Navigating Channels: Distribution and Place
Summary
In this chapter, we explored the foundational concepts of supply chains and distribution channels, their roles in tourism and hospitality, and the strategies used to select and manage them effectively. We examined the importance of intermediaries, considered the pros and cons of their involvement, and looked at real-world examples illustrating various channel configurations in tourism, hospitality and leisure contexts.
By understanding these concepts and strategic considerations, organizations can better design a distribution mix that optimizes customer access, profitability, and overall market presence.
Key Takeaways
- Differentiating Supply Chains and Distribution Channels: Supply chains encompass all activities involved in creating, delivering, and supporting a product or service, while distribution channels specifically focus on how offerings reach the end consumer.
- Roles of Intermediaries: Intermediaries — such as retailers, wholesalers, agents, and online platforms — serve as vital connectors in distribution channels. They provide market access, expertise, and value-added services, though they can also reduce profit margins and limit direct control.
- Channel Types and Strategies: Businesses can choose from direct, indirect, or hybrid channels to distribute their products. The selection of a distribution strategy — intensive, selective, or exclusive — depends on product characteristics, target market preferences, and overall brand positioning.
- Tourism Supply Chains and Challenges: In tourism and hospitality, supply chains are complex and fragmented, involving multiple service providers, suppliers, and support services. Challenges such as perishability, seasonality, and interdependence require careful coordination, quality management, and risk mitigation.
- Adapting to Market Conditions and Trends: Successful distribution strategies involve staying attuned to evolving customer behaviours, technological innovations, and emerging platforms. Balancing direct and indirect channels, integrating digital tools, and partnering with diverse intermediaries can enhance market reach and competitiveness.
- Strategic Decision-Making and Performance Management: Effective channel management involves continuously evaluating partner performance, managing potential conflicts, and using insights and data to refine distribution strategies. A well-chosen and well-managed distribution mix ultimately supports revenue growth, customer satisfaction, and long-term business sustainability.
Exercises
Check Your Understanding
Exercise 1: Distribution Channel Analysis
Task: Identify and describe three different distribution channels a boutique hotel in a popular tourist destination might use to reach potential guests.
Recommended Answer:
- Direct Channel: The hotel’s own website and reservation system, allowing guests to book directly.
- Online Travel Agencies (OTAs): Listing rooms on platforms like Booking.com or Expedia to reach a wider audience.
- Local Tourism Board: Partnering with the destination’s tourism organization to be featured in their promotional materials and booking services.
Exercise 2: Supply Chain Components
Task: Name three key components of a tourism supply chain for a guided hiking tour company.
Recommended Answer:
- Equipment Suppliers: Providing hiking gear, safety equipment, and outdoor clothing.
- Transportation Providers: Offering vehicles to transport guests to and from hiking locations.
- Local Guides: Knowledgeable individuals who lead the tours and provide expertise on the area.
Exercise 3: Distribution Strategy Decision
Scenario: A new eco-resort is deciding between intensive and selective distribution.
Task: Briefly explain which strategy might be more appropriate and why.
Recommended Answer:
Selective distribution would likely be more appropriate for an eco-resort. This strategy allows the resort to choose specific channels that align with its eco-friendly brand image and target market of environmentally conscious travelers. It also helps maintain exclusivity and control over how the property is presented to potential guests.
Exercise 4: Intermediary Roles
Task: Describe the role of a global distribution system (GDS) in the tourism industry.
Recommended Answer:
A global distribution system (GDS) acts as a centralized platform that connects travel service providers (like airlines and hotels) with travel agencies and online booking sites. It allows for real-time inventory management, pricing updates, and reservation capabilities across multiple travel services, streamlining the booking process for both travel agents and consumers.
Exercise 5: Channel Conflict
Identify a potential channel conflict that might arise for a tour operator using both direct and indirect distribution channels and suggest a way to mitigate it.
Recommended Answer:
- Potential Conflict: Price discrepancies between direct bookings and those made through travel agents or online platforms.
- Mitigation Strategy: Implement a price parity agreement across all channels to ensure consistent pricing. Alternatively, offer unique packages or value-added services for direct bookings to differentiate them from indirect channels without undercutting partners.
Exercise 6: Multiple Choice Questions
Glossary of Key Terms
Agents and Brokers: Agents and brokers facilitate transactions without taking ownership of products or services.
Channel Length: The number of intermediary levels in a distribution channel between the producer and the end consumer.
Direct Channel: A distribution channel where a producer sells directly to the end consumer without any intermediaries.
Distribution Channel: The path through which products or services move from the producer to the end consumer.
Distribution Intensity: The extent to which a product is made available in the market, ranging from intensive (widely available) to selective or exclusive (limited availability).
Distribution Strategy: The overall plan for how a company will make its products or services available to customers.
Hybrid Channel: A distribution approach that combines both direct and indirect channels to reach consumers.
Indirect Channel: A distribution channel that includes one or more intermediaries between the producer and the end consumer.
Intermediary: An individual or organization that acts as a link between producers and consumers in the distribution channel, facilitating the movement of goods or services.
Online Travel Agency (OTA): A digital platform that allows consumers to book travel services such as accommodations, flights, and activities.
Retailer: A business that sells products or services directly to end consumers.
Supply Chain: The network of all individuals, organizations, resources, activities, and technology involved in creating and selling a product, from the supplier to the end customer.
Tourism Supply Chain: The network of tourism organizations engaged in different activities ranging from the supply of tourism components to the delivery of tourism products and services in a tourism destination.
Wholesaler: A business that buys products in bulk from manufacturers and sells them to retailers or other businesses.
