Electronic Tools as Distribution Channels

Introduction

Internet has been recognized as an effective tools which not only provide opportunities for hospitalities organization to present their products and services, but also a platform of getting customer feedbacks and comments. The Internet Distribution System plays a significant role in hospitality distribution channel. The internet has enabled organizations to perform both distribution and marketing communication activities online (Bowie and Buttle, 2011). Hotel webpage allow their guests to reserve and pay online and build a good communication with customer, they can put information and pictures to make their customer know more about this hotel.

This research paper based upon the investigation into the importance of using electronic tools as distribution channels which made a significant contribution to China’s economy. Bowie and Buttle (2011) summaries that a good internet distribution channel help hoteliers to make a better understanding of the different roles that the distribution and marketing communication play in the market mix and it provide time and place utilities or benefits to customers. And how will the different distributional influences on the sales of 5-star hotel in China.

The definition of Distribution channels

Hayes and Miller (2011) indicated that distribution channel is a source of business customers or a vehicle used to communicate with a source of customers. Distribution channel management is the process by which RMs target customers by promotion room sales among their various selling alternatives and, as a result, optimize revenues. The concept of a distribution channel is relatively simple, but in practice can be extremely complicated, especially for large organizations. The role of distribution is to help customers find information about products and to make purchasing easy. (Bowie and Buttle, 2004)

Distribution channel is a hotel’s circulatory system which provide a steady flow of customers. A well-managed distribution system can make the difference between a market-share leader and a company struggling for survival. In the global market, electronic distribution techniques, and the perishable hospitality products have increased the importance of distribution. (Philip, 2014) Hospitality principals, especially larger companies, need intermediaries to distribute their product either solely or combined with other travel products in a package. Intermediaries sell the principals’ products customers and are normally paid by the principals. (Bowie and Buttle, 2011)

The Development of electronic and hospitality distribution

The origins of electronic distribution stemmed from the airlines’ internal inventory systems developed in the 1950s and 1960s. In 1976 SABRE established the first GDS, followed by Amadeus, Galileo and later World span. Until the early 1990s, hotel electronic channels of distribution were as described as a cosy status quo between the CRS and the GDS. Each system Cooperated, rather than competed, with each other, participants operated a closer user group and relationships were effectively linear, with each participant playing a mutually beneficial role. (O’Connor, 2004) Spurred by the internet, electronic hotel distribution is increasingly user intimate, screen oriented, and content rich. (Carroll and Siguaw. 2003) Consequently, by 2005 an estimated 1 in 5 hotel bookings will be made online, up from 1 in 12 in 2002.( Carroll and Siguaw. 2003 ) With the continuing geometric growth of individual access to the Internet the volume of reservation coming directly to hotel from individual will increase dramatically in the next few years.(Hsu and Powers, 2002).Major hotel companies with thousands of bedrooms to fill in hundreds of locations need to use a wide range of distribution channels to reach their targeted customers.( Bowie and Buttle, 2011)

The Trends of Distribution channels

Leading into a discussion of the current distribution landscape, it would be appropriate to start with the hottest areas of growth: search engines, social media and mobile. These three technologies are the most influential in terms of sheer visits or growth rate in consumer usage. (Green and Lomanno, 2012)

• Social media:

The phenomenon that is growing very quickly in recent times is the social media, and particularly the social networks that deal with travel. With the appearance of the internet, new types of intermediaries have emerged and many systems have established mutual connections. (Buhalis and Law, 2008) Facebook which is the leading social site has 750 million members with 70% outside the United States, and site usage is staggering with 50% of users logging on in any given day, each with 130 friends on average and spending approximately 30 minutes per day on the site. (Green and Lomanno, 2012)

• Search engines:

