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Chapter 12: Understanding Hospitality Distribution Channels and Intermediaries
- 1. Chapter 12
- 2. Supply chain: Upstream (Ex. Raw materials, info to create a product service) Downstream (Ex. Distribution channel – wholesalers/retailers) Set of individual organizations involved in the process of making a product or service available to the user Marketing = Moves goods from producers to consumers Hospitality/Tourism = Moves customers to product
- 3. They are one-stop shops Selling through wholesalers and retailers can be more efficient and cost effective Eliminates unnecessary work Simplifies the purchasing process for the consumers
- 4. These help complete transactions Information Promotion Contact (access) Matching Negotiating These help fill the orders Financing Risk taking Physical distribution
- 5. Examples of Channels: •Channel 1- Bowen’s Island •Channel 2- State Street Popcorn http://www.statestreetsnacks.com/ •Channel 3- Disney experience – wholesalers – local travel agent – you http://www.libertytravel.com/ https://travel.americanexpress.com/travel/home http://www.friendlyplanet.com/about/
- 6. Travel AgentsTravel Agents Tour WholesalersTour Wholesalers ConciergesConcierges Specialists: Brokers & Junket Reps Specialists: Brokers & Junket Reps Online Travel Agency (OTA)Online Travel Agency (OTA) Hotel RepresentativesHotel Representatives Consortia & Reservations Systems Consortia & Reservations Systems Direct BookingDirect Booking National, State, and Local Tour Agencies National, State, and Local Tour Agencies Marketing Intermediaries History: http://www.youtube.com/watch?v=pgnHOzsWIyo
- 7. Travel Agents More direct sales, less travel agents Commissions/Fees Corporate travelers is the main business Tour Wholesalers Leisure market, especially for int’l destinations Must sell at least 85% of packages to break even Hotel Representatives Sell hotel rooms/services in a given market area Useful when you have a hard time reaching the market
- 8. Tour broker: motor coach tours (events, museums, historic sites, etc.) http://www.citysightsny.com/category.php?id=8 Motivational houses specializes in handling incentive travel http://www.inspira-travel.cz/motivational-tours.php Junket reps – intermediaries for premium players for casinos http://www.mesjunkets.com/upcoming-junkets/atlantic-city-junkets/
- 9. National, State and Local Tourist Agencies Promote areas Ex. CVBs http://www.columbiacvb.com/ http://www.visitorlando.com/ Consortia and Reservation Systems Reservation systems: central reservations systems (CRS) that represent several hotels or chains. Allow guests to call a local number to contact Ex. Lowes Representation International Consortium: loosely aligned group of independently owned and managed properties Ex. Leading Hotels of the World http://www.lhw.com/ Golden Tulip http://www.goldentulip.com/EN/default.aspx Concierge Concierges, bell staff, front-desk employees Sell local hospitality products and travel
- 10. Directed Booking Professional reservation staff (CRO), not front-desk Hotel website Online Travel Agency (OTA) Nonopaque: customer pay agencies, not hotels (hotels.com, travelocity, expedia) Opaque: unaware of hotel brand until purchased, nonrefundable transaction (hotwire, priceline) Global Distribution System (GDS): serve as product catalog for travel agents, allowing connection between travel agents and other distributors (airlines, hotels, rental cars, etc.) Ex. Amadeus, Sabre, Galileo, Worldspan http://www.amadeus.com/web/amadeus/en_US-US/Amadeus-Home/1259071353509-Page-AMAD_HomePpal https://www.amadeus.net/home/ Connecting OTAs http://www.youtube.com/watch?v=6EC1lwfJvvU Sabre Channel Connect http://www.youtube.com/watch?v=jyKbmE8DW9Q More Online distribution channels http://www.youtube.com/watch?v=xdXCFPS9RGw
- 11. Integrated Management Systems (Integrated Management Systems (borrowed from presentationborrowed from presentation by Jim Kelly of Synxisby Jim Kelly of Synxis)) CRS CRS CRS Switch CRS GDS TravelAgentsGuests CRS CRS CRSOnline Travel Sites Management Systems Newtrade Direct Links
- 12. Franchisee is granted the right to engage in offering, selling or distributing foods or services under a marketing format which is designed by the franchisor, can use the trademark, name, and advertising
- 13. Franchisor Provides: A. Technical knowledge B. Managerial techniques C. Marketing support D. Financial support E. Safeguards (support services such as legal, insurance advice etc.) F. Auditing G. Reservation system H. Volume purchasing I. Instant recognition etc. Click to view
- 14. Advantages: Receives a percentage of gross sales Expands brand Support for national advertising campaign Negotiating support for national contracts with suppliers Disadvantages: Distribution system Consistency Changing operation Advertising expenditures
- 15. Advantages: Brand name Marketing supports Contracts Plans and systems Reservation systems Disadvantages: Value of brand name determined by franchiser Introduction of new products determined by franchiser Your reliability tied to the rest of the system
- 16. Alliances are contractual agreements developed to allow two organizations to benefit from each other’s strengths Horizontal marketing systems are two or more companies at one level that join to follow a new marketing opportunity Ex. Zoo tickets sold at a discount at the hotel desk Multichannel marketing occurs when a single firm sets up two or more marketing channels to reach one or more customer segments Franchised Burger King is competing with a BK owned Burger King
- 17. Selecting Customer Needs Attracting Members Evaluating Alternatives Feasibility Control Criteria Responsibilities Business Location Understand Market Strategy Regional Analysis Select Area/Demographics Choose Individual Sites http://www.darden.com/pdf/about/Red_Lobster_eBrochure_2010.pdf http://www.businessweek.com/technology/content/jul2005/tc2005076_7033.htm
- 18. Be selective with intermediaries Make sure you can support the intermediaries Ensure intermediaries make sense Cost Benefit Analysis Establish great relationships Be creative Grow!
