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Tour Operations and Tourism Distribution Channel Management Mike Morgan DG 28 965174 mmorgan@bournemouth. ac. Tour Operations and Tourism Distribution Channel Management Mike Morgan DG 28 965174 [email protected] ac. uk http: //balm. bournemouth. ac. uk

The aims of the unit • Give an overview of the role of intermediaries 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

The content • The role of intermediaries in the tourism system • the elements 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

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

Intermediaries • Those who come between… – Producers/manufacturers – And the end-user customer • 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

Definitions • EU Package Holiday Directive ‘a pre-arranged combination of two or more components 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

The role of the tour operator • Purchase in bulk components of a holiday 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?

An agent • Acts for a principal (the producer of the product) • provides 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

Understanding the tourism system Understanding the tourism system

Exercise • You are managing a hotel in a destination • Draw a map 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?

What theories can help us understand how this industry works? What theories can help us understand how this industry works?

The value chain • Devised by Porter (1980) to analyse what happens inside companies 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?

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

Marketing Channels • Sets of inter-dependent organisations involved in making a product available to 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

 • Offer the suppliers ‘contactual efficiency’ in reaching the end customer (Rosenbloom 1995) • Offer the suppliers ‘contactual efficiency’ in reaching the end customer (Rosenbloom 1995) • 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

Hotel Tour Operator Travel Agent Customer Hotel Tour Operator Travel Agent Customer

Network theory • Looks at relationships, networks and interactions (Gummesson 1988) • a complex 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 valuedelivery systems’ (Kotler 1998) rather than individual firms

Elements of a network analysis Hakansson and Johanson 1992 • • • Resources needed Elements of a network analysis Hakansson 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 longterm commitments

Attractions Local agent Hotel Resort Amenities Tour Operator Conference centres Other hotels Destination Network Attractions Local agent Hotel Resort Amenities Tour Operator Conference centres Other hotels Destination Network Tourist Board Travel Agent Customer

Attractions Local agent Hotel Resort Amenities Tour Operator Conference centres Other hotels Destination Network Attractions Local agent Hotel Resort Amenities Tour Operator Conference centres Other hotels Destination Network Tourist Board Travel Agent Customer

Transport Network Airline Alliance Car rental Airports Attractions Airline Local agent Hotel Resort Amenities Transport Network Airline Alliance Car rental Airports Attractions Airline Local agent Hotel Resort Amenities Tour Operator Travel Agent Financial services -insurance currency Conference centres Other hotels IT systems Destination Network Tourist Board Support Network Customer

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

Easyjet’s Affiliate Network (2008) • • • Airline: Easyjet Hotels: Hotelopia (part of the Easyjet’s 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: Born. For. Sports (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

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

Systems theory (see Laws) • Based on biological, ecological systems • each component is 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

Weather & Climate change Changes Fears of crime in regulation & terrorism Economies of Weather & Climate change Changes Fears of crime in regulation & terrorism Economies of originating countries Changing Lifestyles demographics Destination environment Media influences Destination Economy Investment & changes of ownership New technologies

How are these changing the system? How are these changing the system?

UK holidays abroad 1999 -2005 (UK International Passenger Survey) UK holidays abroad 1999 -2005 (UK International Passenger Survey)

Inter-organisational relationships What each model reveals • Inter-dependent channel members – efficiency • Value-adding Inter-organisational relationships What 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