Unit 5: Marketing and Promotion 2022

5.5. ‘Place’ as part of the marketing mix

The objective of this Chapter is to (a) Investigate the factors that influence the selection of a location for
travel and tourism facilities and (b) Identify and explain the range of distribution channels for travel and
tourism products and services.

Introduction
Place refers to 1) the physical location of destinations or tourist facilities and 2) the chain of distribution
used by tourism providers to get their products to their customers.

Physical location

One of the most important aspects of distribution for hospitality organizations is location. Unlike goods,
tourists or customers have to travel to the tourism facility/destination in order to consume the tourism
products and services they have bought. This therefore requires that the business be conveniently
located. As such, when implementing or setting up a new tourism facility or attraction, organizations
must take into consideration a range of factors referred to as locational factors. The locational factors
include:

 Costs
 Availability of suitable premises
 Character of area
 Local and transient population
 Adjacent facilities
 Access/transport links
 Availability of staff

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Distribution channels or the chain of distribution

A distribution channel is the term used to describe how products and services are made available to
customers. The way in which travel and tourism organizations chooses to get their products and
services to their customers, depends largely on the type of organization and the type of products
offered. In the travel and tourism industry, for instance, four commonly used distribution channels have
been identified which organizations resort to.

Examples of distribution channels for travel and tourism products and services include:

 direct selling
 wholesalers
 retailers
 Internet
 Global Distribution Systems

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“Channels of distribution commonly used in the travel and tourism industry”

Model 1

Service Provider End User/customer/tourists

 As shown in this model, customers purchase travel and tourism products and services directly
from the service provider (hotels, airlines, etc).
 The provider assumes the sole responsibility for getting its products to its customers through
the process of direct selling.
 This means that no intermediaries are used, thus saving the provider from having to pay
commission.
 As no commission needs to be paid to intermediaries, the organisation reduces it operating
costs.
 However, the provider must take sole responsibility for the marketing and promotion of their
products and services.
 Also, this channel medium is used mainly by small privately owned enterprises such as guest
houses.

Model 2

Service Provider Direct Mail, Telemarketing or End User/customer/tourists

Internet Sales

 Technological advances have revolutionalised distribution channels within the travel and
tourism industry, with the introduction of websites and online booking facilities.
 Customers no longer have to leave the comfort of their home to purchase tourism products.
 Customers have 24 hour access from the comfort of their homes and are just a few clicks away
from being able to research, select and make a confirmed booking, without needing any
assistance in the process.
 Increasingly, hotel chains are using this distribution medium to reach their customers.
 In this way, the service providers get to promote their products and services as well as the
intermediaries they usually work with on the Internet.
 Discounted prices may be offered on this medium to reduce queuing time or or guests traffic
within showrooms.
 However, some customers may prefer to have face-to-face interaction with the provider or
intermediaries. In which case this model may not be appropriate for them.
 Also, not everyone has Internet access.
 And some customers lack confidence in the security of online payments, fearing the risk of
identity theft etc. So they may prefer not to use this medium.

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Key points

 Direct mail involves an organization sending promotional material to existing and potential
customers whose details are already on their customer database. The promotional material
may contain special offers, discounts and so on.
 Telemarketing involves the use of telephone calls to targeted customers.
 The Internet enables customers to access information and make reservations via their home
computers at any time of the day, and organizations are able to monitor how many customers
access their website in order to track their promotions.

Model 3

Service Provider Intermediary: Retailer or an End User/customer/tourists

agent

 In this model, the retailer or the agent act as an intermediary to ensure that products reach the
target audience.
 An agent could be an inbound tour handler or a travel agent working for commission on the
sales made on behalf of the provider, but without ‘owning’ the products they sell.
 On the other hand, a retailer must firstly ‘purchase’ the products or services before selling them
on to the customer, usually at a higher price.
 By using intermediaries, tourism providers seek to extend the access that customers have to
the tourism products and services offered, it also provides customers with a face-to-face point
of contact and allows them to make advanced bookings.
 Transport providers, tour operators and hotels, all regularly use this form of distribution.

Note: Travel Agencies use technology to enable them to make accurate travel and hotel bookings being
able to view real-time data about seat and room availability. This technology comes in the form of
Global Distribution Systems (GDS) which uses centralized processes to allow tickets to be produced
instantly.

