U-8 intermediaries - Apunts Tema 8 PDF

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apuntes tema 8 introducción en inglés...

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U-8 INTERMEDIARIES Distribution vs Intermediation Distribution links production and consumption, the aim of which is to make the product available to the final consumer in the quantity demanded, when he needs it, and where he wants to buy it The choice of the distribution channel is one of the most important decisions within the marketing-mix strategy, the 4Ps strategy There are direct and indirect channels for linking tourism supply and demand Channel Directo→ service provider negotiates directly with consumers Indirect channel → An external marketing agent is involved → Intermediary Intermediation will always be part of the distribution, in the centre of the indirect distribution channels, but not the other way around → there can be direct distribution, without intermediaries. INTERMEDIARIES “transform goods and services from a form that consumers do not want into a product that they do want” • Tourism => accommodation, transport, excursions and entertainment directly from producers. Don’t need intermediary. • ICT => experienced travellers to assemble their own itineraries and drive, through their UGC, the general direction of the sector. • Role o Improve distribution channels and so make markets by bringing buyers and sellers together. o Influence consumer behaviour by branding the product and thereby supplying a credence good. o Determining the ability of the industry to respond to consumers’ requests efficiently in terms of the product as a search good. o Distribution channels quite clearly help determine the competitiveness of suppliers and destinations. o Provides an outlet for the actual sales of tours, tickets and travel services, such as insurance or foreign exchange • TTOO package the main components of the trip into a single product and at one price. Principal economic entity • The retail travel agents sale the package. i.e: Europe = inclusive tours packaged by TTOO and sold by travel agents (despite the ICT)6 traditional travel agent exist with many markets (ELDERLY) • It would lead to the demise of the package holiday and disintermediation:  The increasing sophistication of the travelling public.  The ease of making reservations, Principals = tour operator, hotel or transport company. Travelling independentlye => traditional purchasing patterns will continue Operators can negotiate cheaper arrangements through their bulk purchasing power. Respond to the public’s demands with more options to their package Quality assurance and security to the customer. It is not to look at disintermediation in the wake of the ICT revolution6reintermediation as the industry adjusts its strategic positioning and continues to reinvent itself. Benefits • Producers o Transfer risk to the tour operator. o Can reduce promotion costs by focusing on the travel trade • Consumers o Can avoid search and transaction costs in both time and money (inclusive tour). 1

o Gain from the specialist knowledge and the fact that the uncertainties of travel are minimised. (cruising and coach tours) o Often gain most from lower prices, (resorts in the Mediterranean, Mexico, Florida and Hawaii)6discounts of up to 60% off the normal tariff. • Destinations o International marketing network of tour operators. Disadvantages • Producers o Reduce margins. o Reduce the degree of marketing control and influence over the process of distribution. o The attention is directed at the channel intermediaries rather than the end consumer. • Consumer o Concentration and consolidation may actually reduce choice and increase prices. • Destinations o Susceptible to the ‘whims’ and ‘vagaries’ of the marketplace, and the ability of intermediaries to influence consumer choice by ‘switch’ selling to more profitable locations.

DMC: especializados en congresos

TRADITIONAL TOURISM INTERMEDIARIES Classification of intermediaries Traditional (offline) Retail Travel Agencies (RTA) Wholesale Travel Agencies (TTOO Tour Operators) Central Reservation Systems (CRS) Others: - Destination Management Companies (DMC) - Professional Congress Organisers (PCO) Tools Central Reservation Systems (CRS) to Global Distribution Systems (GDS) Wholesalers (TTOO) Characterised by designing their own products: the holiday packages or even tours formed by a combination of transport, accommodation and complementary services and offered to the consumer at a global price 2

They project, elaborate and organize all kinds of services and tourist packages for their proposal to the retail agencies, not being able to offer their products directly to the user or consumer Retailers Those who either market the product of the wholesale agencies by selling it directly to the user; or who design, prepare, organise and/or sell package tours and all kinds of tourist services directly to the user and cannot offer or market their products through other agencies Wholesalers-Retailers Those who can simultaneously carry out the activities of the two previous groups

