The Travel Distribution Value Chain Dimitrios Buhalis, Bournemouth University Business School, UK. dbuhalis@bournemouth.ac.uk And Mark Anthony Camilleri1, University of Malta, Malta. mark.a.camilleri@um.edu.mt The term ‘Distribution (Direct)’ was accepted for publication in the Encyclopedia of Tourism Management and Marketing. This is a prepublication version. Suggested Citation: Buhalis, D. & Camilleri, M.A. (2022). Distribution (Direct), In Buhalis, D. (Ed.), Encyclopedia of Tourism Management and Marketing. Edward Elgar Publishing Ltd., Cheltenham, UK. Keywords: distribution, intermediaries, travel distribution, travel distribution value chain, travel agencies, internet. Distribution is the most critical marketing function for tourism as it determines competitiveness and profitability (Buhalis & Laws, 2001). This term is defined as the mechanism that optimises the physical transportation of commodities and brings supply to demand. It effectively determines the visibility and accessibility of products and services to the marketplace. Effective channel management investigates consumer requirements, establishes supply chains and facilitates access to products and services. In tourism, logistics are reversed as consumers go to destinations to consumer products and experiences. Communication and distribution channels need to be established between potential tourists and principals, in order for a trip to be realised. Tourism distribution channels determine the visibility of tourism organisations and whether they are included in the customer's decision set. Tourism principals, including transportation and accommodation service providers, can either distribute their products directly to consumers or may rely on different intermediaries, 1 Department of Corporate Communication, Faculty of Media and Knowledge Sciences, University of Malta, Malta. Email: mark.a.camilleri@um.edu.mt The Travel Distribution Value Chain 1 including online and offline tour operators and/or travel agents, to reach consumers. Tour operators and travel agents support travel, hospitality and tourism businesses in their marketing and promotions, as they enable them to reach more customers in different markets (Camilleri, 2018). Figure 1 illustrates how travel distribution’s value chain has evolved to become more flexible, dynamic, and customer centric as well as to progress direct distribution. A range of distribution technologies, such as Computer Reservation Systems (CRS), Global Distribution Systems (GDS), own and partner websites as well as travel search engines provide the infostructure for distribution (Buhalis, 2003, Buhalis & Licata, 2002, Paraskevas., et al 2011). Intermediaries facilitate the promotion and purchasing processes, enabling different principals to package products and services for the consumer. Prior to the emergence of the Internet and the digital media, travellers used to book and purchase their travel requirements directly through the service providers’ sales offices or via travel agents. Many airlines had their own ticketing offices in airports and city centres. Alternatively, they appointed general sales agents (GSAs) to distribute their tourism products, where the volume of passengers was insufficient to open sales offices. Travel agents book and sell airline and other transport tickets, hotel accommodation, package tours or even supplementary travel items. They also provide additional services to consumers, as they assist them in their travel formalities, including visas and foreign currency, and insurance policies. The travel agents usually have access to information networks that allow them to track the records of consumers who travel on different airlines. Global Distribution Services (GDSs) amalgamate tourism products and enable transactions between airlines, hotels, car rental companies, rail services and bus reservations. GDSs display real time availability and prices, consolidating tourism products and services across different sectors. GDSs are an expensive distribution channel facilitator for principals and naturally the Internet disrupted and restructured travel distribution (Buhalis & Laws, 2001). On average, the costs of the tickets sold through GDSs hovered around US$12 per return ticket. This amount was 20times more expensive to selling tickets through direct channels, for some airlines (Camilleri, 2018). The Travel Distribution Value Chain 2 Figure 1. The travel distribution value chain Suppliers (including airlines, cruiseliners, hotels, car rental companies) Global Distribution Systems, Internet and ITA software Tour operators Tour operators Online travel agency Travel agency Travel agency Consumers The Travel Distribution Value Chain 3 Travel Search engine Most airlines need to reduce their distribution costs by selling their tickets directly to consumers, rather than through 3rd parties. This was forced further with the development of low-cost carriers, such as SouthWest Airlines, Easyjet and Ryanair that only sold tickets directly through their websites and/or via call centres. They encouraged their customers to purchase their travel requirements through online channels, rather than through sales offices. In the 1990s, many airlines reduced the commissions paid to travel agents as well as added fees to force consumers to purchase tickets direct. In 2015, Lufthansa imposed an additional €16 charge when bookings were made through external GDSs, rather than directly in its own system. Pressurised by direct selling low cost carriers, all full-service airlines had to restructure their distribution mix and reduce their reliance on GDSs to reduce costs (Camilleri, 2018). The International Air Transport Association (IATA) has enabled its accredited travel agents to carry out inter-airline bookings and the ticketing of onward flight connections. Therefore, air travellers could book their entire itinerary involving different flights on IATA carriers. IATA developed a billing and