There are different GDS in operation across the world and these include: Galileo, Sabre, Worldspan.

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Model 4

Service Provider Wholesaler Retailer End User/customer/tourists

 This model is different from Model 3 in that it has an additional intermediary in the form of the
wholesaler.
 As per this model, the wholesaler buys the tourism products and services from the different
service providers in bulk at discounted prices from the provider before selling it at slightly
higher prices to the retailer.
 The retailer (travel agents) then in turn adds on his share of profit such that the customers pay
a higher price for the end product.
 For example, tour operators buy in bulk from the different service providers (airline companies
and accommodation providers) at discounted prices and then assemble together the different
component parts to prepare holiday packages, which they then sell to retailers (Travel Agent)
who in turn sells it to the customers.
 This is a very costly chain of distribution both for the provider, in terms of the commission they
must pay, and for the customer because the final price of the product will reflect the fact that a
wholesaler and a retailer also need to earn money from the process.
 However, using two intermediaries does enable travel and tourism providers to gain access to
a much wider customer base, with additional marketing and promotion efforts being made on
their behalf.

Note: It is worth noting that large hotel chains may use a combination of these distribution channels to
reach more customers and increase their occupancy rates.

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Annex

Brainstorming: Channels of distribution (21.01.2022)

How organisations proceed to sell its products or services to customers? What are the different
options?

(1) Organisation (hotel, visitor attraction, airline etc) sells directly to customers (face to face)

(2) Organisation sells the product to customer online (website, online booking, mobile application)

(3) Organisation (hotel) sell product to customers through another person (agent)

(4)
Tourism Organisation Tour Customers
Operator Travel Agent

Summary

Factors that influence the selection of a location  Costs

for travel and tourism facilities  Availability of suitable premises/land
 Character and features of area
 Local and transient population
 Adjacent facilities
 Access/transport links
 Availability of staff
Identify and explain the range of distribution  Direct selling
channels for travel and tourism products and  Wholesalers
services  Retailers
 Internet
 Global Distribution Systems

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Evaluation:

NOV 2005 QU 4 (a), (b), (c)

A distribution channel is also known as a chain of supply. Two examples of the supply chain for
tourism products are given below in Fig. 2.

(a) Give one advantage and one disadvantage of each of the supply chain models from Fig. 2.
[4]
Ans: Model 1 advantage – direct contact with supplier, cheaper prices as no middleman. Model 1
disadvantage – supplier has to raise awareness to enable direct contact to occur – high advertising
costs. Model 2 advantage – travel agents act on behalf of tour operators and suppliers to entice
customers thus having wider range of products on offer. Model 2 disadvantage – two sets of middlemen
each wanting commission – very expensive and cost passed onto customer. (Accept any four
reasoned responses)

(b) Most travel and tourism providers use Information Technology within the distribution process via a
CRS.
(i) Define the abbreviation CRS. [1]
Ans: Computer reservation system.
(ii) Name two examples of CRS. [2]
Ans include: Sabre, Worldspan, Gemini, Amadeus, Galileo, START, Infini, Fantasia, Abacus, Axess,
Southern Cross, System One, FASTRAK, ISTEL, PRESTEL, etc.
(c) "Location of a destination contributes to its success."
Assess the factors that influence the location of a ski resort. [6]
Locational factors including climate, (snow) physical landscape (mountainous), population for labour,
accessibility, infrastructure, character of area, cost, other local facilities, proximity of other ski resorts,
etc. Candidates must assess the relative importance of each factor. Full evaluation of importance of
each factor – i.e. climate and landscape powerful influence whereas labour force can be drafted in on
residential basis for winter season.

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To elaborate
NOV 2006 QU 3 (d)(i),(ii), (e)
(d) The use of the Internet in the distribution of holidays also influences price.

(i) Draw a diagram to show how the Internet becomes part of a distribution channel in the sale of
holidays. [2]

Holiday provider (Internet) → Client

(ii) Describe how the Internet as a distribution channel impacts on the price of holidays.
[4]

Internet – cheaper because of online discounts, more choice of providers, increased competition =
more competitive prices, cut out middlemen = no commission to pay, customer able to do own detailed
research to find best value for money by putting together cheapest component parts of the holiday.
(Any 4 or 2 x 2 )

(e) Explain the relationship between competing tourism products and price.

[8]

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