Introduction
The link between tourism suppliers and the customers is known as the distribution system. The purposes of the system of distribution are twofold: to give potential travelers the information they need to make a vacation choice, and to allow them to make the necessary reservations once they have decided on their choice.
The various types of distribution systems are diagrammed in Figure 11.1.
Direct distribution system
The distribution system may be direct or indirect. A direct system of distribution is one where the supplier (destination, airline, hotel, etc.) communicates directly with the customer. An individual, for example, may call a specific hotel or airline, or write to them requesting a reservation for a specific date. The supplier then answers over the phone or writes back confirming the reservation. The transaction is direct.
Suppliers have experimented with other, less traditional forms of communicating with the traveler. Larger companies provide toll-free 800 telephone numbers that they advertise to the public. This allows the traveler to call the supplier without charge. In a few cases, automated ticketing machines have been opened at airports. These machines connect directly with the computer reservations system of an airline and allow the traveler with a credit card the availability of receiving flight information, making a reservation and receiving both ticket and boarding pass on the spot. These machines have limited exposure at airports, for the airline runs the risk of upsetting the retail travel agents who are being bypassed. If successful, it is likely that automatic ticketing machines will be installed in hotels and elsewhere.
Technology is available to sell travel through home computers. Mass outlets for selling travel have been utilized in Europe with travel being sold through supermarkets. For simple transactions these direct methods of selling travel can be expected to grow.
For the supplier, the system is simple, profitable and offers control over the sale. The system is simple in that buyer and seller have direct communication with each other; it is profitable in that all the revenue paid by the customer goes to the supplier; control comes from the fact that the sales representative is an employee of the supplier.
Indirect distribution system
An indirect distribution system is one where there are one or more intermediaries between the supplier and the customer. The most common intermediaries are discussed in the sections that follow.
Retail travel agents. These are people who sell tours for wholesalers and operators in addition to hotel rooms, car rentals, and transportation tickets. The retailer acts as agent for the supplier and is paid on a commission basis by the supplier for sales made.
Tour operators or tour wholesalers. These are people who create a package that might include a variety of tourist products such as transportation, lodging, meals, transfers, sightseeing, etc. Wholesalers buy these "products" in bulk from the supplier at a reduced price and make money by marking up the package. They can sell the package directly to the tourist (tour operator) or through retailers (tour wholesaler). In the latter case, they would pay a commission to the retail travel agent.
Retail travel agents can package their own tours and sell them to the public and/or through other retailers.
Specialty channelers. People who are intermediaries between the retailer and the customer are known as specialty channelers. They may represent either the customer or the supplier and include incentive travel firms, meeting and convention planners, association executives, and corporate travel offices. Incentive travel firms put together and sell travel as an incentive to increase sales. They sell their ability to design, promote, and manage incentive travel programs. Other specialty channelers are employees who buy travel services at efficient costs for their organizations.
Supplier choice. Why would a supplier choose to give up control of the sale while paying a commission by distributing the product indirectly?
The major reason is cost. For many companies the cost of maintaining a sales network is prohibitive. To set up national and regional sales offices is very expensive and is a fixed cost; the salaries and rents must be paid irrespective of the sales volume produced. By contrast, the cost of selling through intermediaries is variable; a commission is paid only if a sale is made.
Additionally, the intermediary assists the supplier by checking customer credit, taking various individual payments, and paying the supplier in one sum.
Customer choice. Numerous reasons exist why the customer would wish to deal with an intermediary. In theory, the middleman offers unbiased professional assistance in selecting from a variety of travel products. For customers calling United Airlines by telephone, the reservationist at United will try to sell United products. A travel agent, on the other hand, will have access to and will be paid a commission on selling a variety of airline flights. The customer is offered a better selection and may find a less expensive and/or more convenient flight.
Both the knowledge and the experience of the intermediary are generally available to the traveler free of charge. In unusual situations where the cost of putting together an individualized itinerary involves a fee, travel agents, for example, will spend time advising clients on where to go, how to get there, what to see and even how to pack.
The intermediary can often negotiate options for the traveler that the individual tourist cannot get. Because they deal in larger numbers of travelers, intermediaries have clout with suppliers to provide difficult-to-get theater tickets or special discounts, for example.
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