Hinweis der Redaktion
- Upstream from the company is the set of firms that supply the raw materials, components, parts, information, finances, and expertise needed to create a product or service. Red Lobster working with seafood producers is an example of a company with upstream suppliers. Marketers, however, have traditionally focused on the “downstream” side of the supply chain- on the marketing channels (or distribution channels) that look toward the customer. Downstream marketing channel partners, such as wholesalers and retailers, form a vital connection between the firm and its customers. Ritz-Carlton receive a significant share of business from travel agents because of aggressive development of this channel. Marriott entered a marketing alliance with New Otani Hotels, giving Marriott exposure to Japanese travelers in North America. In return, New Otani gained Marriott’s marketing expertise to help reac Americans traveling to Japan. Producing a product or service and making it available to buyers requires building relationships not just with customers, but also with key suppliers and resellers in the company’s supply chain This supply chain consists of “upstream” and “downstream” partners Upstream from the company is the set of firms that supply the raw materials, components, parts, information, finances, and expertise needed to create a product or service Downstream marketing channel partners, such as wholesalers and retailers, form a vital connection between the firm and its customers The term supply chain may be too limited It takes a make-and-sell view of the business A better approach is a value delivery network made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system
- Why dose Shenago China sell its chinaware to restaurant through an intermediary? Although doing so means giving up control over pricing the products, Shenago does gain advantages from selling through an intermediary. The company does not have to maintain several display rooms and a large sales forces in every major city. Instead, a restaurant supply company displays, promotes, and makes personal sales calls. The restaurant supply house sells hundreds of other items. Its large assortment makes it a convenient supplier to make personal sales calls, send catalogs, and provide other support for the products that it represents. Selling through wholesalers and retailers usually is much more efficient than direct sales. No feasible for a hotel chain or cruise liner to have offices in every city in the US. It is more practical and also more efficient to market and distribute their services to the final consumers through 1500 travel agencies in the US and pay them some commission. This is the same in other industries such as agriculture and retail where products are sold to end consumers through various intermediaries or channels.
- Information- gathering and distributing marketing research & intelligence info. Promotion – persuasive communications about an offer Contact (access) – finding and communicating with prospective buyers Matching – fitting the offer to buyers’ needs e.g. Manufacturing, grading, assembling & packaging Negotiating – agreeing on price and other terms Financing – acquiring and using funds to cover the costs of channel work Risk taking – e.g. Inability to sell inventory at full margin or at all Physical distribution – transporting and storing products
- This graph shows several consumer distribution channels. Channel 1, called a direct marketing channel, has no intermediary level. It consists of a manufacturer selling directly to consumers. For example, a restaurant may buy produce directly from the grower at a farmers’ market. Channel 2 contains one level. In consumer markets, this level is typically a retailer. A restaurant purchases its fish from a fisherman’s cooperative. The cooperative markets the fish, allowing the fishers to specialize in fishing, not marketing. E.g., Sunkist, diamond walnuts, NZ Milk Products Company Channel 3 contains two levels. In consumer markets, these are typically a wholesaler and a retailer. This type of channel is used by smaller manufactures. Channel 4 contains three level. The jobber buys from wholesaler and sells to smaller firms that are not served by larger wholesalers. From the producer’s point of view, a greater number of intermediaries in the channel means less control, more complexity, and more cost.
