LEARNING MODULE

IN

TPC 8
TOUR AND TRAVEL MANAGEMENT

COLLEGE OF TECHNOLOGY
Bachelor of Science in Hospitality Management

Prepared By:

STEPHINEJANE E. MUSICO, MBA

KENNETH CHARLS E. FEROL

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 TABLE OF CONTENTS

Page
Number
MODULE 3 The Tourism Distribution Channel

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MODULE 3

I. TITLE: THE TOURISM DISTRIBUTION CHANNEL

II. TOPICS: 1. Tourism Distribution Channel

2. Travel Intermediaries
3. Global Distribution Systems (GDS)

III. TIME FRAME: 3 hours

IV. INTRODUCTION:

Distribution becomes one of the most significant elements of tourism marketing

as it determines all other aspects of the marketing mix. With customers who are
attracted to using information technologies, especially the Internet, in order to get
direct access to information concerning their travel and tourism needs, electronic
distribution is a game changer. As the costs of ICTs continue to fall and their
capabilities increase, distribution and transaction management of T&T services could
theoretically be within the users’ control.

V. OBJECTIVES/ INTENDED LEARNING OUTCOMES:

In this lesson, learners will be able to determine the role and importance of Tourism
Distribution Channels, with emphasis on travel intermediaries and the Global
Distribution System.

VI. LEARNING ACTIVITIES:

Definition of Terms
Travel Operator or Tour Operator (TO)
A tour operator produces the trip, creates it. 6 months prior to the tourist
season (there are 2 widely accepted seasons: Autumn/Winter from November
- April and Spring/Summer from May - October), they construct their product
by combining the transport and the stay (lodging). They freeze seats on planes
and hotel rooms: this is the principle of allotment. They calculate the price of
the trip (travel and stay included) by adding in their cut and the price of the
brochure which is then put together so that they can offer the trip to agencies
or directly through their own network.
In the latter case though, the agency within the network is somewhat obliged
to promote the referred TO which, in exchange, gives the TO a higher
commission, which is a little bit counteractive. A hotel can be offered by several
TO's. For 2 clients, you can also have 2 different prices for the same services
offered: it all depends on the contract that has been negotiated between the
hotel and the TO. Some TO's have opened their own resort hotels (or at least

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 manage them) where they apply their trademark; enabling them to control all
elements.

Tour Organizer
A tour organizer pulls together packages from a range of suppliers to create
specific types of holiday. This package may be a package created by another
company or a dynamic package, which has been created individually for each
booking. The package is typically sold direct to the customer using direct
marketing and the phone or internet.

Becoming a tour organizer will require a network of suppliers to cover carriers,

accommodation and services. Once this network is in place the challenge of
marketing and selling the tours in a viable way, needs to be met. It remains a
good option to enter the travel industry as the startup costs are relatively low
and the breadth of the start-up business is narrow.

Travel Agent
The travel agent comes to mind when we think about going on holiday. They
don't create the trip, they distribute it: in a simple way (with a flight) and more
complicated (with a stay), beginning with travel plans created by tour
operators. Therefore, the travel agency becomes a purchasing advisor and
provides the client with a general idea about the trip when he or she walks
into their office. A travel agency can specialize in a particular destination or a
specific trip type, like adventure, fishing, rock climbing, or perhaps in a near
future, space. How do they make money? Two ways: first by taking a
percentage from their providers (hotel, travel operators, airline companies),
second on commissions billed to the client. This goes for well-established
agencies and for online agencies that are often much less expensive. Be careful
with referred tour operators: this only means that the agency takes a higher
percentage that can go up to 15% of the price of the trip (instead of 12%).

Brokers & Flight Consolidators

Within the travel industry the term 'broker' is used to mean a company that
buys or has access to a high volume of accommodation places. These are sold
on to tour operators, tour organisers and others.

The term 'flight consolidator' is a company that buys a high volume of flights
from one supplier or a high volume of services across many suppliers and then
sold on to tour operators, tour organisers and others.

Becoming a broker or flight consolidator requires the network of service

providers or a network of tour operators where the broker is buying a large
number of services from one supplier and selling them on to tour operators in
smaller numbers. It will be an option as a start-up business.

