DISTRIBUTION CHANNELS
CHAIN OF DISTRIBUTION
The term “chain of distribution” is used to describe the methods by which a product or service is distributed
from its manufacturing source to its eventual consumers. Traditionally, this is achieved through the intercession
of a number of intermediaries who buy the products and sell them to other links in the chain. The intermediaries
may be wholesalers, buying large quantities of the product and selling in smaller quantities to others, or they
may be retailers, representing the penultimate link in the chain, buying from wholesalers. Wholesalers in turn
sometimes sell products direct to the consumer (as in “cash and carry” companies), avoiding the use of a formal
retailing outlet.
Tourism products consist essentially of transport, accommodation and attractions both natural and manmade.
The producers of these services include air, sea, road and rail carriers, hotels and other forms of tourist
accommodation, and the various facilities designed to attract the tourist, including stately homes and buildings,
catering facilities, amusement parks and activity centres such as skiing resorts. These services may be
distributed in a variety of ways to tourists, either direct, through travel agents (the retailers of the tourism
industry) or through tour operators or brokers. Channel of distribution: Is a route by which products reach the
consumers, from the producers or manufacturers. The traditional channel of distribution is manufacturer or
producers to wholesalers to retailers to customers. That channel of distribution does exist to some extent in the
tourism Industry, but it is by no means as clear-cut as it is with many tangible products and there are
modifications to it, such as the by- passing of wholesalers (Tour Operators) and /or retailers (Travel Agents) and
alternative channels
THE TRADITIONAL CHANNEL OF DISTRIBUTION
Producers Wholesalers Retailers Customers
Principals: Tour Travel Clients/
operators
Agents Customers
Producers (principals) in the Tourism Industry are
Carriers who provide transport air, water, road and rail
Hoteliers and other accommodation providers
Those who run and/or maintain (or make available) manmade and natural attractions and other Tourist
amenities.
Wholesalers (Tour operators)
Tour operators: They buy or reserve various Tourism products in bulk for example airline seats, hotels rooms
and excursions and package them into single product, ready for sale to Consumers directly or through retailers.
The Tour operators buy range tourist products in bulk- airline seats, hotel accommodation and coach transfers,
for example – and “package” these for subsequent sale to travel agents or to consumers direct. By buying a
number of individual items of Tourist services and packaging them into a single product- the “package holiday”.
The tour operators buy in bulk which generates economies of scale that can be passed on to the customers. The
most fundamental function in tour operating is a process of combining aircraft seats and beds in hotels (or other
forms of accommodation) in a manner that will make the price attractive to potential holiday makers.
Brokers
A broker maybe an enterprise or an individual who make bulk purchases or reservations, mainly aircraft seats
but sometimes also of accommodation and other services and in so doing achieves greatly reduced prices for
those components. The broker then resells the Components Individually or small ‘blocks’ to travel agents, who
can thus make up their own packages.
The Retailers (Travel Agents)
In the Tourism industry the retailers are the Travel Agents. They negotiate the purchase of travel and tourism
products on behalf of their customers when requested to do so and are thus ‘middle men’. They may deal
directly with the producers of the products or with tour operators – but only as and when they have customers
for relevant products. They do not hold stock of products, as do retailers of goods. Travel agents receive a
commission from the principal concerned (e.g. the producer or Tour operator) for each sale, which they
negotiate. Travel agents form the retail sector of the distribution chain, buying travel services at the request of
their clients and providing a convenient network of sales outlets catering for the needs of a local catchment area.
They do not normally charge for their services, receiving instead commission from the principals for each sale
they negotiate.
Hotel Representatives;
Hotel Representatives: These sell hotel rooms and hotel services in a given market area. It is often more
effective for hotels to hire a hotel representative than to use their sales person. This is true when the market is
distant one and when cultural differences may make it hard for an outsider to penetrate the market. For example
a hotel group like Rainbow Tourism may have a hotel representative in China who can be responsible for selling
their tourism and hospitality products in the Chinese market
National Sate and Local Tourist Agencies
The National Tourism Organisations (NTO) are excellent ways to get information to the market and gain room
bookings, NTO promotes Tourism within their own nation. The impact can be very important to chains that
have hotels throughout the country like Zimsun or the Rainbow Tourism group. (Refer to the functions of ZTA)
Global Distribution system:
The GDS is a computerized reservation system that serves as a product catalogue for Travel agents and other
distributors of Hospitality products and services. These reservation systems were originally started by airlines to
promote sales e.g. Amadeus/Apollo Galileo.
Internet
The Internet is becoming an effective distribution tool, the hospitality managers can gain marketing information
from the Internet and some service providers are accessible through the internet which enables prospective
clients to book or make reservations for accommodation and other tourism services. The internet has advantage
that it never closes and has worldwide coverage and can transmit colour pictures this makes an exciting
distribution point.
Types of distribution channels
Direct distribution
Direct distribution occurs when suppliers sell directly to the customer. For example a hotel accepting a walk- in
guest or a tourist buying an air ticket directly at the air Zimbabwe offices.