- 1.Travel Agents: Acting on behalf of the client, making arrangements with suppliers of travel (airlines, hotels, tour operators) and receiving a commission from the suppliers and/or a fee from the client. Almost all airline have discontinued paying commissions to travel agents. This has led agencies to charge a $25 to $50 fee for issuing tickets. In addition to selling airline tickets, travel agents book hotel sales, and nearly all cruise travel. Hotels typically pay 10 percent commission to travel agents, and cruise lines can pay up to 15 percent. An expert, knowledgeable in: Schedules, Routing, Lodging, Pricing, Regulation, Safety, Currency, Destination Travel Agents One way of reaching a geographically diverse marketplace is through travel agent The number of travel agents has been decreasing in recent years due to the growth of direct booking and customers self-booking travel on the Internet 2. Tour Wholesalers: Tour wholesalers assemble travel package usually targeted at the leisure market. These generally include transportation and accommodations but may include meals, ground transportation, and entertainment. In developing a package, a tour wholesaler contracts with airline and hotels for a specified number of seats and rooms, receiving a quantity discount. 3. Hotel Representatives A corporate hotel in Houston may find it is more effective to hire s hotel representative in Mexico City than to send a sales manager there. Hotel sales should represent noncompeting hotels. They receive a straight commission, a commission plus a salary, or a combination of both.
- Broker: Tour brokers sell motor coach tours, which are attractive to a variety of markets. Trip to college and sporting events, tours built around Mari Gras, and regularly scheduled tours of the Washington, D.C., area are examples of popular motor coach trips. Some motor coach tours are seasonal, some are based on their routes, motor coach tours can provide an important source of income. 2. Motivational house: Motivational house provide incentive travel offered to employees or distributors as a reward for their efforts. Companies often use incentive travel as a prize for employees who achieve sales goals for the sales team achieving the highest sales. 3. Junket reps: Junket reps serve the casino industry as intermediaries for premium players. Junket reps maintain lists of gamblers who like to visit certain gaming areas, such as Reno, Las Vegas, or Atlantic City, and they work with one or a few casinos rather than the entire industry.
- 1. National, State and Local Tourist Agencies National, State and Local Tourist Agencies are an excellent way to get information to the market and gain room bookings. National associations promotes tourism within their own countries. Their impact can be important to hotel chains that have locations throughout the country. State agencies promote the state resources and attractions overseas, nationally, and in the state itself. Sydney CVB has offices in NY, London… 2. Reservation systems Reservation systems such as Loews Representation International and Steigenberger Reservation Service are expanding their service. Reservations systems provide a CRS for hotel. They usually provide the system for small chains or provide an overseas reservation service, allowing international guests to call a local number to contact the hotel. 3. Consortium A consortium is a group of hospitality organizations that is allied for the mutual benefit of the members. Marketing is often the reason why consortia are formed. The consortium allows a property to be independent in ownership and management while gaining the advantage of group marketing. An example of a consortium is Leading Hotel of the World. 4. Concierge Concierge, bell staff, front-desk employees can be good sources of business for local hospitality products and travel, such as restaurants, tours, and fishing guides. Concierges can be a major source of business for a restaurant that has a unique menu, atmosphere, or simply excellent food and service. These attributes are an attraction to travelers.
- A Global Distribution System (GDS) is a network operated by a company that enables automated transactions between third parties and booking agents in order to provide travel-related services to the end consumers. A GDS can link services, rates and bookings consolidating products and services across all three travel sectors: i.e., airline reservations, hotel reservations, car rentals, and activities. GDS is different from a computer reservations system, which is a reservation system used by the respective vendors. Primary customers of GDS are travel agents (both online and office-based) to make reservation on various reservations systems run by the vendors. GDS holds no inventory; the inventory is held on the vendor's reservation system itself. A GDS system[1] will have real-time link to the vendor's database. For example, when a travel agency requests a reservation on the service of a particular airline, the GDS system routes the request to the appropriate airline computer reservations system. This enables a travel agent with a connection to a single GDS to choose and book various flights, hotels, activities and associated services on all the vendors in the world who are part of that GDS. Amadeus is the leader in technology solutions for the global travel and tourism industry and the largest transaction processor. Each year, Amadeus processes upwards of 948 million key billed travel transactions. Travel agents have access to numerous travel providers via the Amadeus system. Amadeus technology also powers over 260 airline websites, while 110 airlines use both the Amadeus Altéa Reservation and Inventory airline IT systems. 195 countries served. 440 million bookings yearly. 711 airlines (95 percent of the world’s scheduled airline seats) Amadeus was originally created as a neutral global distribution system (GDS) by Air France, Iberia, Lufthansa and SAS in 1987 in order to connect providers' content with travel agencies and consumers in real time. Sabre Holdings' history starts with SABRE (Semi-automated Business Research Environment), a computer reservation system which was developed to automate the way American Airlines booked reservations. SABRE: US company based in Southlake, Texas. Travelport is a leading distribution services provider for the global travel industry. The company operates a global distribution system (GDS) business, with three brands: Apollo, Galileo and Worldspan. Based in Atlanta.
