1. Distribution Channels
A distribution channel - set of independent organizations involved in the process of making a product or service available to the consumer or business user
Used to move the customer towards the product or the product to the customer
Organic development of an industry

2. Place = Distribution The 4Ps
Product, Price, Place, Promotion
What the “P” of Price is to Revenue Management, the “P” of Place is to Distribution

3. Distribution also describes
Locations for hotel brand distribution
Franchising
Ownership
Management contracts
The sales staff and system
Group sales or volume accounts
Reservations and transient sales
National sales offices
Representation firms, consortia

4. Distribution
Today “distribution” in the hospitality industry generally references transient sales today Revenue management and distribution merging together Internet marketing includes distribution issues

5. Distribution Channel Functions
Information: consumer behavior “search stage”
Promotion: messaging
Negotiation: price and other terms
(how is this done online?
Physical distribution: think e-tickets?
Prospecting: finding, communicating, and tracking prospective buyers

6. Digitalization and Connectivity
Digitalization - converting text, data, sound, and image into a stream of bits that can be dispatched at high speeds from one platform to another
Connectivity - building networks connecting people and companies; social and mobile convergence

7. Direct versus Indirect Channels
Employed sales staff
National sales staff
Brand.com
Voice/CRS/Mobile
Indirect – Intermediaries
Why use them?
Why so many of them?

8. Getting the Customer to the Product
Reservation services
Representation firms
Consortia
Incentive travel organizations
Corporate travel management
Global distribution systems (GDS)
Traditional off-line travel agents
Central reservation systems (CRS)
Internet channels
Websites

9. Push vs. Pull strategies
Pushing the product “down” through the distribution channel TO the customer
Incentives to travel agents and intermediaries
Pulling the customer “up” through the distribution to the channel
Traditional media/private sales/CRM

10. Why Use Intermediaries?
History of travel
Selling through wholesalers and retailers usually is much more efficient and cost effective than direct sales
Fragmentation of the travel purchase and travel inventory, transportation (idea of “lift”), hotels, attractions, meeting facilities, restaurants, and so on.

11. Marketing Intermediaries
Travel Agents
Tour Wholesalers
Concierges
Specialists:
Brokers & Junket Reps
Internet
Hotel Representatives
Global Distribution
Systems
National, State,
and Local Tour Agencies
Consortia & Reservations
Systems
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

12. E-Commerce & E-Marketing
E-commerce involves buying and selling processes supported by electronic means, primarily the Internet
E-marketing is company efforts to communicate about, promote, and sell products and other services over the Intranet; also web or Internet Marketing
Not easy to separate but different issues

13. E-Commerce Domains Branded websites Passkey User groups
B2C (business to consumer)
Branded websites
B2B (business to business)
Passkey
C2B (consumer to business)
User groups
C2C (consumer to consumer)
Blogs; review sites are blends of above

14. Internet Intermediaries
History of the internet as a discount channel
Price and convenience key drivers still
Dominance about inventory allocation
Consistency of all 4Ps by channel
How Product is described
Pricing parity
Channel profitability
Communication needs to vary by segment (channel)

15. THE GDS: 1970s Look and Feel

16. Complexities of Distribution

18. Channels Channels Brand.com
Marriott.com, Starwood.com, hotel’s own web site
CRS/Voice
1-800-hiltons, 1-800ichotels, 3rd parties
GDS
Travel agents (Sabre, Galilieo, Amadeus, Worldspan)
OTA
Online travel agents
Property Direct/Other
Walk-in, group/rooming list, employee/discount, contract, Passkey
Channels
Copyright 2011 Smith Travel Research

19. OTA Business Models OTA Business Models Merchant
Net rate, excludes commission
Retail
Includes commission, backed out afterwards
Opaque
Bidding method, brand not disclosed until after sale
OTA Business Models
Copyright 2011 Smith Travel Research

20. Major OTAs and Default Business Models
Bookings.com
retail
Expedia
merchant
Hotels.com
Hotwire
opaque
Orbitz
Priceline
Travelocity
Travelweb
Other OTAs
merchant, retail, & opaque
Copyright 2011 Smith Travel Research

21. Estimated Cost per channel excluding Brand and Switch fees per transient reservation
Brand.com
$2 - $5
CRS/Voice
$2-4/inquiry plus
$6-12/net booking
GDS
$4.50-$6
Property Direct/Other
$ $13
OTA - Merchant
$17-$35 or 20%
OTA - Retail
$10
OTA - Opaque
$5 – 9
Hebs, 2011, Cullen & Heisel, 2012

22. Major Issues/Challenges
Costs have risen as has competition
Global differences in systems
Technology also flattening this
System hard to change and complex to manage
Historical controls of GDS, OTA
Diversity of travel “parts” makes all of the distribution points part of the experience and if an intermediary fails, so does the experience

23. Major Issues/Challenges
Fragmented owner-manager relationships
Capital costs for technology and talent
Travel agents reinvention imperative remains
Battle of the brands—brand channels that is!
Big data: not new
Proliferation: more more more more
Mobile?
Monetizing social media

24. Evaluation of Channels
Control and cost of each channel
Tracking of statistics to better negotiate contracts in the future
Understand when and why to use a channel
Good channel management ensures customer satisfaction AND revenue optimization AND profit maximization

25. Goal for hotels in distribution
Q: What is the definition of revenue management?
A: Selling the right product to the right customer at the right time for the right (read: maximum) price!…by the right channel!

26. References
Cullen, Kathleen and Caryl Helsel, Defining Revenue Management, Top Line to Bottom Line, HSMAI Foundation, Bethesda, MD, 2006
Green, Cindy Estis, Demystifying Distribution, HSMAI Foundation, Bethesda, MD, 2005.
Ho, Alfred, Importing, Exporting and Investing in China, World Trade, March 2007, pp
Kotler, Bowen, Makens, Marketing for Hospitality and Tourism, 4th Edition, Pearson, Upper Saddle River, NJ, 2006
PricewaterhouseCoopers, Hospitality Directions Europe Edition, Briefing Paper, November 2007
Electronic Design, The Cell Phone Simply Irresistible, January 12, 2006, p90-91.
PhoCusWright, Inc, European Online Travel Overview, March 2006.