Tour Operations and Tourism Distribution Channel Management

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Tour Operations and Tourism Distribution
ChannelManagement

• Mike Morgan
• DG28
• 965174
• mmorgan_at_bournemouth.ac.uk
• http//balm.bournemouth.ac.uk

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The aims of the unit

• Give an overview of the role of intermediaries in
  the tourism sector
• apply business management approaches to the
  sector in a practical assignment
• provide an academic framework to convert your
  operational experience
• provide a basis for a dissertation

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The content

• The role of intermediaries in the tourism system
• the elements of tour operations planning
• the strategies of the leading companies
• New distribution channels for tour products
• delivering customer service quality
• the future of tourism distribution

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The work

• Assignment 1
• Group project to design a tour programme
• due 5 June
• Assignment 2
• Essay set by Derek Robbins
• due 19 June

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Intermediaries

• Those who come between
• Producers/manufacturers
• And the end-user customer
• Independent organisations who assist the
  producers to make the product available to the
  customer

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Definitions

• EU Package Holiday Directive
• a pre-arranged combination of two or more
  components when sold... at an inclusive price
  includes overnight accommodation
• A tour operator the organiser of a package
  holiday

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The role of the tour operator

• Purchase in bulk components of a holiday
• Package them into a standardised repeatable
  product
• Brand them into a single entity
• Offer them to the public at an inclusive price
• Middleton
• How does this differ from the role of the travel
  agent?

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An agent

• Acts for a principal (the producer of the
  product)
• provides a service for a fee or a commission
• in British usage a travel agent is someone who
  sells travel and holiday packages for a
  commission, usually from retail shops
• This distinction is becoming blurred

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Understanding the tourism system
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Exercise

• You are managing a hotel in a destination
• Draw a map of the intermediaries involved in
  marketing your rooms to UK tourists
• How do they add value to the end-product?
• What does each party get from the interaction?
• How easy would it be to find a substitute?

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What theories can help us understand how this
industry works?
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The value chain

• Devised by Porter (1980) to analyse what happens
  inside companies - where the value is added to
  the end product
• Applied by Kogut (1985) to the whole external
  supply chain
• Terpstra (2000) writes of configuring the
  value-added chain
• - which activities to do yourself and which to
  pay someone else to do.
• Specialisation
• The same choice faces hotels, resorts, air and
  sea transport.
• Where does your expertise lie?
• Where can you add most value to the product?

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The Value Added ChainTerpstra and Sarathy (2000)
Manufacture Assembly
Retailing
Distribution Marketing
Design
Components
Accommodation Attractions Transport principals
Package Tour
Brochure Reservations
Travel Agent
How does the tour operator add value? By
providing the principals with a marketing
channel for their products
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Marketing Channels

• Sets of inter-dependent organisations involved in
  making a product available to the end-user
  customer (Stern and El Ansary 1996)
• Carry not only flows of product but information,
  promotion, payment and ownership

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• Offer the suppliers contactual efficiency in
  reaching the end customer (Rosenbloom1995)
• Make the product available in the utilities of
  form, time and place required by the customer
  (Bucklin)
• require members to subordinate their own needs to
  the success of the channel (Stern)
• issues of control and leadership, power and
  dependency

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Hotel
Tour Operator
Travel Agent
Customer
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Network theory

• Looks at relationships, networks and interactions
  (Gummesson 1988)
• a complex web of influences on the quality of the
  product (Holmund and Kock 1995)
• these influences can conflict with each other
• Competition is between networks of
  value-delivery systems (Kotler 1998) rather than
  individual firms

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Elements of a network analysisHakansson and
Johanson 1992

• Resources needed to create the product
• Actors - firms, organisations involved
• Interactions - between actors to create..
• Activities that produce the product
• Relationships that develop to ensure long-term
  commitments

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Attractions
Local agent
Resort Amenities
Hotel
Tour Operator
Travel Agent
Customer
Conference centres
Other hotels
Tourist Board
Destination Network
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Attractions
Local agent
Resort Amenities
Hotel
Tour Operator
Travel Agent
Customer
Conference centres
Other hotels
Tourist Board
Destination Network
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Transport Network
Airline Alliance
Car rental
Airports
Attractions
Airline
Local agent
Resort Amenities
Hotel
Tour Operator
Travel Agent
Customer
Financial services -insurance currency
Conference centres
Other hotels
IT systems
Destination Network
Tourist Board
Support Network
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Transport Network
Airline Alliance
Car rental
Airports
Attractions
Airline
Local agent
Corporate clients
Resort Amenities
Hotel
Tour Operator
Travel Agent
Customer
Retail centre Management
Financial services -insurance currency
Conference centres
Other hotels
Web portals search engines
IT systems
Destination Network
Tourist Board
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Easyjets Affiliate Network (2008)

• Airline Easyjet
• Hotels Hotelopia (part of the TUI group)
• Car rental Europcar (part of Volkswagen Group)
• Ski Breaks Erna Low (independent specialist tour
  operator)
• Chalet rental Chaletgroup (consortium of chalet
  owners)
• Skiwear BornForSports (community marketplace for
  sportswear)
• Travel Insurance Mondial Assistance (part of
  Allianz Group)
• To/from the airport Holidaytaxis
• Airport parking NCP
• Travel guides Arrivalguide.com in association
  with Fastcheck AB

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Formalising the relationship

• Vertical marketing systems Star Alliance
• administrative consortia Best Western
• contractual - franchises, joint ventures - Opodo
• corporate - vertically-integrated companies eg
  Thomson/TUI

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Systems theory (see Laws)

• Based on biological, ecological systems
• each component is affected by and in turn affects
  the behaviour of the others
• inputs, processes and outputs
• organic growth
• optimum size and efficiency
• decline and decay

Includes interaction between tourism and the
host society and environment
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Changes in regulation
Fears of crime terrorism
Weather Climate change
Economies of originating countries
Changing Lifestyles demographics
Destination environment
Media influences
Destination Economy
New technologies
Investment changes of ownership
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How are these changing the system?
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UK holidays abroad 1999-2005(UK International
Passenger Survey)
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Inter-organisational relationshipsWhat each
model reveals

• Inter-dependent channel members
• efficiency
• Value-adding chains - value, profit
• Complex and conflicting networks
• understanding, trust
• Organic and evolving systems
• flexibility, responsiveness