settlement plan (BSP) system that was designed to facilitate and simplify the selling, reporting and remitting procedures of accredited passenger sales agents. IATA implemented a ‘new distribution capability’ (NDC) which involved an XML-based data transmission standard that provided a set of guidelines for communications among airlines and 3rd party distributors, including accredited travel agents. In the effort to sell directly, travel and tourism businesses developed their websites to increase consumer leads and sales conversions (Buhalis & Licata, 2002). They focused on the product benefits and attributes, by highlighting their value propositions (Camilleri, 2018). Travel sites can feature a good selection of images and videos. This allows online users to become acquainted with service providers and their products. Online visitors can access highresolution images, floorplans, and video clips in corporate websites (Camilleri, 2019). While it may be tempting to utilize web pages with many actionable steps, web sites should be as clear and focused as possible. Usability is critical in direct distribution and determines whether customer book online. A clear call to action should include high-contrast buttons, call outs and actionable elements to facilitate their consumers’ online purchase and transaction confirmation. A complicated funnel could deter the conversion of prospects. Customers should be empowered to finalize their purchase as quickly and efficiently as possible. Excellent examples of tourism companies’ websites include SNCF French railways, Marriott hotels and Easyjet airline. Tourism Distribution Channels 4 The speed with which a page loads can be a critical determining factor as to whether visitors may (or may not) view content and whether they transact. Hence, when designing web sites, it is important to consider load speeds at the viewer’s end, particularly if there are large images, rich interactivity or other media. Consumers increasingly browse travel companies through smart devices and mobile applications (apps) that can be installed in smartphones and tablet devices. Travel businesses create user-friendly mobile apps to provide personalized experiences. Faster Internet connections, EDGE technology and 5G will address speed issues (Buhalis, 2020). Online websites should use SSL certificates that prove that the transactions are safe and secure. Travel businesses need to articulate their terms and conditions, including any relevant cancellation, curtailment, and refund policies. They should feature clear contact details to their customer services department and provide sufficient care to gain customer confidence. They should also offer live chat facilities and integrate WhatsApp or WeChat functionality to help customers in their queries across all platforms. Increasingly businesses need to interact in real time and to be contextually aware (Buhalis & Sinarta, 2019). Testimonials and consumer online reviews and ratings are serving as proof of quality and demonstrate that service providers are meeting and exceeding customer expectations. Positive experiences from past customers help first-time consumer reassurance and improve conversions and sales. Conversely, negative reviews tarnish the businesses’ image and reputation. The impact of online reputation is increasingly affecting hotel profitability (Anagnostopoulou et al, 2020). In the future, travel and tourism service providers should leverage themselves with datadriven marketing, as they seek new customers and prospects (Camilleri, 2020). They should use dynamic pricing models and revenue management systems to increase their profitability from high-yield, loyal customers. Service providers shall be relying more on direct channels and interact and engage dynamically with their valued customers on all technological platforms to cocreate memorable experiences at all stages of travel. They should aim to reduce their dependency on intermediaries, third party retailers, and online travel agencies and flatten their distribution chain by building competitiveness through direct engagement with their clientele. References Anagnostopoulou, S., Buhalis, D., Kountouri, I., Manousakis, E. and Tsekrekos, A., (2020). The impact of online reputation on hotel profitability”, International Journal of Contemporary Hospitality Management, Vol. 32(1), pp. 20-39. Tourism Distribution Channels 5 Buhalis, D (2020). Technology in tourism-from information communication technologies to eTourism and smart tourism towards ambient intelligence tourism: a perspective article. Tourism Review, 75(1), pp. 267-272. Buhalis, D., and Sinarta, Y., 2019, Real-time co-creation and nowness service: lessons from tourism and hospitality, Journal of Travel and Tourism Marketing, 36(5), pp.563-582 Buhalis, D. (2003). eTourism: Information technology for strategic tourism management. Pearson education. Buhalis, D. & Laws, E. (Eds.). (2001). Tourism distribution channels: Practices, issues and transformations. Cengage Learning EMEA. Buhalis, D. & Licata, M. C. (2002). The future eTourism intermediaries. Tourism management, 23(3), 207-220. Camilleri, M.A. (2018). Travel marketing, tourism economics and the airline product (pp. 327). Cham, Switzerland: Springer.https://link.springer.com/chapter/10.1007/978-3-31949849-2_1 Camilleri, M. A. (Ed.). (2019). Tourism planning and destination marketing. Bingley, UK: Emerald Publishing. https://books.emeraldinsight.com/resources/pdfs/chapters/9781787562929-TYPE23-NR2.pdf Camilleri, M. A. (2020). The use of data-driven technologies for customer-centric marketing. International Journal of Big Data Management, 1(1), 50-63. http://www.inderscience.com/storage/f111412967385210.pdf Paraskevas., A., Katsogridakis, I., Law, R., and Buhalis, D., 2011, Search Engine Marketing: Transforming Search Engines to Hotel Distribution Channels, The Cornell Hotel Restaurant Administration Quarterly, 52(2), pp. 200-208. Tourism Distribution Channels 6