Tourism distribution channel

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 The tourism channel of distribution is an operating structure, system, or
linkage of various combinations of organizations through which a producer of
travel products describes, sells, or confirms travel arrangements to the buyer.

A tourism distribution channel is a chain of businesses or intermediaries

through which a good or service passes until it reaches the end consumer. It
can include wholesalers, retailers, distributors and even the internet itself.
Channels are broken into direct and indirect forms, with a "direct" channel
allowing the consumer to buy the good from the manufacturer, and an
"indirect" channel allowing the consumer to buy the good from a wholesaler
or retailer.

Most Common Travel Distribution Channels

1. Intensive Distribution: used commonly to distribute low
priced products or impulse purchases. For example, snacks
such as chocolates, soft drinks and crisps
2. Exclusive distribution: Involves limiting distribution to a single
outlet. The product is usually highly priced, and requires the
intermediary to place much detail in its sell. An example of
would be the sale of vehicles through exclusive dealers.
3. Selective Distribution: A small number of retail outlets are
chosen to distribute the product. Selective distribution is
common with products such as computers, televisions
household appliances, where consumers are willing to shop
around and where manufacturers want a large geographical
spread. If a manufacturer decides to adopt an exclusive or
selective distribution strategy, they should select reputable
intermediaries, experienced in distributing similar products
and an intermediary known to the target audience.

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Distribution Channels in The Tourism Industry

Distribution channels are increasingly regarded as one of the most critical elements in
marketing, as they determine the competitiveness and profitability of
organizations. Their purpose is twofold:
1. to provide information for prospective tourist and intermediaries; and,
2. to establish a mechanism which would enable consumers to make,
confirm and pay for reservations.

McIntosh defines tourism distribution channels, as ‘‘an operating structure, system or

linkages of various combinations of travel organization, through which a
producer of travel products describes and confirms travel arrangements to the
buyer’’.

WTO proposed that ‘‘a distribution channel can be described as a given combination
of intermediaries who co-operate in the sale of a product. It follows that a
distribution system can be and in most instances is composed of more than one
distribution channel, each of which operates parallel to and in competition with
other channels.

Wanhill (1998) suggests that ‘‘the principal role of intermediaries is to bring buyers
and sellers together, either to create markets where they previously did not
exist or to make existing markets work more efficiently and thereby to expand
market size.’’

Consumers may purchase various components directly from producers, while

numerous distribution and sales intermediaries are involved in promoting and

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 distributing the tourism product. There are endless variations of the tourism
distribution channel, depending on each particular industry structure and
external environment.

Travel Intermediaries
It is a common view that the searching, evaluating, and coordinating functions, which
represent the most knowledge intensive part of the transactions that people
and companies must make when they exchange goods and services, will be
transferred from the intermediary -the retailer- to the customer. Changes in
telecommunications and the spread of the Internet are placing a number
of traditional tasks of intermediaries under the direct control of consumers.
However, extensive empirical evidence and conceptual analysis on the travel
and tourism distribution channel does not support this argument (see Kanellou,
1999).

In a rapidly evolving electronic market, the spread of direct links between

suppliers and customers would lead neither to a ‘squeezed intermediary’ nor
to its disappearance. On the contrary intermediaries not only continue to
operate in the distribution channel, but are likely to do so as ever more powerful
actors, actively shaping the structure of the T&T sector.

The rationale for their continuing existence is in their unique functions of

integrating -‘packaging’- complementary travel services and products to
provide a complete and satisfying service to the customer. This is the
most important function of intermediation: the intelligence function.

Most intermediaries are wholesalers, tour operators, bed banks, booking centers,
DMCs and OTAs (online travel agencies). Intermediaries usually specialize in
specific areas, and serve as a conduit for market and other types of information.
They are also called the “middleman”. In tourism for example intermediaries
are people or businesses that link the tour package with the tourist.

