Distribution Channels A distribution channel - set of independent organizations involved in the...
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Transcript of Distribution Channels A distribution channel - set of independent organizations involved in the...
Distribution Channels A distribution channel - set of
independent organizations involved in the process of making a product or service available to the consumer or business user
Used to move the customer towards the product or the product to the customer
Organic development of an industry
Place = Distribution
The 4Ps Product, Price, Place, Promotion
What the “P” of Price is to Revenue Management, the “P” of Place is to Distribution
Distribution also describes 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
DistributionToday “distribution” in the hospitality industry
generally references transient sales today
Revenue management and distribution merging together
Internet marketing includes distribution issues
Distribution Channel Functions
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
Digitalization - converting text, data, sound, and image into a stream of bits that can be dispatched at high speeds from one platform to another
Connectivity - building networks connecting people and companies; social and mobile convergence
Direct versus Indirect Channels Direct Channels
Employed sales staff National sales staff Brand.com Voice/CRS/Mobile
Indirect – Intermediaries Why use them? Why so many of them?
Getting the Customer to the Product
Reservation services
Representation firms Consortia Incentive travel
organizations Corporate travel
management
Global distribution systems (GDS)
Traditional off-line travel agents
Central reservation systems (CRS)
Internet channels Websites
Push vs. Pull strategies
Pushing the product “down” through the distribution channel TO the customer Incentives to travel agents and intermediaries
Pulling the customer “up” through the distribution to the channel Traditional media/private sales/CRM
Why Use Intermediaries?
History of travel
Selling through wholesalers and retailers usually is much more efficient and cost effective than direct sales
Fragmentation of the travel purchase and travel inventory, transportation (idea of “lift”), hotels, attractions, meeting facilities, restaurants, and so on.
Travel AgentsTravel Agents Tour WholesalersTour Wholesalers
ConciergesConcierges Specialists: Brokers & Junket Reps
Specialists: Brokers & Junket Reps
InternetInternet Hotel RepresentativesHotel Representatives
Consortia & Reservations Systems
Consortia & Reservations Systems
Global Distribution Systems
Global Distribution Systems
National, State, and Local Tour Agencies
National, State, and Local Tour Agencies
Marketing Intermediaries
©2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th editionUpper Saddle River, NJ 07458 Kotler, Bowen, and Makens
E-Commerce & E-Marketing E-commerce involves buying and selling
processes supported by electronic means, primarily the Internet
E-marketing is company efforts to communicate about, promote, and sell products and other services over the Intranet; also web or Internet Marketing
Not easy to separate but different issues
E-Commerce Domains 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
History of the internet as a discount channel Price and convenience key drivers still Dominance about inventory allocation Consistency of all 4Ps by channel
How Product is described Pricing parity Channel profitability Communication needs to vary by segment (channel)
Channels
Copyright 2011 Smith Travel Research
Channels
Brand.comMarriott.com, Starwood.com, hotel’s
own web site
CRS/Voice 1-800-hiltons, 1-800ichotels, 3rd parties
GDSTravel agents (Sabre, Galilieo, Amadeus,
Worldspan)
OTA Online travel agents
Property Direct/Other
Walk-in, group/rooming list, employee/discount, contract, Passkey
OTA Business Models
Copyright 2011 Smith Travel Research
OTA Business Models
Merchant Net rate, excludes commission
RetailIncludes commission, backed out
afterwards
OpaqueBidding method, brand not disclosed
until after sale
Copyright 2011 Smith Travel Research
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
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 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 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
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
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 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, 4 th
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.