CHANNELS OF DISTRIBUTION

A distribution channel is the vehicle utilized to make ap ro du ct ors erv ice available
to the consumer. Inho sp itality, a successful channelman ag emen t 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 thein du s try 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,airlin e tickets, rental cars, etc.).

Contents
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• Hospitality distribution channels
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• Call center
•
• Travel agents
•
• Meeting planners, group TA,corporate TA
Distribution (business)
From Wikipedia, the free encyclopedia
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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 areproduct,pricing, andpromotion.
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:
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Distributor, who sells to retailers,

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Retailer (also calleddealer orres eller), who sells to end customers

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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
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Channel strategy
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Gravity & Gravity

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Push and Pull strategy

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Product (or service)

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Cost
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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
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Channel motivation
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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
consumergoods 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.D ent 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.

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