A lecture on Intermediaries and their role in the tourism industry for the subject Principles of Tourism II for the students enrolled in the College of International Tourism and Hospitality Management of the Lyceum of the Philippine - Cavite campus.

1. INTERMEDIARIES
(updated January 2015)
Sourced from the Lesson Plan for Principles of Tourism II

2. OBJECTIVES
 Explain the functions of travel and
tourism intermediaries
 Explain the basic process of
distribution
 Discuss the challenges facing the
travel agency sector in travel retailing.

3. UNIT TOPICS
1. The Tour Operator
2. The Business of Tour Operation
3. The Role of the “New” Consumer and Future Trends in Tour
Operating
4. Travel agents and Retailing
5. Travel Agents: Role and Activities
6. Business Travel Agents
7. The Online Travel Revolution and the Future of Travel Agents

4. INTERMEDIARIES
Firm or a person who acts as a mediator on a link
between parties to a business deal, investment
decision, negotiation etc. Intermediaries usually
specialize in specific areas, and serve as a conduit for
market and other types of information. They are also
called the “middleman”.
In tourism for example intermediaries are people or
businesses that link the tour package with the tourist..
DEFINITION OF TERMS

5. OTHER DEFINITION OF INTERMEDIARIES?
To transform goods and services from a
form that consumers do not want into a
product that they do want.
Principal role is to bring buyers and sellers
together.
Inserted themselves between providers
and customers.

6. DEFINITION OF TERMS
Tour Operator
A tour operator typically combines tour and travel components to
provide a holiday. The most common example of a tour
operator’s package would include a hotel, a transfer from the
airport, a specific activity and possibly a flight. Niche tour
operators may specialise in specific destinations, e.g. Italy,
India, UK, activities and experiences, e.g. skiing, music trips,
special interest tours, or a combination of both.
For profit, tour operators usually negotiate net rates with
suppliers and then add their own margins onto the package on
a percentage or per passenger basis.

7. DEFINITION OF TERMS
Travel Agent
A travel agent is a private retailer that provides travel related services to the
public on behalf of suppliers such as hotels, flights, car hire or package
holidays (tour operators).
A travel agency’s main function is to act as an agent selling travel products and
services on behalf of a supplier. Consequently, unlike other retail
businesses, they do not keep any stock in hand. A package holiday or a
ticket is not purchased from a supplier unless a customer requests that
purchase. The holiday or ticket is supplied to them at a discount and profitis
therefore the difference between the advertised price which the customer
pays and the discounted price at which it is supplied to the agent. This is
known as the commission.

8. BENEFITS OF INTERMEDIATION
PRODUCERS
Able to sell products in bulk
Reduce promotional costs
CONSUMERS
Avoid search and transaction costs
Gain from knowledge of the specialists
Gain from lower prices
DESTINATION
International marketing networking

9. As agents sell packages on behalf of tour
operators financial protection is generally not
required as the consumer’s contract is direct
with the financially protected tour operator.
However, many travel agents now wish to
provide financial protection to provide their
customers with an added level of protection
and piece of mind.

11. WHAT IS A TOURISM
DISTRIBUTION CHANNEL?
The tourism channel of distribution is an
operating structure, system, or linkage of
various combinations of organizations through
which a producer of travel products describes,
sells, or confirms travel arrangements to the
buyer.

12. TOURISM DISTRIBUTION CHANNEL
TWO WAYS:
DIRECTLY - through advertising, brochure
distribution, website, social media, client
referrals and so on.
INDIRECTLY - through a third party (indirectly) by
using tourism distribution channels such as
retail travel agents, wholesalers and inbound
tour operators.

13. TOURISM DISTRIBUTION CHANNEL
EXAMPLES:
A TOURIST has seen footage of beautiful Western Australia on TV and also heard
about it from his friends. He decides to find out more.
A tourist visits his local RETAIL TRAVEL AGENT to enquire about Western
Australia, and ends up booking an eight-week adventure including
accommodation.
A travel agent plans a comprehensive West Australian itinerary through the
brochure of a TOUR WHOLESALER and then proceeds to book all tour
operations through them.
The tour wholesaler contacts the INBOUND TOUR OPERATOR (ITO) to book each
individual element of the tour itinerary, such as accommodation and tours.
The inbound tour operator contacts individual LOCAL TOUR OPERATORS to book
accommodation and tours directly.