TRADITIONAL TOURISM INTERMEDIARIES: Wholesalers (TTOO)

They are the agencies that elaborate and organize all kinds of services and tourist packages to offer them to the retail agencies, not being able to offer their products directly to the final consumer

TRADITIONAL TOURISM INTERMEDIARIES: Wholesalers (TTOO) TTOO has exclusive contracts with travel agencies, transport companies, hotel chains, etc. →oferta competitive price They design the tourist packages and sell them in exchange for a small commission TurMstico→ a set of servivces provided on the basis of a pre- arranged itinerary, which is purchased as a "block" at a single, all- inclusive price It can include:  Accommodation  Transport  Gastronomy  Recreation  Guided tours  Local transport… Principal stages of tour operating/wholesaling The practicalities of the tour-operating cycle require careful: • Planning • Preparation • Coordination. The task of coordinating => marketing department. AFFINITY GROUPS => TTOO do not put together their own programs and contract the work out to a TTOO and pass on the bookings as they come in Stages: 1. Research 2. Capacity planning 3. Financial evaluation 4. Marketing 5. Administration 3

6. Tour Management

1. Research Forecasts of overall market size and the changing patterns of holiday-taking. From destination choice, the research process will enable the operator to derive a market strategy: 1. Market penetration, suggests that the destination continues to appeal to existing markets with the same product. 2. Product development, suggests that the destination develops a new product to appeal to its existing market. 3. Market development suggests that the existing destination product is targeted to new segments within the wider market. 4. Destinations could diversify developing totally new products for new markets. 2. Capacity planning Negotiations for beds and aircraft or coach seats may take place. Bed contracts may take two forms:  Allocation: sale-or-return basis with an appropriate release date. The risk is thus transferred from the TTOO to the hotelier  Guarantee: the TTOO agrees to pay for the beds whether they are sold or not. Such a commitment naturally brings with it a cheaper rate. Aircraft seats: The largest TTOO are likely to have their own charter airline (Thomsonfly by TUI) TTOO may contract an aircraft: • for the whole season (a ‘time charter’) • for specified flights (a ‘whole plane charter’), • or purchase a block of seats on a scheduled service or a chartered airline (a ‘part charter’)  JOINT VENTURE The use of scheduled services => specialist tours (which are often escorted) or tailor-made packages for customers. The underlying principle is that aircraft should be operated back to back, namely that the plane should fly out with a new tour group and return with the previous group. Empty flights ( ‘empty legs’) will arise at the beginning and end of the season, and these must be allowed for in the costing of seats. 3. Financial evaluation Risks:  Contracts in the currency of the destination country;  US dollars;  Airlines maintain the right to raise prices in response to increases in aviation fuel costs; and  Alterations in dues, taxes or fees levied by governments. 4. Marketing Brochure production starts several months prior to the publication date (FRONT COVER) Limit number of agents or own retail travel chain to distribute their products. TTOO reserve the right to cancel or ‘consolidate’ holidays if the demand take-up is insufficient. Last-minute sales needs a network of retailers linked into the operator’s own computer reservation system, as well as own website postings and distribution to e-intermediaries => encouraged later booking. 4