The players that have achieved the greatest impact in the online travel booking spaces are the search engines (Kracht and Wang, 2010) Google or Yahoo generate millions of travel-related bookings every day and there are millions of new potential search engines enter this market. For example. the world of travel-specific search has recently become a major battleground with Google’s acquisition of airfare engine ITA Software followed by the launch of Google’s Hotel Place Ads and Hotel Finder products in July 2011.(Green and Lomanno, 2012)

• Mobile and Mobile APPs:

A discussion of distribution is not complete without a significant reference to the importance of mobile. It is likely the single technology category that will most affect every aspect of distribution and yet, it is still largely in development. Many hotels have launched basic mobile-friendly websites, and have had enormous numbers of consumers download apps that assist with travel booking. For example, a discussion of distribution is not complete without a significant reference to the importance of mobile. It is likely the single technology category that will most affect every aspect of distribution and yet, it is still largely in development. Many hotels have launched basic mobile-friendly websites, and have had enormous numbers of consumers download apps that assist with travel booking. (Green and Lomanno, 2012)

Travel Reviews

This is currently one of the fastest growing phenomena. Webs such as TripAdvisor or igougo.com (Buhalis and Law, 2008) are already very mature sites and have almost become an obligatory stop for online travel buyers. According to a recent survey by Forrester Research, 30% of online travel buyers read the online advice of other travellers. (Antoni et al, 2013) The power of consumer review sites as a popular form of social media is gaining influence in travel. From the December 2011 spinoff of TripAdvisor (previously an Expedia company), and the emergence of new consumer review-oriented travel sites, it seems that they may create a new type of distribution channel that may be one part each social, inspiration and booking referral site. (Green and Lomanno, 2012)

Overview of Electronic Distribution Channels

The structure of the travel and tourism industry is continually evolving. There are different structures in different countries depending on the historical development of tourism. Although the vast majority of tourism intermediaries are small, independent organizations, a few major international companies have emerged with dominant market position. From hospitality perspective, intermediaries can be categorized under the following broad headings (Bowie and Buttle, 2011)

Traditional distribution channels in the hotel industry:

Travel agents: Travel agents are retail business that provide information, advice and booking for individual and group travel in both business and leisure market. The concept of a travel agency is well established in the travel market. They act as an intermediary between customers and principals such as airlines, hotels, car rental companies, attractions, entertainment, event and sporting venues.

(Bowie and Buttle, 2011)

GDS – Global Distribution System: The GDSs were the first electronic channel, predating

Brand.com and the OTAs by several decades. Typically, these systems were used by the broadly defined category of travel agents to book airlines and hotel rooms for their clients. While generally not accessible to the broader public at large, they were a relatively easy way to connect a potential customer with a hotel room. (Green and Lomanno, 2012)

CRS/Voice: A Call centre is a central location phone bank, also called a central reservation office (Laura, 2011). Bookings through this channel have accounted for a declining share of both total room reservations and the revenue associated with those bookings for several years now. That decline is evident at both the national level and for each of the chain scale categories. While there has been a decline, the volume is still significant and only slightly less than the brand.com channel contribution. (Green and Lomanno, 2012)

 

Property Direct/Other: Groups/meetings, contract business, rooming lists, and walk-ins are all the types of business that fall into this channel category. With this in mind, and knowing it has such a mix of business types, it makes this category the most difficult for the property or brand to manage without parsing it into its component parts by business segment. Due to the large amount of business transacted locally, it is still likely to be several years before any other channel overtakes property direct/other as the most widely utilized booking channel.

Emerging Distribution Channels

Online Travel Agencies (OTAs): OTA is an acronym for online travel agents, who have the same function as traditional physical travel agents, but the service is conveyed via the Internet. Unlike traditional travel agents, OTA specializes in offering vacation-planning sources and booking resources. (Yu, 2012) Of all the distribution channels the OTA opaque model is probably both the least financially understood model as well as the one that creates the most controversy. It is least financially understood because of the nature of the arrangement with the hotels that keeps the properties from knowing what the guest actually paid for the room. So while the properties know what room rate they receive from the vendor, the differential paid by the consumer on the upside remains unknown to the hotel.

