CHANNELS OF DISTRIBUTION

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.

One of the clear difficulties in discussing distribution channels is the lack of standardized
definitions to describe them. The terms may overlap and the industry is not uniform in its
nomenclature (Lewis and Chambers, 1999). Consequently, the reader may encounter
different names to describe some of the concepts presented here. The terms ‘operator’ and
‘supplier’ will be used interchangeably to designate the supplier of the hospitality product
(hotel rooms, airline tickets, rental cars, etc.).
Contents
• • Hospitality distribution channels
• • Call center
• • Travel agents
• • Meeting planners, group TA,corporate TA

Distribution (business)
From Wikipedia, the free encyclopedia
Jump to: navigation, search

Physical distribution (or place) is one of the four elements of the marketing mix. An
organization or set of organizations (go-betweens) involved in the process of making a
product or service available for use or consumption by a consumer or business user.
The other three parts of the marketing mix are product, pricing, and promotion.

The distribution channel

Chain of intermediaries,each passing the product down the chain to the next organization,
before it finally reaches the consumer or end-user.... This process is known as the
'distribution chain' or the 'channel.' Each of the elements in these chains will have their
own specific needs, which the producer must take into account, along with those of the
all-important end-user.
[edit] Channels
A number of alternate 'channels' of distribution may be available:

• Distributor, who sells to retailers,

• Retailer (also called dealer or reseller), who sells to end customers
• Advertisement typically used for consumption goods

Distribution channels may not be restricted to physical products alone. They may be just
as important for moving a service from producer to consumer in certain sectors, since
both direct and indirect channels may be used. Hotels, for example, may sell their
services (typically rooms) directly or through travel agents, tour operators, airlines,
tourist boards, centralized reservation systems, etc.
.
Channel decisions
• Channel strategy
• Gravity & Gravity
• Push and Pull strategy
• Product (or service)
• Cost
• Consumer location

Managerial concerns
The channel decision is very important. In theory at least, there is a form of trade-off: the
cost of using intermediaries to achieve wider distribution is supposedly lower. Indeed,
most consumer goods manufacturers could never justify the cost of selling direct to their
consumers, except by mail order. Many suppliers seem to assume that once their product
has been sold into the channel, into the beginning of the distribution chain, their job is
finished. Yet that distribution chain is merely assuming a part of the supplier's
responsibility; and, if they have any aspirations to be market-oriented, their job should
really be extended to managing all the processes involved in that chain, until the product
or service arrives with the end-user. This may involve a number of decisions on the part
of the supplier:

• Channel membership
• Channel motivation
• Monitoring and managing channels

Type of marketing channel

1. Intensive distribution - Where the majority of resellers stock the 'product' (with
convenience products, for example, and particularly the brand leaders in
consumer goods markets) price competition may be evident.
2. Selective distribution - This is the normal pattern (in both consumer and industrial
markets) where 'suitable' resellers stock the product.
3. Exclusive distribution - Only specially selected resellers or authorized dealers
(typically only one per geographical area) are allowed to sell the 'product'.

Channel motivation
It is difficult enough to motivate direct employees to provide the necessary sales and
service support. Motivating the owners and employees of the independent organizations
in a distribution chain requires even greater effort. There are many devices for achieving
such motivation. Perhaps the most usual is `incentive': the supplier offers a better margin,
to tempt the owners in the channel to push the product rather than its competitors; or a
compensation is offered to the distributors' sales personnel, so that they are tempted to
push the product. Dent defines this incentive as a Channel Value Proposition or business
case, with which the supplier sells the channel member on the commercial merits of
doing business together. He describes this as selling business models not products.

Monitoring and managing channels

In much the same way that the organization's own sales and distribution activities need to
be monitored and managed, so will those of the distribution chain.
In practice, many organizations/corporations such as PickEgg electronics use a mix of
different channels; in particular, they may complement a direct salesforce, calling on the
larger accounts, with agents, covering the smaller customers and prospects. these
channels show marketing strategies of an organisation. Effective management of
distribution channel requires making and implementing decision in these areas.

Hospitality distribution channels

In hospitality, particularly in the lodging industry, the traditional main distribution channels
were the call center and the travel agencies. Over time, other channels were created. For the
most part, these new channels acted as intermediaries between the property and the global
distribution system (GDS)/travel agent. The advent of the Internet led to profound changes in
hospitality distribution. New business models were created, as well as online-based
reservations networks, which allowed worldwide exposure to products while avoiding
intermediaries such as the GDSs. For detail on this important and complex matter in today’s
hospitality environment see the section on ‘Internet Channels.’ An overview of the various
channels is presented next.

Call center
This is a central location phone bank, also called central reservation office (CRO). In its
simplest form, it consists of a telephone and a reservation agent. Generally, call centers
have the ability to place multiple reservations at the same time through central computer
reservation systems (CRSs), usually through an 800 number. Hotel companies may have
call centers that serve many different properties within the corporation. Airlines and car
rental companies usually have one centralized call center in each of the different
countries where they operate, all interlinked through the CRSs. Centralized call centers
have the advantage of providing consistent service and decreasing the company’s costs,
such as management and training. Multi-branded companies, however, may have
different call centers and, in some cases, different CRSs within their system, mostly due
to mergers and acquisitions.
The term ‘CRS reservations’ is sometimes used to refer to the reservations originating
from the call center, even though the CRS serves as an intermediary between most other
channels and the property management system (PMS). There are companies that provide
third party call centers (e.g. Utell), which may handle all incoming calls or overflowing
calls in periods of high demand.

