Tour Operations and Tourism Distribution Channel Management Mike Morgan DG

The aims of the unit Give an overview of the role of intermediaries in the tourism sector apply business management approaches to the sector in a practical assignment provide an academic framework to convert your operational experience provide a basis for a dissertation

The content The role of intermediaries in the tourism system the elements of tour operations planning the strategies of the leading companies New distribution channels for tour products delivering customer service quality the future of tourism distribution

The work Assignment 1 Group project to design a tour programme due 5 June Assignment 2 Essay set by Derek Robbins due 19 June

Intermediaries Those who come between… –Producers/manufacturers –And the end-user customer Independent organisations who assist the producers to make the product available to the customer

Definitions EU Package Holiday Directive ‘a pre-arranged combination of two or more components when sold... at an inclusive price …includes overnight accommodation’ A tour operator = the organiser of a package holiday

The role of the tour operator Purchase in bulk components of a holiday Package them into a standardised repeatable product Brand them into a single entity Offer them to the public at an inclusive price Middleton How does this differ from the role of the travel agent?

An agent Acts for a principal (the producer of the product) provides a service for a fee or a commission in British usage a travel agent is someone who sells travel and holiday packages for a commission, usually from retail shops This distinction is becoming blurred

Understanding the tourism system

Exercise You are managing a hotel in a destination Draw a map of the intermediaries involved in marketing your rooms to UK tourists How do they add value to the end-product? What does each party get from the interaction? How easy would it be to find a substitute?

What theories can help us understand how this industry works?

The value chain Devised by Porter (1980) to analyse what happens inside companies - where the value is added to the end product Applied by Kogut (1985) to the whole external supply chain Terpstra (2000) writes of ‘configuring the value-added chain’ - which activities to do yourself and which to pay someone else to do. Specialisation The same choice faces hotels, resorts, air and sea transport. Where does your expertise lie? Where can you add most value to the product?

The Value Added Chain Terpstra and Sarathy (2000) Manufacture Assembly Retailing Design Components Distribution Marketing Accommodation Attractions Transport ‘principals’ Package Tour Brochure Reservations Travel Agent How does the tour operator add value? By providing the ‘principals’ with a marketing channel for their products

Marketing Channels Sets of inter-dependent organisations involved in making a product available to the end-user customer ( Stern and El Ansary 1996) Carry not only flows of product but information, promotion, payment and ownership

Offer the suppliers ‘contactual efficiency’ in reaching the end customer (Rosenbloom1995) Make the product available in the ‘utilities’ of form, time and place required by the customer (Bucklin) require members to subordinate their own needs to the success of the channel (Stern) –issues of control and leadership, power and dependency

Hotel Tour Operator Travel Agent Customer

Network theory Looks at relationships, networks and interactions (Gummesson 1988) a complex web of influences on the quality of the product (Holmund and Kock 1995) these influences can conflict with each other Competition is between ‘networks of value- delivery systems’ (Kotler 1998) rather than individual firms

Elements of a network analysis Hakansson and Johanson 1992 Resources needed to create the product Actors - firms, organisations involved Interactions - between actors to create.. Activities that produce the product Relationships that develop to ensure long- term commitments

Hotel Tour OperatorTravel Agent Customer Attractions Resort Amenities Conference centres Other hotels Local agent Destination Network Tourist Board

Hotel Tour OperatorTravel Agent Customer Attractions Resort Amenities Conference centres Other hotels Local agent Destination Network Tourist Board

Hotel Tour OperatorTravel Agent Customer Attractions Resort Amenities Conference centres Other hotels Local agent Destination Network Airline Alliance Airports Car rental Transport Network Tourist Board Financial services -insurance currency IT systems Support Network

Hotel Tour OperatorTravel Agent Customer Attractions Resort Amenities Conference centres Other hotels Local agent Destination Network Airline Alliance Airports Car rental Transport Network Tourist Board Financial services -insurance currency IT systems Corporate clients Retail centre Management Web portals & search engines

Airline: Easyjet Hotels: Hotelopia (part of the TUI group) Car rental: Europcar (part of Volkswagen Group) Ski Breaks: Erna Low (independent specialist tour operator) Chalet rental: Chaletgroup (consortium of chalet owners) Skiwear: BornForSports (community marketplace for sportswear) Travel Insurance: Mondial Assistance (part of Allianz Group) To/from the airport: Holidaytaxis Airport parking: NCP Travel guides: Arrivalguide.com in association with Fastcheck AB Easyjet’s Affiliate Network (2008)

Formalising the relationship Vertical marketing systems – Star Alliance administrative – consortia – Best Western contractual - franchises, joint ventures - Opodo corporate - vertically-integrated companies eg Thomson/TUI

Systems theory (see Laws) Based on biological, ecological systems each component is affected by and in turn affects the behaviour of the others inputs, processes and outputs organic growth optimum size and efficiency decline and decay Includes interaction between tourism and the host society and environment

Weather & Climate change Destination environment Destination Economy Fears of crime & terrorism New technologiesInvestment & changes of ownership Economies of originating countries Changing Lifestyles demographics Media influences Changes in regulation

How are these changing the system?

UK holidays abroad (UK International Passenger Survey)

Inter-organisational relationships What each model reveals Inter-dependent channel members –efficiency Value-adding chains - value, profit Complex and conflicting networks –understanding, trust Organic and evolving systems –flexibility, responsiveness