5. Administration Extra staff required to run the reservation system and represent the operator/wholesaler overseas

6.Tour management The function of the operator’s resort representative is to host the tour: Meeting the tourists  Ensuring the transfer procedures  The representative will check facilities before the start of the season  After the holiday the operator/wholesaler will receive compliments, suggestions and complaints TRADITIONAL TOURISM INTERMEDIARIES: Wholesalers (TTOO) The Tour Operator's CEO, Peter Fankhauser, made the early morning announcement on 23 September 2019 in a letter. The manager admitted that the company's top management had assumed that "there was no other option than to go into compulsory liquidation with immediate effect". Operation Matterhorn, the plan for the return of Thomas Cook's more than 150,000 British passengers who went ashore on holiday, considered the largest peacetime repatriation in history Finally, on 1 November, the Chinese group Fosun International announced that it was acquiring the brand of the bankrupt British tour operator for 11 million pounds (12.75 million euros). Hosteltur Magazine November 2019 The bankruptcy has revealed the excessive dependence of the TTOO on some destinations and/or businesses (serious problem) And it has raised important questions about the future of the tourism package Since 2002, trips without a package have outperformed trips with a package Arab Spring 2011 caused an upturn in travel with contracted packages Package loses weight but doesn't disappear... in any case more presence of the dynamic packages Currently, OTAs are gaining ground in touroperation... ...but its disappearance is not foreseeable, although its weight will be reduced TRAVEL AGENCIES Definition Travel Agency "companies constituted as a commercial company, whether public or private, which, in possession of the corresponding title-licence, are professionally and commercially dedicated exclusively to the exercise of mediation activities and/or the organisation of tourist services, and may use their own resources in the provision of such services". Travel agencies are classified, by law, into three groups: • Wholesalers • Retailers • Wholesalers-Retailers TRADITIONAL TOURISM INTERMEDIARIES: Retailers o Origin => Thomas Cook (1841) o Concept: intermediary companies whose main objective is to facilitate to tourists their travel to destinations, putting them in contact with transport companies, accommodation companies and all other services destined to the tourist consumption. o Integration of products => tourist package => standardization => economies of scale 5

CLASSIFICATION ¡¡¡SUELE ENTRAR!!! In view of its intermediary role:  Passive intermediation → TTAA (intermediary) offers services that come from other companies (plane tickets, rooms or tourist packages)  Active intermediation → TTAA adds some services or goods created by themselves (holiday package) According to the activity developed in origin or destination: Inbound Agencies: situated in the tourist destination. They welcome and take care of tourists sent by other agencies. Outbound Agencies: Close to consumers. Advise, produce and sell their products or the products of other agencies. Outbound- Inbound Agencies According to its structure and management, we can talk about • Own agencies: those belonging to a legal entity and managed independently • Franchises: travel agencies open under the franchise formula • Large networks: travel agencies belonging to one of the large tourist groups such as Thomas Cook, TUI Travel, Globalia According to the strategy followed:  Generalists: they market all types of trips  Specialized: they only market some products or markets  Social: with links to public or social bodies (certain markets) Services offered by retail TTAA (travel agencies) Professional information and consultancy services → It has extensive sources of information on destinations and companies in order to adjust the product to the specific needs of the client: guides, brochures, maps, its own database. Intermediation services → booking, issue and sale of tourist services (air tickets, boat tickets, hotel accommodation, tickets for shows, theme parks...) Subsidiary services:  Currency exchange  Changing and selling traveler's checks  Modification or cancellation of reservations  Processing of necessary travel documents such as passport or visa  Representation services of suppliers, destinations or other travel agencies → the agency buys the product and then sells it, therefore it is assuming the risk of the operation THE ROLE OF RETAIL AGENT (TTAA) • The primary task is to supply the public with travel services. • Travel-related services such as insurance or foreign exchange. • The agent is rewarded by commission from the principals. o 10% of the selling price, o 1% or 2% less for hotel bookings and rail travel o 0% airlines agents now charge the customer a booking fee. o 30% Insurance o More than 10% in car hire o 2% Sales of travellers’ cheques and currency o Overrides => 2,5% extra commissions with preferred suppliers. 6

• e-intermediaries REGULATIONS Very strict norms and conditions to protect consumers (Spain): - Transferred to Autonomous Communities (CC.AA) - Coordination: Sector’s Conference of Tourism -> Agreed Norms (consensus) - Order of April 14 1988 of the Ministry of Transport, Tourism and Communications (BOE April 22) Travel Agencies -> RD 271/1988, mars 25 -> Law 21/1995, July 6; Regulatory of Inclusive tours (UE: Package travel Directive) - It’s the guarantee that tourists have when they contract their travel services - High Confidence (guarantee found): Title-license with a code of identification (CI) that is given by the regional authorities (CC.AA.) - Obligation of intermediation - It limits the flexibility of the travel Agency in today’s world (present times) Very strict Norms and conditions by law to avoid failures: “They have the consideration of travel agencies (intermediaries) the companies created as merchant society, anonym or limited, that, in possession of the corresponding title- license, they dedicate professionally or commercially in exclusivity to the exercise of activities of intermediation and or the organization of tourist services, having the possibility of using their own means to accomplish them” • Merchant Societies (in some cases professionals). • Title-license • Exclusivity • Main function of intermediation • By Own means. E.U. (Commission) => “Package Travel Directive” => empowers consumer and sets standards of quality to avoid the effects of failures and protect consumers SPAIN→ RDL 23/2018 on the transposition of directives on trademarks, rail transport and package travel and related travel services, which amends RDL 1/2007 approving the revised text of the General Law for the Defence of Consumers and Users The new Law on Combined Travel increases protection for citizens who contract package and package tours, and especially affects travel agencies in terms of guarantees and liability Main objectives:

