2013 distribution overview

7/21/2019 2013 Distribution Overview

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Distribution Channels A distribution channel- set of

independent organizations involved in theprocess of making a product or service

available to the consumer or business user

Used to move the customer towards theproduct orthe product to the customer

Organic development of an industry


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Place = Distribution

The 4Ps

Product, Price, Place, Promotion

What the P of Price is to Revenue

Management, the P of Place is to

Distribution


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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


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Distribution

Today distribution in the hospitality industry

generally references transient sales today

Revenue management and distribution mergingtogether

Internet marketing includes distribution issues


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Distribution Channel Functions

Information:consumer behavior searchstage

Promotion:messaging

Negotiation: price and other terms

(how is this done online?

Physical distribution:think e-tickets?

Prospecting: finding, communicating, andtracking prospective buyers


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Digitalization and Connectivity

Digitalization - converting text, data,

sound, and image into a stream of bits

that can be dispatched at high speedsfrom one platform to another

Connectivity - building networks

connecting people and companies;

social and mobile convergence


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Direct versus Indirect Channels

Direct Channels

Employed sales staff

National sales staff

Brand.com

Voice/CRS/Mobile

IndirectIntermediaries

Why use them? Why so many of them?


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Getting the Customer to the Product

Reservationservices

Representation

firms Consortia

Incentive travelorganizations

Corporate travelmanagement

Global distributionsystems (GDS)

Traditional off-line

travel agents

Central reservationsystems (CRS)

Internet channels Websites


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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


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Why Use Intermediaries?

History of travel

Selling through wholesalers and retailers usually is

much more efficient and cost effectivethan directsales

Fragmentation of the travel purchase and travelinventory, transportation (idea of lift), hotels,

attractions, meeting facilities, restaurants, and so on.


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Travel Agents Tour Wholesalers

ConciergesSpecialists:

Brokers & Junket Reps

Internet Hotel Representatives

Consortia & Reservations

Systems

Global Distribution

Systems

National, State,

and Local Tour Agencies

Marketing Intermediaries

2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th editionUpper Saddle River, NJ 07458 Kotler, Bowen, and Makens


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E-Commerce & E-Marketing

E-commerceinvolves buying and sellingprocesses supported by electronic means,primarily the Internet

E-marketingis company efforts tocommunicate about, promote, and sellproducts and other services over the Intranet;

also web or Internet Marketing

Not easy to separate but different issues


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E-Commerce Domains

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


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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)


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THE GDS: 1970s Look and Feel


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Complexitiesof

Distribution


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Channels

Copyright 2011 Smith Travel Research

Channels

Brand.com

Marriott.com, Starwood.com, hotels

ownweb site

CRS/Voice 1-800-hiltons, 1-800ichotels, 3rdparties

GDSTravel agents (Sabre, Galilieo, Amadeus,

Worldspan)

OTA Online travel agents

Property

Direct/Other

Walk-in, group/rooming list,

employee/discount, contract, Passkey


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OTA Business Models

Copyright 2011 Smith Travel Research

OTA Business Models

Merchant Net rate, excludes commission

RetailIncludes commission, backed out

afterwards

Opaque Bidding method, brand not discloseduntil after sale


20/26Copyright 2011 Smith Travel Research

Major OTAs and Default Business Models

Bookings.com retail

Expedia merchant

Hotels.com merchant

Hotwire opaque

Orbitz merchant

Priceline opaque

Travelocity merchant

Travelweb merchant

Other OTAs merchant, retail, & opaque


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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 $3.25 - $13

OTA - Merchant $17-$35 or 20%

OTA - Retail $10

OTA - Opaque $59

Hebs, 2011, Cullen & Heisel, 2012


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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 anintermediary fails, so does the experience


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Major Issues/Challenges Fragmented owner-manager relationships Capital costs for technology and talent

Travel agents reinvention imperative remains

Battle of the brandsbrand channels that is! Big data: not new

Proliferation: more more more more

Mobile?

Monetizing social media


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Evaluation of Channels

Control and cost of each channel

Tracking of statistics to better negotiatecontracts in the future

Understand when and why to use a channel

Good channel management ensurescustomer satisfaction AND revenue

optimization AND profit maximization


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Goal for hotels in distribution

Q: What is the definition of revenuemanagement?

A: Selling the rightproduct to the right

customer at the righttime for the right(read:maximum) price!by the right channel!


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References

Cullen, Kathleen and Caryl Helsel, Defining RevenueManagement, Top Line to Bottom Line, HSMAI Foundation,Bethesda, MD, 2006

Green, Cindy Estis, Demystifying Distribution, HSMAIFoundation, Bethesda, MD, 2005.

Ho, Alfred, Importing, Exporting and Investing in China,World Trade, March 2007, pp 20-22.

Kotler, Bowen, Makens, Marketing for Hospitality andTourism, 4thEdition, Pearson, Upper Saddle River, NJ, 2006

PricewaterhouseCoopers, Hospitality Directions EuropeEdition, Briefing Paper, November 2007

Electronic Design, The Cell Phone Simply Irresistible,January 12, 2006, p90-91.

PhoCusWright, Inc, European Online Travel Overview,

March 2006

2013 distribution overview

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