Brand.com (A hotel’s website): On average about 16% of all hotel room bookings are being made through either the brand or property website referred to in this study as brand.com. This number grew slightly in 2010 and has been on an upward track since the widespread use of the Internet about a decade ago. (Green and Lomanno, 2012) More and more hotel brands build their own websites and provide booking service on their home pages, which enables customers to be driven from OTAs to their own websites. (Yu, 2012)

Mobile Apps: A recent study by BIA/Kelsey concluded that by the end of 2013 local businesses will be receiving three times the number of phone calls as they do currently because of the increase in mobile marketing and smart phone searches. The trend is emerging (Michael, 2012). Over the last five years, mobile has become closely correlated to local. People are looking for a restaurant nearby, a hotel nearby. The Wyndham hotel group has dedicated numbers on its 13 mobile websites, with a dedicated number assigned to every brand. Finally, the increase in call-centre volume has been noticeable (Keith, 2012). Mobile phones will be a great source of business, though this may present issues on the logistical end. If such issues arise, hotels will need more staff to take calls and, the call centre will need to be developed extensively (Harvet, 2012).

The implement of Distribution Channel

Since the GDS is a Distribution provides two key utilities or benefits to customer. Distribution makes hospitality products and services available when and where customer want them; there are known as time and place utilities, respectively. Online and traditional intermediaries, for example, travel agents and tour operators, help customers to find and choose hospitality and travel products. (Bowie and Buttle, 2011) For several years travel has been the most popular products sold online. The Internet is the perfect medium for selling travel products as it brings together a vast network of suppliers and a widely dispersed customer pool into a centralized market place. (O’Connor, 2004)  The structure of the travel and tourism industry is continually evolving. In Europe, change drives include the deregulation of air travel and the growth of Internet technology, which can deliver economies of scale and cost savings to the large tourism organization. From an accommodation provider’s perspective, effective Internet marketing is based upon an understanding of how search engines work, recognizing the importance of destination links, development accessible and easy-to-use websites, developing effective booking engines, and the transparency of pricing. Numerous survey confirm that internet users depend upon search engines and directories when looking for information on the internet Search engines such as Google and Alta Vista Provide an indexed guide to website. Directories or website, grouped into categories such as business, a website needs to ensure that the domain name, destination, text copy. Page titles, description tag and Meta tags are designed to ensure that search engines and directories find the web pages. Optimizing ensure that search engines and directories find the web page. Optimizing easy accessibility for Internet searchers is clearly important for the hospitality brand. (Bowie and Buttle, 2004)

The management of distribution channel

The hospitality industry varies from other industries significantly due to the perishable and intangible nature of the hospitality service/product. (Bastakis, Buhalis, & Butler, 2004) As Bowie and Buttle (2004) said because of the high              commission fee which can be 8 present and the norm is 10 present, with certain hotels playing up to 30 present commission on specific products available during the low season and the cost of GDS which can be assumed a $100 per night room rate, the total deductions can be as much as $26.55 (Middleton, 2000), which only leaves $73.45 for hotel (although this dose include an internal company charge of $9 for the hotel chain’s CRS), some hospitality companies wish to reduce  or eliminate. Hospitality companies see the Internet as a means of reducing distribution costs and enabling direct communication with consumers and customers. There can be significant hardware, software and human resources costs attached to developing and operating a direct-to-customer distribution strategy. From an accommodation provider’s perspective, effective Internet marketing is based upon an understanding of how search engines work, recognizing the importance of destination links, developing links, developing accessible and easy-to-use website, developing effective booking engines, and the transparency of pricing.( Bowie and Buttle,2004 ) However, hospitality organization will loss of control of a key element in the marketing mix, which can lead to an unhealthy dependence upon intermediaries and it can be closer to the end user, taking “ownership of the customer” away from the hospitality organization.

 

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