Unit V

Distribution Channel Management

A distribution channel - set of
independent organizations involved in the
process of making a product or service
available to the consumer or business
user

Used to move the customer towards the

product or the product to the customer
 Place = Distribution

The 4Ps
Product, Price, Place, Promotion

What the “P” of Price is to Revenue Management, the

“P” of Place is to Distribution
 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
 Distribution

 Today “distribution” in the hospitality industry generally

references transient sales today

 Revenue management and distribution merging together

 Internet marketing includes distribution issues

 Distribution Channel Functions

Information: consumer behavior “search stage”

Promotion: messaging
Negotiation: price and other terms
(how is this done online?
Physical distribution: think e-tickets?
Prospecting: finding, communicating, and tracking
prospective buyers
 Digitalization and Connectivity

Digitalization - converting text, data, sound, and image

into a stream of bits that can be dispatched at high
speeds from one platform to another
Connectivity - building networks connecting people
and companies; social and mobile convergence
 Direct versus Indirect Channels

 Direct Channels
Employed sales staff
National sales staff
Brand.com
Voice/CRS/Mobile
 Indirect – Intermediaries
Why use them?
Why so many of them?
 Getting the Customer to the Product

Reservation services
Representation firms
Consortia
Incentive travel organizations
Corporate travel management
 Global distribution systems (GDS)
 Traditional off-line travel agents
 Central reservation systems (CRS)
 Internet channels
 Websites
 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
 Why Use Intermediaries?

History of travel

Selling through wholesalers and retailers usually is much more

efficient and cost effective than direct sales

Fragmentation of the travel purchase and travel inventory,

transportation (idea of “lift”), hotels, attractions, meeting
facilities, restaurants, and so on.
 Brief history of Distribution Channels

Earlier days (much before 1900s) – Travelers first contact with an inn or hotel was possible
when they physically arrived at a property.
mail service was a millstone in the hotel industry.
Mid 1970s – major transformation began. Airlines developed relationships with various
intermediaries as hotels, cruise lines, travel agents etc.
End of 1970s – Airlines provided travel agencies with an E-method for verifying availability
and making reservations. GDS developed and added more products such as hotel booking, car
rentals etc.
1990s – emergence of internet and changed radically the way hotels sold rooms.
 Consortia
Consortia&&Reservations
Reservations
Systems
Systems
National,
National,State,
State, Global
GlobalDistribution
Distribution
and
andLocal
LocalTour
TourAgencies
Agencies Systems
Systems
Hotel
HotelRepresentatives
Representatives Internet
Internet
Specialists:
Specialists:
Brokers Concierges
Concierges
Brokers&&Junket
JunketReps
Reps
Tour
TourWholesalers
Wholesalers Travel
TravelAgents
Agents
Marketing Intermediaries
 Benefits of Distribution Channel
 Eliminate double bookings. Any property manager in the business knows the frustration and chaos that results
when this occurs. A Channel Manager receives the booking and communicates to other channels that the unit is
no longer available thereby minimising the risk of double bookings.
 Manual updates are a huge drain on that one precious commodity; time. A Channel Manager will automate the
process leaving you time for other tasks.
 Connect to more channels. As already mentioned there are literally hundreds of channels out there. A channel
manager allows a hotelier to connect to a global audience.
 More revenue. You will notice an exponential increase in bookings as rates and availability can be managed
across many platforms at the same time.
 Visibility. Travellers will visit up to a dozen booking sites before making their final choice so appearing on
more channels can broaden visibility and leave a lasting impression. Additionally if a potential guest likes what
they see on the channels they will often visit a hotels own website, thereby increasing the possibility of direct
bookings. Read more about this in our blog; grow your business with the billboard effect
 Ease of use. A PMS with a built in Channel Manager maximises efficiency by organising processes so they
require little to no manual labour. 
 E-Commerce & E-Marketing

 E-commerce involves buying and selling processes supported by

electronic means, c`primarily the Internet

 E-marketing is company efforts to communicate about, promote, and sell

products and other services over the Intranet; also web or Internet
Marketing

Not easy to separate but different issues

 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
THE GDS: 1970s Look and Feel
Complexities
of
Distribution
 Channels

Marriott.com, Starwood.com, hotel’s own

Brand.com
web site

CRS/Voice 1-800-hiltons, 1-800ichotels, 3rd parties

GDS Travel agents (Sabre, Galilieo, Amadeus, Worldspan)

OTA Online travel agents

Walk-in, group/rooming list, employee/discount, contract,

Property Direct/Other
Passkey
 OTA Business Models

Merchant Net rate, excludes commission

Retail Includes commission, backed out afterwards

Opaque Bidding method, brand not disclosed until after sale

 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
 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
 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 an intermediary fails, so does the experience
Major Issues/Challenges

 Fragmented owner-manager relationships

 Capital costs for technology and talent
 Travel agents reinvention imperative remains
 Battle of the brands—brand channels that is!
 Big data: not new
 Proliferation: more more more more
 Mobile?
 Monetizing social media
 Evaluation of Channels

 Control and cost of each channel

 Tracking of statistics to better negotiate contracts in the future
 Understand when and why to use a channel
 Good channel management ensures customer satisfaction AND
revenue optimization AND profit maximization