Slide 12.1 Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors Travel Intermediaries - Middlemen Chapter

Slide 12.1

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Chapter 12

Travel ITravel Intermediariesntermediaries - - MiddlemenMiddlemen

Slide 12.2


This Lecture will give you1. Familiarity with the nature and structures of

intermediation and the arguments for and against dis-intermediation of distribution channels in tourism;

2. An awareness of ‘online’ developments and the increasing consolidation and concentration of tourism intermediaries;

3. Familiarity with the operating characteristics, roles and functions of retail travel agents and tour operators;

4. An understanding of the process of distribution; and

5. An awareness of the financial constraints on the operation of intermediaries.

Slide 12.3


Middlemen Middlemen are intermediaries between consumers and suppliers.

Customer (tourist) – middlemen – supplier

Using middlemen has many advantages for both customers & suppliers

Tourism industry has been traditionally characterised by its use of intermediaries.

Intermediaries

Slide 12.4


Figure 12.1 Structure of distribution channels

Slide 12.5


Various middlemen that are included in the travel and tourism industry are;

• TTravel agencies,ravel agencies, Tour Operators Tour Operators• TTravel clubs, ravel clubs, • HHotel marketing and booking schemes, otel marketing and booking schemes,

incentive travel organizations, incentive travel organizations, • SSales representatives, ales representatives, • CComputerised reservation system (CRS), omputerised reservation system (CRS),

global distribution system (GDS) etc.global distribution system (GDS) etc.

Intermediaries

Slide 12.6


Functions of Intermediaries

• Provide info about tourism products • Contact current & potential customerscurrent & potential customers • Make reservations & other arrangements • Assemble services to meet customer

needs • Prepare tours & make confirmations

Slide 12.7


Functions of Intermediaries

• Provide databases on customer behavior • Reduce cost Reduce cost of acquiring new customers • Market excess or distressed inventories • Take risks by buying (or reserving)

products & then reselling them to individuals or groups

Slide 12.8


The Nature of IntermediationThe Nature of Intermediation

• BenefitsBenefits– Producers are able to sell in bulk and so

transfer risk to intermediaries– Producers can reduce promotioncan reduce promotion costs by

focusing on the travel trade, rather than consumer promotion, which is more expensive

Slide 12.9


The Nature of IntermediationThe Nature of Intermediation - - BenefitsBenefits

– Consumers can avoid search and search and transactions coststransactions costs

– Consumers can benefit from the sspecialist pecialist knowledge of intermediaries,knowledge of intermediaries, their market power and the resulting lower cost of products

– Destinations can benefit from the marketing, and international marketing, marketing, and international marketing, network of many intermediariesnetwork of many intermediaries

Slide 12.10


The Nature of IntermediationThe Nature of Intermediation

• DisadvantagesDisadvantages

–Use of intermediaries by producers will result in the loss of margins and their degree of marketingmarketing control and influence over the process of distribution

Slide 12.11


Travel AgenciesTravel Agencies

• Travel agent = person person • Travel agency = companycompany • They provide important info & sales links • Links between: tourists & tourismtourism supplierssuppliers • Using Travel Agents, one of most common (popular)

ways to buy tourism products\services • Many tourists now use Internet travel agencies:

Travelocity, Travelocity, Tripadviser, Tripadviser, Expedia, & Orbitz Expedia, & Orbitz

Slide 12.12



• Via websites & e-mails Travel Agencies compete with each other regardless of their physical location

• They do not own products they sell, so they have little or no inventory no inventory or cost of goods sold

Slide 12.13



• As commissions dwindle(fall), markups (profits) increase

• Large volume agencies often earn override commissions (above the normal percentage)

• They are destinations experts and make beneficial recommendations

Slide 12.14


Figure 12.4 Conceptual model of the process and factors influencing agents’ destinations recommendations

Slide 12.15


The Role of the Retail AgentThe Role of the Retail Agent

• Travel counsellorTravel counsellor

• Principal role is to supply the public with travel products and services (such as insurance and foreign exchange)

• Income is predominantly earned via Income is predominantly earned via commissionscommissions

• Retail location and choice of reservation Retail location and choice of reservation systems are key decisionssystems are key decisions

Slide 12.16


Receptive Service OperatorsReceptive Service Operators

• RSO are part of tourism distribution channel • A receptive tour operator is a ground handler