Meeting planners, group TA,corporate TA

Meeting planners and group travel agents, also simply called ‘third parties’ or ‘third party
meeting planners,’ are companies that specialize in providing business travel services, such
as meeting planning, incentive travel, and convention services. Their roles may overlap, but
generally these third parties prescreen hotels, negotiate rates, and organize events, working
with travel agents or acting as specialized travel agents in order to cater to corporate group
travel needs. Examples of third parties are Carlson Marketing Group, PGI HRT, and Krisam.
Corporate travel agents perform similar roles, but they are part of a corporation (e.g.
American Express, Sony, etc.) and attend exclusively to the corporation needs. National,
state, and local tourism agencies

These agencies promote tourism in certain geographic areas. They may be sponsored by the
state or constitute business associations with the common goal of providing information and
promoting travel in certain regions. Tourist agencies advertise resources, tourist attractions,
and help customers to plan their trips providing maps, guides, and effectuating bookings,
generally though destination management systems (DMSs). They are usually located either in
strategic target markets (e.g. the Spanish Office of Tourism, in Los Angeles) or in entrance or
strategic points (e.g. the Los Angeles Convention and Visitors Bureau).

Tour operators and wholesalers

According to Lewis and Chambers (1999), tour operators and wholesalers differ from the
previous channels in that they take nominal possession, or secure an allotment, of the
suppliers inventory to sell to the public. 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. 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. 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. Examples of wholesalers are America West, GoGo Tours, and 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 operator.

Consortia, affiliations,companies
These are associations with common marketing efforts. In the United States, the term
‘consortia’ normally refers to a conglomerate of travel agencies. In some other countries,
particularly in Europe, ‘consortia’ refer to entities that provide chains or individually owned
and operated hotels with access to global distribution systems and representation services,
acting as intermediaries between the supplier and the travel agents.

Affiliations and reservation companies have similar roles. However, as Lewis and Chambers
(1999) explain, the strength of the association and entry requirements may vary among
consortia, affiliations, and reservation companies. Membership in a consortium is a quality
statement. The properties become associated to a third party brand and there are entry
requirements, even though the hotels still keep an individualized image. An example of a
consortium is the ‘Leading Hotels of the World.’ There are also entry requirements and
certain consistency among the members in affiliations. The hotel name, however, is
secondary, and the affiliation brand becomes the flagship for the members. Best Western
Hotels is an example of an affiliation. There are virtually no entry requirements for
reservation companies. Hotel companies use reservation services when they wish to delegate
GDS distribution and reservation processing, as well as broad Internet distribution, to a third
party. Unirez, Utell, and TRUST International are examples of reservation companies. Most
reservation companies are also known as representation companies, because they usually
provide representation services.

Representation companies
These companies act as sales organizations, representing hotels through their sales force, the
representatives, in regional offices located in different geographical areas. Representation
companies eliminate the supplier’s need for establishing sales offices in certain markets.
European Hotels Representation and David Green Organization are examples of
representation companies. A special case of representatives are the ‘junket reps,’ individuals
who have a casino clientele and work with casinos that are promoting gambling trips. Junket
reps are particularly active in international markets.

Internet channels
These channels involve the online dispersal and purchase of travel products, and include
Internet counterparts of the traditional channels. These companies interact with the customer
in different ways, forming complex and dynamic distribution arrangements. The online
reservation environment has two major players: hotel companies and third party travel
companies. Most dot-commers currently use the so-called ‘merchant model,’ which consists
of a certain mark-up over rates to sell rooms in lieu of commissions and fixed fees used in
traditional GDS-based channels. Internet channels also use innovative sales strategies, such
as ‘name your own price auctions’ and opaque models. For further details see ‘Internet
Channels.’

Distribution channelsEditTop
The concept of distribution channels is not limited to the distribution of physical goods.
Although the principles are the same, the channel distribution for tourism differs
significantly from those used for manufactured goods. This difference stems from the
nature of tourism services and their production system and consumption patterns.
Tourism services require simultaneous production and consumption, meaning the product
is not normally 'moved' to the consumer. Further, the product is often sold in conjunction
with another one, such as airline tickets. Because of the perishability of most of the
tourism products, many traditional channels may not work. While eliminating some of
the functions and problems of transportation and warehousing, a distribution channel in
tourism should consider such reasons in reaching and catering to the market.

A tourism distribution channel may be defined as a total system of linkages between

actual and potential tourists and the suppliers. The structure

of the distribution system may be either direct (from the producer to the seller) or indirect
(the sale to the consumer through an intermediary). As the definition implies, the
challenge is how to get the customer to the consumption site (the retailer), that is, to make
it convenient and accessible. This unique feature raises the need for a different kind of
distribution system in tourism.

Suppliers of tourism services and destinations may use several different methods to
distribute their goods and services. These include their own channels (partially or wholly
owned), selling through management and marketing contracts, franchising, hiring sales
representatives and using various intermediaries. The intermediaries in a tourism channel
of distribution consist of three main categories: tour packagers, retail travel agents and
speciality channels. Included in the latter are incentive travel firms, meeting planners and
convention planners, hotel representatives, association executive marketing organisations,
corporate travel offices and others.