Unlike the domestic market where everyone uses the same distribution structure, international distribution systems vary from market to market. It’s vital you know and understand what structures are in place in the markets you plan to target. Tourism Australia gives an excellent breakdown of the market structures in its publication, Planning for Inbound Success.
With the relentless and rapid change in technology, consumer knowledge and booking trends, the distribution supply chain is a moving feast.
The individual parts in the chain are clearly defined but increasingly, they are evolving to meet new demands. The diagram below shows the international distribution chain and highlights the customer’s ability to deal directly with suppliers, wholesalers or travel agents depending on their booking preference.
In international markets you can distribute your product through wholesalers, travel agents and inbound tour operators (ITOs), and directly via your website or telephone.
ITOs are based in Australia and their role is to package itineraries and sell them direct to in market (overseas-based) wholesalers and distributors. For this reason, ITOs are extremely helpful in getting your product to market.
In market travel agents and wholesalers rely on ITO recommendations because they are the on-the-ground specialists in tourism product and a single point of contact for information on new Australian product and experiences. ITOs know the individual products and their operators as well as where they fit in the market. They’ll help you work out which markets your product is best suited to, package it into suitable itineraries and sell it into multiple destinations at one time.
At any given point, you may be working with several ITOs depending on how many markets you’re targeting. Each ITO will specialise in certain markets and have a deep understanding of the respective consumer needs, market industry players and how the structures operate.
An inbound tour operator (ITO), also known as a ground operator or destination management company (DMC), is an Australian-based business that specialises in developing programs and itineraries for distribution through overseas travel distributors, organising land arrangements on behalf of overseas travel companies.
Dealing with an ITO provides many benefits for overseas travel companies including:
• local expertise and staff knowledge of Australia;
• itinerary consultation and advice on packaging products together;
• instant access to a wide range of products;
• quality control; and
• a local contact point for the clients of overseas agents visiting Australia.
Tour wholesalers are located in overseas markets and have traditionally provided a link between travel agents and ITOs or suppliers. Tour wholesalers purchase programs developed by Australian-based ITOs or develop their own packages and itineraries to make travel planning easier for travel agents and consumers.
Traditionally, travel packages are published in brochures and promoted and distributed via retail travel networks. Wholesalers may operate their own retail outlets or work with an established network of travel agents in their own country.
Wholesalers may also specialise in niche market segments such as adventure, gay and lesbian, or the 50-plus market, and have access to consumers who may not be available through mainstream distribution networks.
Many wholesalers rely on an ITO to identify and recommend new Australian products to include in their programs. It is essential that you establish good relationships with the ITOs who specialise in your target markets.
Retail travel agents are the shop front of the travel industry, dealing directly with consumers located within the market. Retail travel agents offer wide distribution in prominent city, suburban and town centre locations and provide a convenient place for potential travellers to make bookings and buy holidays.
Traditionally, retail travel agents have provided a link between wholesalers and consumers. With the integration of distribution roles, however, the retailers may deal directly with ITOs or Australian-based products, particularly in Asian markets. Many retail travel agents belong to a larger chain of travel agencies or consortium which uses its combined resources to market the agency brand. In some countries, retail agencies may be operated by travel wholesalers.
Online travel agents (OTAs) specialise in online distribution and have no intermediaries – they deal directly with consumers and tourism product. Consumers can purchase a product or an entire holiday package online. Online distribution is less structured than the traditional travel distribution system and commission levels may vary.
Before establishing a distribution contract deal with any online partners, it is important to research the site, how it operates and how it will promote your product, as well as how information is uploaded and updated. An excellent tool to determine the most visited consumer travel websites is Experian Hitwise. This company provides insights and reviews into the performance of travel websites.
Direct sales to the consumer involve no commission. |
Between 20 to 30% commission is paid if your product is listed with a domestic wholesaler's program and is being sold through retail travel agents. |
Packaging involves combining a number of component products to form a package, which can be on-sold through the distribution system to consumers. Before developing a package it is important to determine the target markets for the package and what may appeal to them.
A package normally involves compatible products such as accommodation, transport, entry to attractions, meals and touring.
Packages can make it more appealing for travel/retail agents and tour wholesalers to take up a product, particularly for a single attraction or an accommodation property with a small number of rooms. A central booking number for the package makes it attractive for the travel industry, as it only means one call to secure all elements of the package.
Packages can also assist in driving business during low seasons or off-peak times. Attractive pricing can drive consumers to book packages at these times. Packages can help develop new markets by offering products that appeal to a new market segment.
Packages make it easier for travel agents and wholesalers to sell product and earn commission. Packages contracted through the distribution system will need to be fully commissionable. The cost of covering commissions on top of operating costs may seem daunting to some operators, however, it is important to remember that commissions are only paid on those bookings actually made through wholesalers or travel agents.
The commission must be included in the rack or retail rate, and should not be added to this rate. For example, if a product sells for $110, the nett rate from retail agents would be less 10 per cent i.e. $99.
If it sells through wholesalers it would be less 20 per cent i.e. $88 and if working with ITOs it would be between 25 and 30 per cent i.e. $82.50 to $77.
The maximum commission to pay is 30 per cent, as wholesalers or ITOs would pass on the travel agents’ or wholesalers’ share (i.e. it is not 10 per cent + 20 per cent + 30 per cent).
Eighty-three per cent of visitors to Brisbane are domestic visitors. Given this massive chunk, there’s a fair chance it’s your biggest market too.
There’s a huge network of wholesalers, retail travel agents and online travel agents whose job it is to distribute your product. They partner with you and other operators to package, promote and sell tourism products and experiences.
The main distribution channels include:
• regional tourism brochures or travel planners (produced by regional tourism organisations);
• Visitor Information Centres (VICs);
• Australian Tourism Data Warehouse (ATDW);
• State tourism organisations’ consumer websites such as TQ’s queenslandholidays.com.au;
• Regional tourism organisations’ websites and online booking systems;
• direct to the consumer;
• wholesalers;
• retail and online travel agents; and
• cooperative marketing.
Wholesalers can be a great asset to your business. They package travel, accommodation and tours and sell them to retail travel agents on your behalf.
Key wholesalers include:
• AOT Holidays;
• Flight Centres’ Infinity Holidays;
• Qantas Holidays; and
• Virgin Australia’s Blue Holidays.
Key retail travel agents include:
• Flight Centre Ltd (including Escape Travel, Student Flights and Travel Associates);
• Harvey World Travel;
• Jetset Travel;
• STA;
• Travelscene AMEX; and
• Travelworld.
Just about everyone uses the Internet to research, plan or even book their holidays. For this reason, it’s an area worth your time and investment. Channels for online distribution include:
• your website;
• online travel agents e.g. distressed inventory sites, retail travel agents, wholesaler and e-travel company websites such as wotif.com, quickbeds.com.au, lastminute.com.au and needitnow.com.au;
• state and regional tourism websites e.g. queenslandholidays.com.au and tropicalaustralia.com.au; and
• search engines such as Google, Yahoo, etc.