Transcript PPT Chapter 16

Chapter Sixteen
Channels of Distribution
How Distribution Channels
Work
Distribution involves two questions:
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How do I get my product to the
customer?
How do I get the customer to my
product?
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Exhibit 16-2; Estimating Costs to Hotel to Book
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How Distribution Channels
Work
Distribution channels are important
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A group of organizations, independent or
not, that are involved in the process of
making a product or service available for
use or consumption
Goal is to get the product where the
customer is now or is going to be in the
future
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How Distribution Channels
Work
Distribution in hospitality is different
and complex
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Hospitality product must be where the
customer is
Focus on “getting” the customer
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Getting the Product to the
Customer
Branded
Hospitality
Companies
Franchising
Management
Without
Ownership
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Getting the Product to the
Customer
Branded hospitality companies
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May own all, part or none of the actual asset
All carry a brand name and adhere to strict
standards
Importance
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Allow for franchising and higher revenues
Gain management contracts
Gain access to capital
Brands bring desired familiarity to the customer
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Getting the Product to the
Customer
Franchising
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Commonly used in hospitality to:
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Increase the distribution network
Increase revenue
Obtain geographical presence
Access the company’s industry experience
and marketing tools
Also common in non-hospitality firms
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Getting the Product to the
Customer
Franchising
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Contracts and control between
franchisee/franchisor vary and cover:
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Marketing support
Revenues to the franchisor
Duration of agreement
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© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Getting the Product to the
Customer
Management without ownership
Many hotels today manage without
ownership
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Increases distribution without the
financial cost and risk
Also known as a “management
contract”
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Getting the Customer to the
Product
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Reservation services
Representation firms
Consortia
Incentive travel
organizations
Corporate travel
management
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Global distribution
systems (GDS)
Traditional off-line
travel agents
Central reservation
systems (CRS)
Internet channels
Websites
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Getting the Customer to the
Product
Reservation services
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Used by hotels to market themselves
independently
Only connects them to the channels of
distribution
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SynXis or Pegasus
Links directly to GDS or Internet without
needing brand affiliation
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Getting the Customer to the
Product
Representation firms
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A channel of distribution that brings a hotel to the
marketplace
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Market the hotel and sales for independent hotels that do
not have sales or reservation networks
Termed “soft brands”
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Represent both the representation firm and their own
independent brand
Maintain independence with representation but also have
access to marketing programs
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Getting the Customer to the
Product
Representation firms offer:
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Standards for membership
Connectivity to electronic channels of
distribution
Sales initiatives
Marketing programs
Participation in trade shows
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Getting the Customer to the
Product
Consortia
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A loosely knit group of independently owned and
managed properties (e.g. hotels or travel
agencies) with different names, a joint marketing
distribution purpose, and a common consortium
designation
Purpose is to open a channel of distribution by
maximizing combined marketing resources and
reducing expenses for individual properties
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Getting the Customer to the
Product
Incentive travel organizations (incentive
houses)
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A company that specializes in handling incentive
reward travel which rewards top-performing
employees
Need for new and exciting destinations and for the
trip to be perfectly executed
Thoroughly review the destination and facilities,
sell it to the company and sell it to the employee
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Getting the Customer to the
Product
Corporate travel departments and travel
management companies
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Services range from a travel director who
creates policies and contracts with travel
suppliers to a full, in-house travel agency
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Referred to as the corporate or managed
business traveler
Goal is to balance the need of employee and
employer
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Getting the Customer to the
Product
Global distribution systems (GDS)
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A computerized reservation system that
connects the travel agent to hotels, airlines,
cruise lines, care rentals, and other services
Additional fees are added at each point in
booking
To avoid this, many companies are now
directly marketing to customers
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Getting the Customer to the
Product
Traditional offline travel agents
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Intermediary who assists travelers in
making arrangements for a fee
Travel agents can also form consortia
Belief that they may shrink with growth
of internet
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Getting the Customer to the
Product
Central reservation systems (CRS)
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Computerized reservation system of a hospitality
company that allows customers to make
reservations without having to contact the
company directly
All major hotel chains worldwide now
communicate from their CRS and GDS directly to
the individual hotels
Seamless connectivity allows two-way inventory
management
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© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Getting the Customer to the
Product
Internet channels
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Now reaching 80% of US households, the
internet’s influence on hospitality is
growing
Internet has evolved:
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Provides information
Simplifies transactions
Improving technology with complex
interactions taking place
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Getting the Customer to the
Product
Internet Channels
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Early on was the advent of the online
travel agent
September 11th and the increase of
online discounted booking
The merchant model
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Third party site negotiated net rates for
hotels and marked price up for market sale
To compete, hotel brands began to offer
their own sites
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© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Getting the Customer to the
Product
Websites
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Is the hospitality modern day equivalent of the
rack brochure
Should reflect the personality of the hotel with
visuals
Focus on the needs of the customer
Website will vary based on market segment
Many fail to provide visitors with information
needed to make a purchase decision
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© 2008 Pearson Education, Upper Saddle River, NJ 07458.
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Getting the Customer to the
Product
Websites
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Two audiences
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Potential customer
Search engine
Functionality best practices
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Reservation area should be at the front of the page
Email acquisition section should be on the home page
Site should convey the best value to the customer and
keep them interested
Security has to be conveyed
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© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Getting the Customer to the
Product
Website-generated market research data
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Computer servers track visitors and record surfing
and clicking behavior
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First page visited
Last page visited
Navigation sequences
Referring site
Average number of pages visited
Time on site
Low cost tool
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Future Challenges of Online
Distribution
The internet has fundamentally changed travel and
hospitality distribution
Challenges
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The consideration set for travel options has expanded
Price transparency and consistency
Need to manage transaction costs
Reallocation of marketing dollars
“Onward distribution”
Rise of third parties that are going after the group market
Increase in packaging
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Future Challenges of Online
Distribution
Selecting channels
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Length should be analyzed
Shorter is better due to less cost, less
management issues
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All Rights Reserved.
Future Challenges of Online
Distribution
Market Opportunities in China
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Barriers to e-commerce in China
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Cash based nature of Chinese society
Little experience or trust in online transactions
Doubt the reliability of information provided
online
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Evaluation of Channels
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Tracking of statistics to better
negotiate contracts in the future
Understand the break-even point of a
channel
Must be marketing driven with good
channel management to ensure
customer satisfaction
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Discussion
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Do you believe that traditional travel
agents will one day be obsolete? What
can they do to make themselves a
competitive distribution channel?
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All Rights Reserved.