& inbound operator at the same time • RSO is a local company that specializes in

handling needs of groups traveling to it destination

Slide 12.17


Consolidators & Travel ClubsConsolidators & Travel Clubs

• They are the combinations of wholesalers & retailers

• They perform a unique function a unique function within tourism distribution channels

• ConsolidatorsConsolidators buy excess inventory of air tickets, then resell them at reduced prices via TA or directly to travelers or directly to travelers

Slide 12.18


Tourist Information SourcesTourist Information Sources

• Travelers need info before, during, & after a trip about tourism product benefits, prices, & availability

• Marketing communications provides this via: – Advertising, public relations, & personal selling Advertising, public relations, & personal selling

Slide 12.19


Tourist Information SourcesTourist Information Sources

• Information is available from national tourist offices (NTOs), convention & visitor bureaus (CVBs), and chambers of commerce

• These sources have tool-free phone numbers, websites, & welcome centers.

Slide 12.20


Table 12.112.1 Some developments and trends in the marketplace affecting travel agencies

Slide 12.21


Slide 12.22


Slide 12.23


Slide 12.24


Slide 12.25

Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authorsTable 12.5 Major global travel conglomerates

Slide 12.26


Online TravelOnline Travel• Drivers of growthDrivers of growth

– Growth of Internet usage and electronic commerce– Success of global distribution systems (GDSs)(GDSs)

• SabreSabre• WorldspanWorldspan• GalileoGalileo• AmadeusAmadeus

– Phenomenon of ‘no frillsno frills’ (low cost) airlines– Role of commissions in ‘traditionaltraditional’ channels of

distribution

Slide 12.27


Global Distribution SystemsGlobal Distribution Systems• Majority of Travel Agency business is done via

GDS

• GDS provide extensive data on suppliers:

• Schedules

• Rates & fares

• Space availability

• GDS can also: – Make reservations – Print itineraries, tickets, & invoices

Slide 12.28


Computer Reservation Systems

• Travel Agencies are linked on-line via one or more computer reservation systems (CRS) built & operated by airlines (Apollo and Amadeus in TR)

• CRS make airline reservations,& serve as databases for tourism suppliers

Slide 12.29


Internet vs. Travel AgentsInternet vs. Travel Agents

• Consumers have choice in buying travel products

• Increases scope & reach of options • Open 24/7 • But requires more work & knowledge by

consumers • TravelAgencies have expertise & human touch • Can save clients time, money, & energy • Can manage entire trip & its details

Slide 12.30


Tour OperatorsTour Operators

• TO are the business organizations engaged in planning, arranging, marketing, & operating planning, arranging, marketing, & operating vacation packages

• TO work with all sectors all sectors of tourism industry • They perform many functions:

– Planning , Sales and reservations , Representatives Planning , Sales and reservations , Representatives /guides /guides

• They organize and put together package trips and holidays.

Slide 12.31



Reasons to Buy Tour PackageReasons to Buy Tour Package

1. Convenience2. One-stop shopping3. Cost savings4. Special treatment5. Worry-free

Slide 12.32



Tour Operators RisksTour Operators Risks

• TO are unregulated • Very susceptible to perishability • Must commit to place, products, & prices in

advance • Currency fluctuations • Possible natural disasters• Changing consumer tastes• Security & Safety Concerns

Slide 12.33


The Role of theThe Role of theTour Operator / WholesalerTour Operator / Wholesaler

• Principal stages of the tour operating process

– ResearchResearch– Capacity planningCapacity planning– Financial evaluationFinancial evaluation– MarketingMarketing– AdministrationAdministration– Tour managementTour management

Slide 12.34


Table 12.8 Price structure of a 14-night inclusive tourSource: Trade information

Slide 12.35


ConclusionConclusion

• Increasing consolidation, integration consolidation, integration and concentration

• Pressure from ‘virtualvirtual’ players

• Changing patterns of booking behaviourof booking behaviour

• Pressure on cost structures and commission cost structures and commission ratesrates

• New market entrantsNew market entrants

• Branding

Slide 12.36


Related Web Sites

• http://www.abta.com

• http://www.travelmole.com

• http://www.tuigroup.com

• http://www.tursab.org.tr

Slide 12.37


End of Chapter SlidEnd of Chapter Slideses

Documents

Slide 12.1 Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors Travel Intermediaries - Middlemen Chapter