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TRADITIONAL TOURISM INTERMEDIARIES: CENTRAL RESERVATION SYSTEMS  These are companies or entities that are mainly dedicated to making reservations for tourist services on an individual basis  Companies that work as large databases with up-to-date information on the suppliers they represent or are partners with  Traditionally linked to the hotel sector  They get low prices for their customers by buying in volume and months in advance, which is advantageous for hoteliers  In this sense, they function like tour operators, but they do not have the capacity to organize excursions or tour packages, but only to sell the individual services of their suppliers, usually hotels Hotel CRS are still present in the main hotel chains worldwide: Among the main CRS, there are Hotusa: a reservation centre for voluntary chains with more than 2,500 hotels in 48 countries on four continents and one of the leading hotel consortia in the world and the first in Europe Keytel: 4 and 5 star segments in urban destinations In addition to making the reservation, it allows the printing and sending by e-mail of reservation documents and vouchers, electronic invoicing and the consultation, modification or cancellation of the same Others: HotelBeds TRADITIONAL TOURISM INTERMEDIARIES: OTHERS DMC Destination Management Companies Professional service companies that, locally, help their clients to achieve the objectives set for their corporate events Specialized in the implementation and process of events related to the MICE sector (Meetings, Incentives, Congresses, Exhibitions) Operated in a given destination, specialised in the design, execution and logistic coordination of programmes for groups and events of all types, including accommodation, activities, tours, transport, etc. all thanks to their extensive knowledge of the destination, wide experience and resources PCO Professional Congress Organisers They are in charge of developing the logistics from start to finish for the congresses Having the advice of an PCO company when organising any type of event, allows you to download all the technical tasks into an experienced professional team, equipped with the essential technological means PCOs are contracted by the organisation or body generating the event and are responsible for operating the event and contracting the various service providers, such as DMCs, hotels, transport, entertainment and many others TOURIST INTERMEDIARY TOOLS CRS. Computerized Reservation System. Computerized Reservation Systems Before the appearance of the CRS the system of reservation of airplane seats was ineffective and costoso→ manual search of TAS and telephone or telex contact Computerized reservation systems appear in the 70's as a first step in the strategic use of technology in tourism The beginnings of these reservation systems are in the United States and specifically in the commercial aviation sector Computer tool for the TAs, initially linked to air transport 8

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Initially → centralised inventory of seats available on each flight At all points of sale (airlines' own offices) and through peripheral terminals, users could directly access all information regarding available seats in different airlines, such as routes or fares From that moment on, other companies began to launch their own reservation systems, extending them to travel agencies Despite the advantages provided by these data processors, the first disadvantages begin to appear: the terminals placed in the agencies have to access each of the different CRSs in order to make the reservation with different Airlines Problem of integration of the different systems; while travel agents demanded the integration of databases, the different airlines had made a large investment separately in their different reservation systems

In the 1980s, CRSs developed reservation systems with multiple access to international airlines → global distribution systems (GDS) The great leap from these centralised reservation systems to global distribution systems is made when, in addition to the air offer, other tourist products are incorporated, among which we can highlight the reservation of hotels, tourist packages, cruises and rent-a-car, etc GDS Global distribution systems  GDS comes from the CRSs that gradually transformed themselves by expanding their geographical coverage, while integrating horizontally with other airlines and vertically, incorporating a wide ra...