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Chapter Sixteen Channels of Distribution How Distribution Channels Work Distribution involves two questions: How do I get my product to the customer? How do I get the customer to my product? Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 2 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Exhibit 16-2; Estimating Costs to Hotel to Book Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 3 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. How Distribution Channels Work Distribution channels are important A group of organizations, independent or not, that are involved in the process of making a product or service available for use or consumption Goal is to get the product where the customer is now or is going to be in the future Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 4 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. How Distribution Channels Work Distribution in hospitality is different and complex Hospitality product must be where the customer is Focus on “getting” the customer Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 5 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Product to the Customer Branded Hospitality Companies Franchising Management Without Ownership Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 6 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Product to the Customer Branded hospitality companies May own all, part or none of the actual asset All carry a brand name and adhere to strict standards Importance Allow for franchising and higher revenues Gain management contracts Gain access to capital Brands bring desired familiarity to the customer Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 7 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Product to the Customer Franchising Commonly used in hospitality to: Increase the distribution network Increase revenue Obtain geographical presence Access the company’s industry experience and marketing tools Also common in non-hospitality firms Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 8 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Product to the Customer Franchising Contracts and control between franchisee/franchisor vary and cover: Marketing support Revenues to the franchisor Duration of agreement Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 9 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Product to the Customer Management without ownership Many hotels today manage without ownership Increases distribution without the financial cost and risk Also known as a “management contract” Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 10 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Reservation services Representation firms Consortia Incentive travel organizations Corporate travel management Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 11 Global distribution systems (GDS) Traditional off-line travel agents Central reservation systems (CRS) Internet channels Websites © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Reservation services Used by hotels to market themselves independently Only connects them to the channels of distribution SynXis or Pegasus Links directly to GDS or Internet without needing brand affiliation Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 12 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Representation firms A channel of distribution that brings a hotel to the marketplace Market the hotel and sales for independent hotels that do not have sales or reservation networks Termed “soft brands” Represent both the representation firm and their own independent brand Maintain independence with representation but also have access to marketing programs Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 13 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Representation firms offer: Standards for membership Connectivity to electronic channels of distribution Sales initiatives Marketing programs Participation in trade shows Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 14 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Consortia A loosely knit group of independently owned and managed properties (e.g. hotels or travel agencies) with different names, a joint marketing distribution purpose, and a common consortium designation Purpose is to open a channel of distribution by maximizing combined marketing resources and reducing expenses for individual properties Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 15 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Incentive travel organizations (incentive houses) A company that specializes in handling incentive reward travel which rewards top-performing employees Need for new and exciting destinations and for the trip to be perfectly executed Thoroughly review the destination and facilities, sell it to the company and sell it to the employee Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 16 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Corporate travel departments and travel management companies Services range from a travel director who creates policies and contracts with travel suppliers to a full, in-house travel agency Referred to as the corporate or managed business traveler Goal is to balance the need of employee and employer Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 17 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Global distribution systems (GDS) A computerized reservation system that connects the travel agent to hotels, airlines, cruise lines, care rentals, and other services Additional fees are added at each point in booking To avoid this, many companies are now directly marketing to customers Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 18 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Traditional offline travel agents Intermediary who assists travelers in making arrangements for a fee Travel agents can also form consortia Belief that they may shrink with growth of internet Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 19 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Central reservation systems (CRS) Computerized reservation system of a hospitality company that allows customers to make reservations without having to contact the company directly All major hotel chains worldwide now communicate from their CRS and GDS directly to the individual hotels Seamless connectivity allows two-way inventory management Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 20 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Internet channels Now reaching 80% of US households, the internet’s influence on hospitality is growing Internet has evolved: Provides information Simplifies transactions Improving technology with complex interactions taking place Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 21 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Internet Channels Early on was the advent of the online travel agent September 11th and the increase of online discounted booking The merchant model Third party site negotiated net rates for hotels and marked price up for market sale To compete, hotel brands began to offer their own sites Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 22 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Websites Is the hospitality modern day equivalent of the rack brochure Should reflect the personality of the hotel with visuals Focus on the needs of the customer Website will vary based on market segment Many fail to provide visitors with information needed to make a purchase decision Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 23 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Websites Two audiences Potential customer Search engine Functionality best practices Reservation area should be at the front of the page Email acquisition section should be on the home page Site should convey the best value to the customer and keep them interested Security has to be conveyed Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 24 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Getting the Customer to the Product Website-generated market research data Computer servers track visitors and record surfing and clicking behavior First page visited Last page visited Navigation sequences Referring site Average number of pages visited Time on site Low cost tool Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 25 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Future Challenges of Online Distribution The internet has fundamentally changed travel and hospitality distribution Challenges The consideration set for travel options has expanded Price transparency and consistency Need to manage transaction costs Reallocation of marketing dollars “Onward distribution” Rise of third parties that are going after the group market Increase in packaging Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 26 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Future Challenges of Online Distribution Selecting channels Length should be analyzed Shorter is better due to less cost, less management issues Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 27 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Future Challenges of Online Distribution Market Opportunities in China Barriers to e-commerce in China Cash based nature of Chinese society Little experience or trust in online transactions Doubt the reliability of information provided online Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 28 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Evaluation of Channels Tracking of statistics to better negotiate contracts in the future Understand the break-even point of a channel Must be marketing driven with good channel management to ensure customer satisfaction Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 29 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Discussion Do you believe that traditional travel agents will one day be obsolete? What can they do to make themselves a competitive distribution channel? Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw 30 © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
