1. Chapter 12 Travel Intermediaries - Middlemen

2. This Lecture will give you
Familiarity with the nature and structures of intermediation and the arguments for and against dis-intermediation of distribution channels in tourism;
An awareness of ‘online’ developments and the increasing consolidation and concentration of tourism intermediaries;
Familiarity with the operating characteristics, roles and functions of retail travel agents and tour operators;
An understanding of the process of distribution; and
An awareness of the financial constraints on the operation of intermediaries.

3.   Intermediaries
Middlemen are intermediaries between consumers and suppliers.
Customer (tourist) – middlemen – supplier
Using middlemen has many advantages for both customers & suppliers
Tourism industry has been traditionally characterised by its use of intermediaries.

4. Figure 12.1 Structure of distribution channels

5.   Intermediaries
Various middlemen that are included in the travel and tourism industry are;
Travel agencies, Tour Operators
Travel clubs,
Hotel marketing and booking schemes, incentive travel organizations,
Sales representatives,
Computerised reservation system (CRS), global distribution system (GDS) etc.

6. Functions of Intermediaries
Provide info about tourism products
Contact current & potential customers
Make reservations & other arrangements
Assemble services to meet customer needs
Prepare tix & make confirmations

7. Functions of Intermediaries
Provide databases on customer behavior
Reduce cost of acquiring new customers
Market excess or distressed inventories
Take risks by buying (or reserving) products  & then reselling them to individuals or groups

8. The Nature of Intermediation
Benefits
Producers are able to sell in bulk and so transfer risk to intermediaries
Producers can reduce promotion costs by focusing on the travel trade, rather than consumer promotion, which is more expensive
Consumers can avoid search and transactions costs
Consumers can benefit from the specialist knowledge of intermediaries, their market power and the resulting lower cost of products
Destinations can benefit from the marketing, and international marketing, network of many intermediaries

9. The Nature of Intermediation
Disadvantages
Use of intermediaries by producers will result in the loss of margins and their degree of marketing control and influence over the process of distribution

10. Travel Agencies Travel agent = person Travel agency = company
Provide important info & sales links
Links between: tourists & tourism suppliers
Using TA, one of most common (popular) ways to buy tourism products\services
Many tourists now use Internet travel agencies: Travelocity, Expedia, & Orbitz

11. Travel Agencies
Via websites & s TA compete with each other regardless of their physical location
Do not own products they sell, so they have little or no inventory or cost of goods sold
As commissions dwindle, markups increase
Large volume agencies often earn override commissions (above the normal percentage)
Destinations experts; make recommendations

12. The Role of the Retail Agent
Travel counsellor
Principal role is to supply the public with travel products and services (such as insurance and foreign exchange)
Income is predominantly earned via commissions
Retail location and choice of reservation systems are key decisions
Impartiality (neutrality)?

13. Receptive Service Operators  
RSO are part of tourism distribution channel
AKA receptive tour operator, ground handler & inbound operator
RSO: a local company that  specializes in handling needs of groups traveling to it destination

14. Consolidators & Travel Clubs
Are combinations of wholesalers & retailers
They perform a unique function within tourism distribution channels
Consolidators buy excess inventory of air tix, then resell them at reduced prices via TA or directly to travelers

15. Tourist Information Sources
Travelers need info before, during, & after a trip about tourism product benefits, prices, & availability
Marketing communications provides this via:
Advertising, public relations, & personal selling
Information is available from national tourist offices (NTOs), convention & visitor bureaus (CVBs), and chambers of commerce
These sources have tool-free phone numbers,  websites, & welcome centers/TICs

16. Table 12.1 Some developments and trends in the marketplace affecting travel agencies

17. Table 12.2 Arguments for and against the dis-intermediation of travel agencies

18. Table 12.2 Arguments for and against the dis-intermediation of travel agencies (cont’d)

19. Table 12.3 Arguments for and against the dis-intermediation of tour operators

20. Table 12.3 Arguments for and against the dis-intermediation of tour operators (cont’d)

21. Table 12.5 Major global travel conglomerates

22. Online Travel Drivers of growth
Growth of Internet usage and electronic commerce
Success of global distribution systems (GDSs)
Sabre
Worldspan
Galileo
Amadeus
Phenomenon of ‘no frills’ airlines
Role of commissions in ‘traditional’ channels of distribution

23. Global Distribution Systems
 Majority of TA business is done via GDS
GDS provide extensive data on suppliers:
Schedules
Rates & fares
Space availability
GDS can also:
Make reservations
Print itineraries, tix, & invoices

24. Computer Reservation Systems
Travel Agencies are linked on-line via one or more computer reservation systems (CRS) built & operated by airlines
CRS make airline reservations,& serve as databases for tourism suppliers

25. Internet vs. Travel Agents
Consumers have choice in buying travel products
Increases scope & reach of options
Open 24/7
But requires more work & knowledge by consumers
TravelAgencies have expertise & human touch
Can save clients time, money, & energy
Can manage entire trip & its details

26. Figure Conceptual model of the process and factors influencing agents’ destinations recommendations

27. Tour Operators
TO: business organizations engaged in planning, arranging, marketing, & operating vacation packages
TO work with all sectors of tourism industry
They perform many functions:
Planning , Sales and reservations , Representatives /guides
They organise and put together package trips and holidays.

28. Tour Operators 1. Convenience 2. One-stop shopping 3. Cost savings
Reasons to Buy Tour Package 
1. Convenience
2. One-stop shopping
3. Cost savings
4. Special treatment
5. Worry-free

29. Tour Operators TO are unregulated Very susceptible to perishability
  Tour Operators Risks 
TO are unregulated
Very susceptible to perishability
Must commit to place, products, & prices in advance 
Currency fluctuations:
Natural disasters:
Changing consumer tastes:
Security & Safety Concerns

30. The Role of the Tour Operator / Wholesaler
Principal stages of the tour operating process
Research
Capacity planning
Financial evaluation
Marketing
Administration
Tour management

31. Price structure of a 14-night inclusive tour
Table Price structure of a 14-night inclusive tour
Source: Trade information

32. Conclusion Increasing consolidation, integration and concentration
Pressure from ‘virtual’ players
Changing patterns of booking behaviour
Pressure on cost structures and commission rates
New market entrants
Branding