- Franchising Franchising is a method of doing business by which a franchisee is granted the right to engage in offering, selling, or distributing goods or services under a marketing format which is designed by the franchisor The franchisor permits the franchisee to use its trademark, name, and advertising. For the right to use the name, methods of operation, and other benefits that come with a franchise, the franchisee pays an initial fee, a royalty, and a marketing fee to the franchise organization The franchisee pays an initial fee, a royalty, and a marketing fee to the franchise organization. In the case of hotel, a fee for use of the CRS is also charged. Radisson charges an initial fee that is minimum of $50,000. The royalty is 4 percentages are gross room revenue, the marketing fee is 1.75 percentage of gross room revenue, and the reservation fee is 2 percentage of gross room revenue. The franchisor can verify gross receipts through tax reports.
- One of the reasons for the popularity of franchising is that is the safest way to start a new business. Estimate of the success rate for franchise: a 90 percent chance for survival.
- One of the reasons that companies decide to franchise is that it allows for increased distribution of their products. The franchisee’s money expands the business while the franchisor collects an initial fee and royalties. The company must be able to offer the operational system, management support, and a good business concept. McDonalds has 68 million customers daily in 119 countries across 35,000 outlets.
- Alliances: Another form of contractual agreement, are developed to allow two organizations to benefit from each other’s strength The alliance between the Welcome Group and Sheraton Hotels. It would be difficult, if not impossible, for Sheraton to go into India by itself because of India’s regulation of foreign-owned business. The Welcome Group offered Sheraton an India partner. Additionally, the Welcome Group had a good reputation in India and understood how to do business there. Sheraton offered the Welcome Group a name that was known to the international business traveler. Sheraton offered training and management support systems. Similarly with Ruth’s Chris steak house, which has locations in hotels operated by Marriott, Westin. Thus, both partners benefited from the alliance. 2. Horizontal marketing systems Two or more companies at one level join to follow a new marketing opportunity By working together, companies can combine their capital, production capabilities, or marketing resources to accomplish more than what one company can accomplish working alone For example, Seaworld offers tickets at a discount to an automobile club, which promotes these discount tickets as one benefit for its members. In return, Seaworld gains access to several hundred thousand automobile club members. 3. Multichannel marketing For example, McDonald’s sells through a network of independent franchisees but owns more than a fourth of its outlets. Thus, the wholly owned restaurant compete to some extent with those owned by McDonald’s franchisees. Multichannel Marketing Systems With the proliferation of customer segments and channel possibilities, more companies have adopted multichannel marketing distribution Such multichannel marketing occurs when a single firm sets up two or more marketing channels to reach one or more customer segments
- Selecting 1.Customer Needs: Selecting channel members starts with determining the services that consumers in various target segments want. 2.Attracting Members: Companies vary in their ability to attract qualified intermediaries. 3. Evaluating Alternatives: Economic Feasibility of the Channel Member Each channel produces different levels of sales and costs The business that channel members bring must offset the cost of paying and supporting the channel member These costs are measured two ways Directly By opportunity costs A company must regularly evaluate the performance of its intermediaries As business changes, the value of an intermediary may change Control Criteria: Using sales representatives offers less control than building your own sales force. An important consideration in the choice of channels is control Control is also an important consideration in franchising and choosing multiple channel members Responsibilities The company and its intermediaries must agree on the terms and responsibilities of each channel member. For instance, hotels make it clear to travel agents which rates are commissionable and the amount of commission to be paid, and they often guarantee to pay the commission within a certain number of days. Business Location One of the most important aspects of distribution for hospitality organizations is location. For business whose customers come to them, the business must be conveniently located. Many retailers say the three secrets of successful retailing are “location, location., location.” 1. Understanding the marketing strategy and target market of the company. 2. Conducting a regional analysis. 3. Selecting an area within that region. 4. Choosing individual site (compatible businesses, potential demand generators, competitors, site evaluation including accessibility)