YATEC Diary – 3rd session

The topic for discussion for the third session of the YATEC National Development Program was the ever-changing product distribution channel, with participants introduced to the ways in which technology and consumer demand is changing the traditional model.   

I entered the session questioning how elements of the traditional model will prevail when there are so many other options a consumer can take now to buy a travel product.

  • Will direct bookings remove the need for retailers, especially when customers can book direct with wholesalers?
  • Will Generations Y and Z have a need for retailers, wholesalers or Inbound Tour Operators (ITOs) seeing as though they’ve been brought up in the age of the internet where they know how to research and then book direct?
  • How can the traditional links in the distribution chain compete with the online retailers of the world like Expedia and Wotif.com?

Participants learnt from David Thomas of ITO, Swain Travel and Genevieve Matthews of supplier, Kingfisher Bay Resort about the traditional distribution model and ways in which it is changing.

They explained the traditional model as follows: An ITO purchases a product (hotel room, tour, rental car etc) from the supplier which they sell to the offshore wholesaler, who then sells it onto the travel agent who sells it to the consumer.

While the process seems quite straight forward, the interesting part begins when certain elements of the channel can bypass one another to reach the consumer directly or to avoid paying commissions.

In the current model, a product supplier can:

  • Bypass the ITO and go direct to the wholesaler
  • Bypass the ITO and wholesaler and go direct to the retailer
  • Bypass all three and go direct to the consumer

An ITO can:

  • Bypass the wholesaler and go direct to the retailer

A wholesaler can:

  • Bypass the retailer and go direct to the consumer

With general commission rates for ITOs at 25 per cent, wholesalers at 20 per cent and retailers at 10 per cent, a supplier can technically avoid paying up to 55 per cent commissions but loses out on a potential worldwide promotion of their product through the wholesaler and retailer distribution networks. The question is, which is more important?

And then there’s the internet.

The internet brings with it many options for consumers and suppliers alike but widens and complicates the distribution model.

Online retailers and wholesalers pop up, which compete with traditional bricks and mortar businesses.

Distressed inventory sites such as Wotif.com, lastminute.com.au also add another dimension to the distribution network, as they can offer product for lower rates but also lower commission paid by suppliers. Expedia and Travelocity don’t just offer a single product to consumers but enable whole packages to be booked, omitting the consumer’s need for a bricks and mortar retailer.

While participants of the course were taught about the benefits of each of the links in the “travel food chain”, the question still remains, as travellers become more web-savvy and the younger generations become used to shopping, banking and ‘living’ online, how can retailers, wholesalers and ITOs adapt to remain an integral part of a techno-savvy traveller’s holiday?

Thumbrella reporter Alice Terlikowski is participating in the Young Australian Tourism Export Council’s National Development Program and will be blogging on a weekly basis following each session to give Thumbrella readers an insight into the eight-week program.

By Alice Terlikowski  ·  October 27th, 2009 at 3:22 pm

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Comments


  1. Mary
    4 Nov 09
    3:47 pm

    2. I find this very interesting, especially your question on
    ” Will Generations Y and Z have a need for retailers, wholesalers or Inbound Tour Operators (ITOs) seeing as though they’ve been brought up in the age of the internet where they know how to research and then book direct? ”
    It’s be great to see a breakdown of age groups booking patterns (which I may look up now on TRA) and see if there is any difference in age group.
    Thoughts anyone?

  2. Elle
    10 Nov 09
    1:48 pm

    3. Good point Mary!
    Aswell, while many of the traditionally distributed travel products are well represented in ATEC and support the YATEC development propgram, where are the online distributors? They gain a lot from the industry and don’t appear to be returning much in return or investing in the future leaders.

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