Intermediaries in the travel and tourism distribution channel

In the absence of a physical distribution system in the T&T sector, a distribution
channel based on intermediary functions has developed. The distribution
channel is an orchestrated type of network that creates value for the
producer/ supplier or the consumer, and is built on the simultaneous existence
of trust and power relationships (Stern and El-Ansary, 1992). The actors
(intermediaries) in the distribution channel are creating value, and being paid
for it on three basic levels: the access to information, the ability to
evaluate, process and manipulate the information for each individual case
and come up with the ‘right information’, and the ability to sell directly.

The analysis of the stages of intermediation in T&T (Kanellou,1999) suggests that:

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 ✔ the role of the intermediary has been an important element in all stages
experienced by the tourism and travel sector so far;
✔ the role of the intermediary is inextricably linked to changes in
technology;
✔ since each major wave of new technology changes the arena and the
distribution of power between the actors, the role of each intermediary
also changes; however, this change does not lead to disintermediation;
✔ in each stage a new intermediary controls the distribution channel;
the nature of intermediation (source of power, product/service, and
driving force) though is different

Benefits of Travel Intermediaries

Travel Intermediaries are able to sell products in bulk and reduce promotional costs.
Meanwhile, consumers avoid search and transaction costs, gain from
knowledge of the specialists and lower prices.

As agents sell packages on behalf of tour operators, financial protection is generally

not required as the consumer’s contract is direct with the financially protected
tour operator. However, many travel agents now wish to provide financial
protection to provide their customers with an added level of protection and
peace of mind.

The manufacturers are responsible for creating the product or developing the service
before it is sent forward to the travel intermediary and from the travel
intermediary to the consumers. Travel intermediaries are used by companies
because they keep manufacturers from assuming too much risk while providing
financing and information flow. They also eliminate the need for the consumer
to negotiate each individual product or service exchange with the manufacturer
or seller, which in turn is cost effective for both parties. Some examples of
travel intermediaries include large retailers such as Kmart and JCPenney and
grocery stores like Kroger. Marketing intermediaries also offer distribution
practicalities that take care of "when" and "where" the customer will go in order
to purchase the product as well as allowing the customer to take ownership of
the product. The intermediaries help to create an efficient and cost-effective
exchange process

The Global Distribution System

Global distribution systems (GDSs) are computerized networks/platforms that
centralize services and provide travel-related transactions. They cover everything from
airline tickets, to car rentals, to hotel rooms, and more.

A GDS is a worldwide conduit between travel bookers and suppliers, such as hotels
and other accommodation providers. It communicates live product, price and
availability data to travel agents and online booking engines, and allows for automated
transactions.

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The GDS is often used to tap into the corporate travel market because it has the ability
to present hotels, flights, and car rentals in one simple interface which is convenient.
Many companies organizing trips for their staff will use the GDS as their preferred
booking method.

As early as the 1970s GDSs were some of the first companies in the world to facilitate
business to business (B2B) electronic commerce (now more commonly known as
ecommerce). Airlines realized that by automating the reservation process for travel
agents, they could make the travel agents more productive and essentially turn them
into an extension of the airline’s salesforce.

Four of the major legacy GDSs are:

✔ Amadeus
Amadeus has been operating for over 30 years, building critical solutions to
help airlines, hotels, railways, travel agencies, tour operators and more
to run their business and improve the travel experience.
Amadeus has the biggest global footprint of any of the GDSs, with a potential
reach to millions of guests. The company operates in over 190 markets
and employs over 17,000 people.
✔ Galileo
Galileo traces its roots back to 1971 when United Airlines created its first
computerised central reservation system. Due to the high market
penetration of the Sabre and Apollo systems, owned by American Airlines
and United Airlines, respectively, Worldspan and Galileo were created by
other airline groups in an attempt to gain market share in the computer
reservation system market.
The Galileo system was moved from Denver, Colorado, to the Worldspan data
centre in Atlanta, Georgia, in 2008, following the merger of Travelport
and Worldspan (although they now share the same data centre, they
continue to be run as separate systems).
✔ Sabre
Sabre is a leading technology and data-driven solutions provider helping
airlines, hotels and travel agencies grow their businesses and transform
the traveler experience. It is seen as a pioneer for online travel agencies,
corporate booking tools, revenue management, and web and mobile
itinerary tools, to name a few.
Sabre is a leading technology and data-driven solutions provider helping
airlines, hotels and travel agencies grow their businesses and transform
the traveler experience. Sabre is seen as a pioneer for online travel
agencies, corporate booking tools, revenue management, and web and
mobile itinerary tools, to name a few. Sabre Travel Network is its global
business-to-business travel marketplace and consists primarily of the
GDS and a broad set of solutions that integrate with the GDS. This
marketplace is used by travel suppliers including 400 airlines, 175,000

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 hotels, 200 tour operators, 50 rail carriers, 40 car rental outlets and 17
cruise lines.

