Travelling through distribution channels

Charmaine Calleja | 211807066

You may own and operate a hotel with fantastic facilities and have prices that are more than competitive, but that alone will not get customers in your rooms.

No matter how impressive your product is, success relies on people knowing you exist!

Building a strong presence in the market depends on the distribution channels selected to reach and sell to your target customers.

In the travel industry, there has been a significant shift in the channel distribution options since the growth of the online world.  Before the internet, the process of booking a holiday was relatively simple for customer:

  • You chose a travel agent, and sought their advice
  • You flicked through a brochure, assessing your accommodation options based on one or two static 5cm x 5cm photos and half a dozen bullet points describing the facilities.
  • You booked and paid for your trip
  • You walked out with a travel wallet full of paper airline tickets and printed confirmation of hotel bookings.

Although not visible to the customer, the travel distribution channel was one involving a product/service provider, wholesaler, inbound tour operator, retailer and customer

Figure 1: the travel distribution chain

the-travel-distribution-chain

For hotel and holiday accommodation providers, there are both benefits and challenges to the distribution model shown in figure 1.

Wholesalers – Purchase large quantities of products and on-sell through retailers.

Retailers – Sell products to customers.  

A distribution channel utilising a wholesaler and retailer can be beneficial to hotels through the avoidance of costs associated with marketing directly to customers and hiring the sales forces to facilitate the large volume of sales to individual customers required to maintain profitability.

However, with advantages come disadvantages that must be considered….

How do you motivate wholesalers and retailers to promote your product over your competitors?

Through push marketing strategies, hotels can incentivise wholesalers and retailers to promote and sell their product above their competitors.   Typically, wholesalers and retailers are driven by price.  So, if a wholesaler or retailer stands to make more money from selling your product than your competitors, you are sure to find your brochure displayed at eye level in their retail displays.

However, pricing alone will not always appeal to end customers and can be problematic for hotel owners, resulting in their own financial distress.  Hotels need to ensure that the products are appropriately priced and packaged, both to be competitive and to meet the end user’s needs ensuring continued future demand.

According to a Situational Analysis conducted by PWC, the customer purchase cycle within the travel industry consists of the steps shown in figure 3.

Figure 2: The customer purchase cycle

the-customer-purchase-cycle

At the beginning of the purchase cycle, customers draw on all resources available to research options and gain opinions in order to make informed decisions about their own travel plans.

Often, the power of experience can prove persuasive throughout the sales process.  If sales representatives can speak first hand of their experience within a certain hotel, a customer is more likely to make a booking.  Therefore, an effective push marketing strategy for a hotel is to offer members of the wholesaler and retailers significantly discounted accommodation or even complimentary stays to gain that first-hand experience.

How the internet has changed the tourism distribution channels

With the ever increasing use of the internet, customers are taking advantage of a wider range of resources to make more informed decisions.  End customers are now often cutting out the intermediaries within a distribution channel and choosing to deal directly with product/service providers.  Travel is now one of the most popular online activities within major e-commerce markets.

Figure 3: the ‘new’ travel distribution chain

the-new-travel-chain

Now, for businesses in the tourism industry, efforts and budgets need to be equally shared between push and pull marketing.  For hotels, acquiring customers directly through online sales provides a relatively low cost sales and marketing channel and cuts out the lost earnings resulting from sales commissions paid to wholesalers and retailers.

Additional benefits to be gained from direct customer acquisitions lie in the firsthand knowledge and data collection potential.   By connecting directly with customers through online sales, hotels are able to build a database of  ‘Big Data’ which can provide invaluable insights into the characteristics of their customers.  These insights can be used to develop future marketing strategies and ensure on-going company success and profitability.

References:

Iacobucci, D 2013, 2012, MM4 Marketing Management, South Western, Cengage Learning, Mason, OH, USA

McEvoy, A 2010, The principles of tourism marketing, TourismConnect.com.au, retrieved 18 September 2016. http://www.tourismconnect.com.au/industry-action-kit/view-the-kit/starting-a-tourism-business/the-principles-of-tourism-marketing/

PriceWaterhouseCooper, 2012, ‘Distribution 2020: A situational Analysis

Distributing your tourism product, VOLUME 2: Developing your tourism product

Mack, S ‘Selling to Wholesalers’, Small Business.chron.com, retrieved 18 September 2016 http://smallbusiness.chron.com/selling-wholesalers-65164.html

 

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