Lecture 5: The Role of Travel

Intermediaries in International Tourism

Lecturer: Janelle Murray

TOUR 2000: International Tourism
18 October 2022
Email: janellepmurray@gmail.com
 Lecture Outline
 Explain the distribution channel in international tourism
 Assess the different definitions of travel intermediaries
 Understand the different types of travel intermediaries in
the distribution channel
 Appreciate the roles and functions of the tour operator,
travel agent and e-intermediaries in the international
tourism industry
 Explain the trends impacting the players in the
distribution channel
 Provide arguments for and against the importance and
relevance of travel intermediaries in the current market
 Discuss the opportunities and way forward for travel
intermediaries
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 Marketing

“A social and managerial process by which individuals and

groups obtain what they need and want through creating and
exchanging products and value with others”. (Kotler et al.,
2005)
 Tourism Distribution Channels (1)

 A tourism distribution channel, is what makes products

available to consumers; it connects the tourist destination with
the tourists. Since tourism products are intangible (they cannot
be seen, tasted, felt, heard or smelt before purchase; Kotler et
al., 2005), distribution channels in tourism offer the
products/services at the location of potential consumers which is
usually far from the destination they may wish to visit.

 Distribution Channels link the producer and its buyers.

Tourism Distribution Channels (2)
 The distribution channel may be direct or indirect.

 “In the hospitality & travel industries, distribution systems

are used to move the customer to the product: hotel,
restaurant, cruise ship or airplane.” (Kotler et al., 2005)
Tourism Distribution Channels
 A TOURIST sees an advertisement on TV about New
Zealand and also hears about it from friends. He
decides to find out more.

 A tourist contacts a TRAVEL AGENT to enquire

about a trip to New Zealand and ends up booking
his entire trip.

 A travel advisor plans a comprehensive travel

itinerary to New Zealand using a WHOLESALER &
books all tour operations through them.

 Tour wholesaler contacts inbound TOUR

OPERATOR in New Zealand to book each individual
element of the itinerary
Tourism Distribution Channels

Cooper et al., 2005

Travel Intermediaries
 McIntosh, Goeldener and Ritchie (1995, 133) define
tourism intermediaries as ‘an operating structure,
system or linkages of various combinations of travel
organisation, through which a producer of travel
products describes and confirms travel arrangements
to the buyer’.

 Page (2007) describes tourism intermediaries as

‘agents that sell products for the industry’

 More recently, McIntosh and Minnaert (2012, 134)

define a travel intermediary as a ‘company acting
between separate parties in the distribution of travel
products’
 Travel Intermediaries

Intermediaries act as middlemen between consumers and suppliers.

“Any person or entity that assists in or facilitates the distribution of

travel products to travellers.” (Travel Industry Dictionary, 2018)

TRAVEL
PRODUCER CONSUMERS
INTERMEDIARIES
Functions of Travel Intermediaries (1)

 Identify consumers’ needs and expected experiences

 Assemble tourism products according to customer expectations
 Facilitate the selling process by reserving and issuing travel
documents
 Negotiating and pre-booking tourism products
 Ameliorate inventory and yield management by manipulating supply
and demand
 Assessment of quality of facilities and products at the destination
 Assistance in legal requirements (e.g. visas)
 Facilitate communications between consumers and suppliers in
multicultural environments
 Dissemination of promotional materials
 Consumer advice, guidance and consultations
Functions of Travel Intermediaries (2)
 Market research
 Facilitate access to remote tourism products
 Establish clearing system where each channel member receives
payment
 Arranging ancillary services (e.g. travel insurance)
 Complaint handling between consumers and suppliers
 Provide databases on customer behaviour, i.e. via CRM system
 Market excess or distressed inventories
 Take risks by buying products and reselling them
Types of Travel Intermediaries
The Tour Operator
 Traditionally offers travel products for sale to the leisure tourism
markets
 A tour operator will organize, assemble and package together
the various components of the tourism experience and sell them
through the medium or a leaflet, brochure or information
technologies (Page and Connell 2006, 126)
 Contract capacity from tourism suppliers – accommodation,
airline seats, airport transfers, train tickets, ground
transportation, attractions.
 Negotiate to be contracted at net rates, and then adds
surcharges to each component and markets packages as a single
product to the travel consumer
 Advantage of the tour operator is their knowledge of the travel
market and the suppliers’ products.
 Tour operator business is volatile and susceptible to external
environments
The Tour Operator
 Capitalise on bulk–selling and therefore benefit on economies of
scale through intersectoral linkages
 Vertical integrations – tour operator companies control
transportation companies, travel agencies and hotels (e.g.
Thomas Cook, Virgin Atlantic Airline with Virgin Holidays, and
British Airways with British Airways Holidays)
 Horizontal integrations – companies amalgamates with another
company operating at the same stage of production I the same
industry.
 For destinations such as the Caribbean, suppliers can become
dependent on the tour operators with some cases where they
bring in up to 90% of business
The Role of the Tour Operator

