Transcript Distribution Channels

Distribution Channels
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A distribution channel - set of
independent organizations involved in the
process of making a product or service
available to the consumer or business user
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Used to move the customer towards the
product or the product to the customer
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Organic development of an industry
Place = Distribution
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The 4Ps
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Product, Price, Place, Promotion
What the “P” of Price is to Revenue
Management, the “P” of Place is to
Distribution
Distribution also describes
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Locations for hotel brand distribution
 Franchising
 Ownership
 Management contracts
The sales staff and system
 Group sales or volume accounts
 Reservations and transient sales
 National sales offices
 Representation firms, consortia
Distribution
Today “distribution” in the hospitality industry
generally references transient sales today
Revenue management and distribution merging
together
Internet marketing includes distribution issues
Distribution Channel Functions
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Information: consumer behavior “search
stage”
Promotion: messaging
Negotiation: price and other terms
 (how is this done online?
Physical distribution: think e-tickets?
Prospecting: finding, communicating, and
tracking prospective buyers
Digitalization and Connectivity
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Digitalization - converting text, data,
sound, and image into a stream of bits
that can be dispatched at high speeds
from one platform to another
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Connectivity - building networks
connecting people and companies;
social and mobile convergence
Direct versus Indirect Channels
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Direct Channels
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Employed sales staff
National sales staff
Brand.com
Voice/CRS/Mobile
Indirect – Intermediaries
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Why use them?
Why so many of them?
Getting the Customer to the Product
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Reservation
services
Representation
firms
Consortia
Incentive travel
organizations
Corporate travel
management
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Global distribution
systems (GDS)
Traditional off-line
travel agents
Central reservation
systems (CRS)
Internet channels
Websites
Push vs. Pull strategies
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Pushing the product “down” through the
distribution channel TO the customer
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Incentives to travel agents and intermediaries
Pulling the customer “up” through the
distribution to the channel
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Traditional media/private sales/CRM
Why Use Intermediaries?
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History of travel
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Selling through wholesalers and retailers usually is
much more efficient and cost effective than direct
sales
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Fragmentation of the travel purchase and travel
inventory, transportation (idea of “lift”), hotels,
attractions, meeting facilities, restaurants, and so on.
Marketing Intermediaries
Travel Agents
Tour Wholesalers
Specialists:
Brokers & Junket Reps
Concierges
Hotel Representatives
Internet
Global Distribution
Systems
National, State,
and Local Tour Agencies
Consortia & Reservations
Systems
©2006 Pearson Education, Inc.
Upper Saddle River, NJ 07458
Marketing for Hospitality and Tourism, 4th edition
Kotler, Bowen, and Makens
E-Commerce & E-Marketing
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E-commerce involves buying and selling
processes supported by electronic means,
primarily the Internet
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E-marketing is company efforts to
communicate about, promote, and sell
products and other services over the Intranet;
also web or Internet Marketing
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Not easy to separate but different issues
E-Commerce Domains
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B2C (business to consumer)
 Branded websites
B2B (business to business)
 Passkey
C2B (consumer to business)
 User groups
C2C (consumer to consumer)
 Blogs; review sites are blends of above
Internet Intermediaries
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History of the internet as a discount channel
Price and convenience key drivers still
Dominance about inventory allocation
Consistency of all 4Ps by channel
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How Product is described
Pricing parity
Channel profitability
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Communication needs to vary by segment (channel)
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THE GDS: 1970s Look and Feel
Complexities
of
Distribution
Channels
Channels
Brand.com
Marriott.com, Starwood.com, hotel’s
own
web site
CRS/Voice
1-800-hiltons, 1-800ichotels, 3rd parties
GDS
Travel agents (Sabre, Galilieo, Amadeus,
Worldspan)
OTA
Online travel agents
Property
Direct/Other
Copyright 2011 Smith Travel Research
Walk-in, group/rooming list,
employee/discount, contract, Passkey
OTA
Models
OTABusiness
Business Models
Merchant
Retail
Opaque
Copyright 2011 Smith Travel Research
Net rate, excludes commission
Includes commission, backed out
afterwards
Bidding method, brand not disclosed
until after sale
Major OTAs and Default Business Models
Bookings.com
retail
Expedia
merchant
Hotels.com
merchant
Hotwire
opaque
Orbitz
merchant
Priceline
opaque
Travelocity
merchant
Travelweb
merchant
Other OTAs
merchant, retail, & opaque
Copyright 2011 Smith Travel Research
Estimated Cost per channel excluding Brand
and Switch fees per transient reservation
Brand.com
$2 - $5
CRS/Voice
$2-4/inquiry plus
$6-12/net booking
GDS
$4.50-$6
Property Direct/Other
$3.25 - $13
OTA - Merchant
$17-$35 or 20%
OTA - Retail
$10
OTA - Opaque
$5 – 9
Hebs, 2011, Cullen & Heisel, 2012
Major Issues/Challenges
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Costs have risen as has competition
Global differences in systems
 Technology also flattening this
System hard to change and complex to manage
 Historical controls of GDS, OTA
Diversity of travel “parts” makes all of the
distribution points part of the experience and if an
intermediary fails, so does the experience
Major Issues/Challenges
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Fragmented owner-manager relationships
Capital costs for technology and talent
Travel agents reinvention imperative remains
Battle of the brands—brand channels that is!
Big data: not new
Proliferation: more more more more
Mobile?
Monetizing social media
Evaluation of Channels
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Control and cost of each channel
Tracking of statistics to better negotiate
contracts in the future
Understand when and why to use a channel
Good channel management ensures
customer satisfaction AND revenue
optimization AND profit maximization
Goal for hotels in distribution
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Q: What is the definition of revenue
management?
A: Selling the right product to the right
customer at the right time for the right (read:
maximum) price!…by the right channel!
References
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Cullen, Kathleen and Caryl Helsel, Defining Revenue
Management, Top Line to Bottom Line, HSMAI Foundation,
Bethesda, MD, 2006
Green, Cindy Estis, Demystifying Distribution, HSMAI
Foundation, Bethesda, MD, 2005.
Ho, Alfred, Importing, Exporting and Investing in China,
World Trade, March 2007, pp 20-22.
Kotler, Bowen, Makens, Marketing for Hospitality and
Tourism, 4th Edition, Pearson, Upper Saddle River, NJ, 2006
PricewaterhouseCoopers, Hospitality Directions Europe
Edition, Briefing Paper, November 2007
Electronic Design, The Cell Phone Simply Irresistible,
January 12, 2006, p90-91.
PhoCusWright, Inc, European Online Travel Overview,
March 2006.