✔ Worldspan
Worldspan is a Travelport platform, and is the technology leader in web-based
travel eCommerce, offering solutions for all facets of travel business
online. As a leading GDS, Worldspan provides travel distribution,
technologies and services for thousands of travel companies worldwide,
including travel agencies, corporations, travel suppliers and travel
websites.
Worldspan transforms global travel distribution and transaction processing with
industry-first fares, pricing, shopping and booking technologies, and a
portfolio of interactive shopping tools that enable travel companies to
reduce costs, increase productivity and build revenues.
✔ Abacus
Abacus was founded in 1988 and became a leading provider of travel solutions
and services in the Asia Pacific region. The company is headquartered in
Singapore and owned by Sabre Holdings, after Sabre acquired a full
stake off 11 Asian airlines who were holding a majority share.
Abacus serves more than 100,000 travel agents across the Asia-Pacific region’s
59 markets and has both global and uniquely local relationships with
airlines and hotels, including the leading portfolio of low-cost content
and Chinese airline content.

How does the GDS work in travel?

Live rates and availability are sent from a hotel’s property management system (PMS)
directly to the GDS and online booking websites via a channel manager. As soon as a
reservation is made on the GDS or an online booking website, the channel manager
instantly reduces inventory across all channels, including the hotel’s own website, and
automatically delivers the reservation details back into the PMS or central reservation
system (CRS).

Each GDS has its own set of connection fees and requirements to sign up if you do
this independently, rather than through a technology solution.

VII. SELF-EVALUATION
Fill up the notes below with appropriate answers based on module reading and
multimedia content viewing.

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VIII. REVIEW OF CONCEPTS:

Global distribution systems are an intermediary between vendors, such as hotels and
airlines, and service providers, such as online travel agencies. While most big
GDSs are linked to the major travel agencies, smaller, less expensive GDSs may
offer a limited amount of travel agencies. These systems, facilitates and equips
connectivity and convenience in the tourism distribution channel.

Vendors sign up and link their own inventory to a global distribution system. Once
linked, customers can use the different portals associated with the GDS to
purchase from a vendor. To avoid overbooking, each service provider receives
real-time updated inventory from the airline or hospitality company (vendor).

Not only do vendors show their inventory, but they can automatically update products
and rates. This allows vendors to use a dynamic pricing method that
immediately changes over all of their portals.

IX. REFERENCES
Tourism Distribution System - Tourism Distribution... (2017, March 28).
[Link]. [Link]
Distribution-System/

Kanellou, D. (2000, October). The New Role of Intermediaries in Travel and Tourism
Distribution Channels. ResearchGate; unknown.
[Link]
aries_in_Travel_and_Tourism_Distribution_Channels

Sci-Hub | Relationships in the Distribution Channel of Tourism. International Journal

of Hospitality & Tourism Administration, 1(1), 113–139 | 10.1300/J149v01n01_07.
(2021). [Link]. [Link]

Global distribution system (GDS): Complete guide for hotels - SiteMinder. (2019,
March 18). SiteMinder. [Link]
Global Distribution System | TravelPerk. (2021, January 26). TravelPerk.
[Link]

Tripsavvytips (2020). Learn about Global Distribution Systems (GDS) and How They
Affect Travel. TripSavvy. [Link]

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MODULE 3

PRE-TEST:

Discuss the following questions. Write your answer in a short bond paper.

1. What is the tourism distribution channel?

POST-TEST:

Discuss the following questions. Write your answer in a short bond paper.

1. What is tourism product distribution?

2. What are the various distribution channels for tourism marketing?

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