 The role of the tour operator is complex and multifaceted as

it involves:
 Planning and coordination of packages
 Signing of contracts and negotiation of rates with suppliers
 Creation and dissemination of brochures
 Strategically planned media and advertising
 Managing inventory of perishable products from suppliers based
on supply and demand
 Managing financial risk
The Travel Agent
 Known as the retail sector
 The tour operators due to location in prime urban centres
 Travel agents are known as destination experts where
trusted recommendations can be made
 Travel agencies make money from commissions provided by
the supplier and agency fees.
 Travel agencies have no control over inventory as products
sold are not owned by the agency.
 Travel agencies sell mainly through Global Distribution
Systems such as Sabre.
The Role of the Travel Agent
 Making reservations
 Planning itineraries
 Calculating fares
 Advising clients on destinations, resorts and other types of
travel
 Some specialize in niche markets which may include adventure
travel, destination weddings, sport travel tours, corporate and
business travel.
The E-Intermediaries
 Tourists and potential tourists can now access a reservoir of
information on the internet and use as a primary source of travel
information
 Provides a channel of direct marketing of tourism products
 The internet and new technologies allow tourism suppliers to
transcend borders by adopting a more direct approach to distribution
 Online experience has much greater potential in animating travel
products than traditional brochures or telephone sales
 Developments in technology have given birth to the online booking
portals or e-intermediaries, which pull information from the global
distribution systems – Expedia, booking.com, Travelocity, Orbitz, etc
 Mobile technologies and development provide opportunities to
remodel the distribution channel
The E-Intermediaries
 Enable suppliers to control, promote and sell their
products directly to the global consumer
 Suppliers can communicate directly with potential and
past customers
 Opportunity to create and manage customer relationship
and loyalty programmes and use social media to stay in
contact.
 Many hotels have adopted the “shelf” approach to
electronic distribution which requires the hotel to be
available on as many book channels as possible.
 Restriction in ability to up-sell or cross-sell products
Travel Intermediaries
Industry Trends affecting Travel
Agencies & Tour Operators
 Emergence of “no frills” airlines that perform most of
their reservations online
 Expansion of product offerings in the airline industry, e.g.
the introduction of 3 types of Economy products
 Airlines cease commissions for travel agents
 Vertical and horizontal integrations
 Tourism suppliers have more control over costs of
distribution & have improved communication by
developing internet-based interfaces with consumers
 Emergence of “new” tourist – more independent traveller
 Increased computer literacy among consumers
 Increase in online forums and third-party review sites
(e.g. TripAdvisor)
Industry Trends Affecting Travel
Agencies & Tour Operators

 Emergence and rapid development of electronic intermediaries

 Traditional intermediaries re-engineering their processes in order
to update offering, improve customer satisfaction & remain
competitive; e.g. goingplacestravel.com
 Tourism destinations develop systems to enhance their
representation, boost their image and attract direct bookings
 Emergence of shared economies (e.g. Airbnb, Homeaway)
 COVID-19 pandemic’s impact on the travel industry
Arguments for the Disintermediation of
Travel Intermediaries

 Technology enables consumers to do everything on their

own
 Gradual increase in independent holidays and a decrease
in packaged holidays
 Electronic intermediaries offer great flexibility and
choice
 E-intermediaries Open 24/7
 Agencies merely manage information and undertake
reservations
Arguments against the Disintermediation of
Travel Intermediaries
 Offer valuable services and advice as they are more
knowledgeable
 Use expertise to save consumers time & stress
 In some instances, technology is difficult to use and expensive to
acquire (mainly with the senior demographic)
 Can achieve better pricing through the use of the right channels
and have access to net rates for packaging
 Offers that human element that can’t be achieved if travel is
booked online
 Without a travel advisor, you’re on your own
 Increased incidences of credit card fraud
Arguments against the Disintermediation of
Travel Intermediaries

 Insecurity of travel is reduced as travel agents are

responsible for all arrangements
 Travel agents can cut through the clutter of the internet
 Have access to and relationships with suppliers that you
will not have
 First time cruisers need travel advisors
COVID-19 and the Resurgence of
Travel Intermediaries
 Helped clients return home amid lockdowns
 Seen once again as a trusted source with the necessary
contacts
 Surge of business due to changing rules and restrictions for
entry into destinations
 Travellers looking for to take vacations without the
stressful planning experience
How will traditional travel
intermediaries survive?
 Raise the bar with an unrivalled level of customer service
 Value-added services to keep customers
 Corporate Travel - Business Development Manager
 Niche marketing
 Use technology as an opportunity, not a threat
 Redevelop websites to remain competitive on digital
landscape
 Increase training opportunities for agents
Summary
 A tourism distribution channel is what makes products available to
consumers, connecting the destination with the tourists.
 Travel intermediaries acting as middlemen between consumers and
suppliers.
 Tour operators have a complex and multifaceted role in international
tourism and may feature horizontal and vertical integrations.
 Travel agents are seen as destination experts. They sell mainly through
the GDS and have no control over inventory as products sold are not
owned by the agency.
 E-intermediaries allow suppliers to control, promote and sell their
products directly to the global consumer
 COVID-19 brought a resurgence of traditional travel intermediaries, but
they must adapt and remain competitive in order to survive
  Gustafson, P. (2012) Managing business travel: developments and
dilemmas in corporate travel. Tourism Management 33 (2) 276-284.
 Goeldner & Ritchie (2003) Tourism: Principles, Practices &
Philosophies. Ch. 7
 Holloway, C. (2016) The Business of Tourism. Ch.6 & 12
Suggested  Mill, R. and Morrison, C. (2012) The Tourism System. Ch.1

Readings  Mc Kercher, B., Packer, T., Yau. M. and Lam, P. (2003) Travel agents as
facilitators or inhibitors of travel perceptions of people with
disabilities. Tourism Management. 24 (4), 465-474.
 Page, S. and Connell, J. (2014) Tourism: A Modern Synthesis. Ch.2 & 6
 Roberts, S. et al (2015) Contemporary Caribbean Tourism: Concepts
and Cases. Ch. 7