Functions of Distribution Channels Factors affecting distribution channels Structure of Distribution Channels Various Distribution Channels of Hospitality Industry

1. DISTRIBUTION CHANNELS IN
HOSPITALITY INDUSTRY
By : Om Patel

2. Contents
Introduction
What is a Distribution Channel?
Function of Distribution Channels
Factors Influencing Distribution Channels
Structure of Distribution Channels
Types of Distribution Channels in Hospitality Industry

3. Introduction
 An important function of marketing is to bring the products and services
of company to the customer.
 Since customers are widespread in different continents, regions, cities
and zones, it becomes difficult for the company to reach the customer.
The company, therefore needs the assistance of intermediaries present
in regions which are far from the location of the company, to provide the
product or service to the customer.
 A business cant survive or grow by depending on the customers in the
intermediate neighborhood. It has to expand its base of customers to be
profitable. Therefore, to reach an expanding base of customers
geographically, it is essential to use distribution channels.

4. What is a Distribution Channel?
 A distribution channel (also known as marketing channel) is the path
or route decided by the company to deliver its goods or service to the
customers. The route can be as short as a direct interaction between
the company and the customer or can include several interconnected
intermediaries like wholesalers, distributors, retailers, etc.
 Hence, a distribution channel can also be referred to as a set of
independent intermediaries that help make a product available to the
end customer.

5. Functions of Distribution Channels
Help to complete the
transactions
Information
Promotion
Contact
Matching
Negotiation
Help to fulfill the
completed transactions
Physical distribution
Financing
Risk taking

6. Factors Influencing Distribution Channels
Considerations Related
to Product:
• Unit value of the product
• Standardized
/Customized Product
• Perishability
• Technical Nature
Considerations Related to
Market:
•Number of Buyers
•Types of Buyers
•Buying Habits
•Buying Quantity
•Size of Market
Considerations Related to
Manufacturer/ Company:
•Goodwill
•Desire to control the channel of
distribution
•Financial Strength
Considerations Related to
Government
Others:
•Cost
•Availability
•Possibilities of Sales

7. Structure of Distribution Channel
 Distinguished on the basis of intermediaries
 Each level presents both opportunities and challenges
• Zero Level: Manufacturer – Consumer (E.g. – Eureka Forbes)
• One Level: Manufacturer – Retailer – Consumer ( E.g. - Specialty
products like Washing Machines, TVS, Refrigerators, or industrial
products are sold)
• Two Level: Manufacturer – Wholesaler – Retailer – Consumer (E.g. –
Goods like food items drugs etc., small manufacturers’ goods which
are widely sold to consumers)
• Three level: Manufacturer – Agent – Wholesaler – Retailer – Consumer
(E.g. – Items like cloth, grocery where producer wishes to totally pass
on the burden of distribution to intermediaries)

8. Types of Distribution Channels in Hospitality
Industry
 Direct Sales or Direct Booking:
• Zero level channel ( Direct from
manufacturer to consumer)
• Low transaction cost
• Help to improve closeness with
customer
 Online Travel Agencies (OTA):
• Third parties who sell services on
behalf of other companies.
• Business using internet usually
without physical store
• Impartial reviews give customers
the confidence to book
• E.g. : Booking.com, Hotels.com,
Agoda.com, Tripadvisor.com

9.  Global Distribution Channel (GDS):
• Computerized network system
owned or operated by a company
that enables transactions between
travel industry service providers,
mainly airlines, hotels, car rental
companies, and travel agencies.
• The GDS mainly uses real-time
inventory to service providers.
• E.g. : Amadeus, Sabre, Galileo, and
Apollo
 Travel Agents:
• Private retailer or public service that
provides travel and tourism-related
services to the general public on
behalf of accommodation or travel
suppliers.
• E.g. : Thomas Cook, Cox & Kings
Types of Distribution Channels in Hospitality
Industry

10.  Tour Operators:
• Combines tour and travel
components to create a package
holiday.
• Advertise and produce brochures to
promote their products, holidays
and itineraries.
• E.g. : Ker & Downy, Greaves Tours,
Boundless Journeys
 Hotel Representatives:
• Promote and sells hotel rooms
& Services at transport areas or
at some given areas. E.g.
Railway Station, International
Airport.
• They usually represents non
competing hotels or economy
hotels.
Types of Distribution Channels in Hospitality
Industry

11. Types of Distribution Channels in Hospitality
Industry
 Consortia and Reservation
Systems:
• Computerized systems used to
store and retrieve information and
conduct transactions related to air
travel, hotels, car rental, or other
activities.
• A consortium is an association of
two or more companies with the
objective of participating in a
common activity for achieving a
common goal.
• E.g. : ALHI, Global Hotel Alliance,
HOTELOGIX
 E – commerce:
• Activity of electronically buying or
selling of products on online
services or over the Internet.
• Provide abundant information.
• Remain open all the time.

12. Types of Distribution Channels in Hospitality
Industry
 M – Commerce:
• Buying and selling of goods and
services through wireless handheld
devices such as smartphones and
tablets.
• Many international hotel companies
also started their mobile application
to promote their services to the
customers via internet. E.g. Taj
Hotels Resorts and Palaces, IHG,
World of Hyatt
 Dual Distribution:
• A wide variety of marketing
arrangements by which the
manufacturer or wholesalers uses
more than one channel
simultaneously to reach the end
user.
• Using two or more channels to
attract the same target market can
sometimes lead to channel conflict.