Tourism Marketing for small businesses Chapter 13 Tourism Distribution

Chapter learning aims To enhance your understanding of: tourism distribution opportunities and challenges commission as a cost of getting a sale through an intermediary the range of travel trade intermediaries

Key terms Tourism distribution (place) The point of sale (place is the 4th P in the traditional marketing mix) for intangible tourism services, as well as a cost of getting a sale through travel intermediaries.   Travel trade intermediaries Agents in the distribution chain, in between a business and their target consumers, such as concierge services, visitor information centres, retail and online travel agents, airlines, inbound tour operators, and overseas wholesalers. Commission The cost of getting a sale through an intermediary, on behalf of the business, typically as a percentage of the advertised retail selling price. Commission levels vary between different types of intermediaries, and can include an override payment to secure preferred supplier status for the tourism business.

Tourism distribution For intangible services, distribution represents the point of sale, as well as a cost of getting a sale through travel trade intermediaries. Business pays a commission to an intermediary who supplies a customer Commissions impact on pricing, competitiveness and profits. Intermediaries provide access to consumers, often in markets the business would not be able to reach. As many intermediaries have a powerful influence in travellers’ itineraries, distribution is an important aspect of tourism marketing planning.

Commission A cost of getting a sale Akin to tax…high commission costs are because of high sales levels Only paid when a sale is made Commission levels vary between different types of intermediaries Typically 10% + Be aware of kickbacks Unethical cash-under-the-table deals where ultimately the traveller is disadvantaged

Preferred supplier agreements A tiered system of preferred service suppliers A preferred supplier is recommended by an agent to their customers first Eg a travel agent displays brochures of preferred suppliers only In return, the service supplier pays a higher level of commission Referred to as an override commission

The power of travel trade intermediaries In some markets a small number of intermediaries have enormous influence over travellers’ decision making Eg international outbound packages Gaining access to these intermediaries is a key aim of many tourism service suppliers Securing a contract with leading intermediaries can be a source of competitive advantage At a cost, of course

Range of travel trade intermediaries Visitor information centres (VIC) Concierge services DMOs as information brokers and Convention & Visitors Bureaus (CVB) Retail travel agents Corporate travel offices Online travel agents (OTA) Online daily deal sites General sales agents (GSA) Inbound tour operators (ITO or IBO) Tour wholesalers Professional conference organisers (PCO) Incentive travel planners Airlines

Visitor information network (VIN) offices Local information offices Funded by local government and/or industry Rarely profitable due to level of information provision Over reliant on commissions Legislation in different countries prohibits selling other forms of travel other than local sights and domestic travel. Many run by volunteers

Concierge services Many hotels provide a concierge service to assist guests Brochure rack opportunities Spotter’s fee opportunities Cruise ships travel desks Only information carried is shore excursions with preferred suppliers

DMOs as information brokers Most DMOs don’t sell wholesale packages or retail products With the exception of Convention & Visitors Bureaus (CVB) The DMO provides information to intermediaries on local tourism services, and updates the local industry on intermediaries needs As well as opportunities to feature tourism services on the DMO website, many coordinate a digital database of local tourism information, enabling businesses to list their services.

Retail travel agents Traditionally the most visible element in tourism distribution In the digital age there is much discussion about the potential demise of travel agents through disintermediation However, while online sources are accounting for increasing volumes of some tourism sales, the traditional retail agent does still has a role to play in major travel purchase decisions where trust is a major factor in overcoming the risks inherent with intangible services While official statistics in different countries show a decline in the number of registered travel agencies, the figures often don’t take into account the increasing number of independent home-based travel agents.

General Sales agents (GSA) Either based domestically or overseas Represents a group of independent service suppliers Sometimes provide a booking service for travel agents Sales calls to domestic/international agents and wholesalers Representation at travel trade events Organisation of familiarisation visits Providing market updates to clients

Tour wholesalers Outbound tour wholesalers based overseas Promoting their range of products to a network of travel agents Traditional link between domestic Inbound Tour Operators and overseas travel agents Some own their own retail travel agency chain Some deal with trade and public Eg http://www.qldtravel.com.au/ Most deal only with trade Eg www.anzcro.com.au

Inbound tour operators (ITO) Specialists in international inbound tourism Promote and sell travel packages to offshore buyers such as wholesalers, travel agents, meeting planners and event managers Key element in international distribution network Key to tourism success for many businesses Eg Case 13.1 – It’s just a sheep show isn’t’ it?

Advantages in working with ITOs For local suppliers For overseas wholesalers Market knowledge Market access Forward bookings an regular contract business Payment in local currency Local knowledge Access to a wide range of quality products Better $$$ rates Reduces time/effort in dealing with multiple suppliers Local contact for tour problems

Professional Conference organisers (PCO) All conferences need to be organised! Eg Industry associations Eg Franchise networks Eg Academic conferences PCOs contracted by organisations and associations to take care of arrangements Eg http://www.mci-group.com/australia.aspx Registration process Venue hire Special equipment Functions Key note speakers Pre and post conference tours Lucrative commissions

Incentive travel planners Society of Incentive Travel Executives (SITE) http://www.siteglobal.com/ Work performance-based travel rewards Eg https://www.accumulate.com.au/ Travel is a popular reward Short, mono destination, itineraries The best of service Exclusive tailor-made experiences Sometimes including a corporate meeting Sometimes including team building retreats

Promoting to the travel trade Sales calls Brochure distribution eg visitor information office, hotel concierge Familiarisations/educationals Travel trade events Travel expos Travel exchanges Horizontal integration Collectives of independent service suppliers

Discussion questions Why is paying commission to an intermediary a positive outcome?   Describe what is meant by the role of the local DMO being an information broker. How could a small group of local tourism businesses work together to improve their access to travel trade intermediaries?