, tour, auto including making reservations for
transportation, hotels, ground arrangements, and sometimes special events such as sports events or
entertainment. The agent is a counselor and important source of information regarding all aspects of a
trip. Compensation is obtained by commissions from suppliers, fees, or a combination.