14. TRADITIONAL DISTRIBUTION SYSTEM
Reference: http://www.tourismexportcouncil.org.nz/distribution-system/

15. MODERN TOURISM DISTRIBUTION SYSTEM
Reference: http://www.tourismexportcouncil.org.nz/distribution-system/

16. TOURISM DISTRIBUTION
MECHANISM?
The tourism channel of distribution is an
operating structure, system, or linkage of
various combinations of organizations through
which a producer of travel products describes,
sells, or confirms travel arrangements to the
buyer.

18. THE TOUR OPERATOR
AKA travel supplier or travel wholesaler

19. THE TOUR OPERATOR
A tour operator will organize package tour together and
offer them for sale to the public either through the
medium of a brochure, leaflet or advertisement, or
using ICT to display its offering.
For a tour operator to offer a package also known as an
“inclusive tour”, it will normally have to have at least
two elements which are offered for sale at the
inclusive sale price and will involve a stay of more
than 24 hours in overnight accommodations?

20. INCLUSIVE TOUR
Normally includes:
• Transportation
• Accommodation
• Meals
• Entertainment
• Attractions
• Sightseeing Activities

21. THE NATURE OF THE BUSINESS OF TOUR
OPERATION
Success of a tour operator depends on its ability
to buy its product in bulk at a much lower price
Compared to direct buying from customers
Such packaging gives value for money to the
customers
11/14/12

22. TOUR OPERATION PROCESS
AIRLINES HOTEL ANCILLIARY SERVICES
Once the dates of departures have been fixed,
negotiations start with different parties e.g.
Airlines, hotels and other tourism counterparts,
leading to formal contracts
Hotel agrees to guarantee accommodation based
on receipt of the notification of booking from the
tour operator, whether by phone, mail fax or e-mail
Inbound tour operators and coach
companies to provide coach transfers
between airport and hotels
Spell out the conditions for the release of
unsold accommodation or of block bookings on
air-seat of a scheduled flight, or the
cancellation of aircraft flights with any
penalties that the tour operator will incur
Tour operator must also clarify a number of
other facts; including :-
1. Reservations and registration procedures
2Accommodation requirements for tour guide or
representatives
3.Handling procedures and fees charged for Porter
4. Special facilities availabilities
5. Languages spoken by hotel staff
6. Systems of payment by guest of drinks or other
extras
7. Reassurance on suitable fire and safety
precautions
Car rental companies’ commission
10% of the total cost for a deposit to be paid
upon signing the contract
Consolidated into a form suitable for printing into a
tour brochure
Consolidated into a form suitable for
printing into a tour brochure
Determined dates and frequency of departures,
airports to be used and times of arrival and
departure
Consolidated into a form suitable for printing
into a tour brochure

23. THE BUSINESS OF TOUR OPERATION
1. Tour operators fulfill a major role in the tourism
sector as they allow the different tourism sectors to
sell their capacity in advance – often a long time in
advance as contracts are drawn up a year prior to
tourists using accommodation or services
2. The tour operator connects together with all the
delivered services to negotiate contracts and deals
which will allow a holiday to be sold and be
delivered on the ground.

24. THE BUSINESS OF TOUR OPERATION
3. Tour operators traditionally have provided a
guaranteed level of sales which allowed principals to
fix their costs in advance and allow the operators to
achieve economies of scale by giving them heavily
discounted rates on their purchase
4. The tour operator will often add a mark up on the
product they are selling by calculating all the input
costs, their overheads, profit margin and then
producing a price.

25. TYPES OF TOUR OPERATOR
Mass
market
Tour
Operator
Domestic
Tour
Operator
Specialized

26. PACKAGES ARE OFTEN SEGMENTED INTO:
1. Those focused on a mode of travel, such as
ferry or coach holiday. The package may also be
based on twin-transport packages such as fly-drive, which
are very popular with inbound tourist in the USA.
2. Mode of accommodation, where hotel chains
become tour operators by packaging their surplus
capacity to offer weekend or short breaks in business
oriented hotels, selling rail or air transport and visits to
attractions as an all-inclusive package for holiday makers.

27. PACKAGES ARE OFTEN SEGMENTED INTO:
3. Whether they are international or domestic
packages
4. Length of holiday: (short breaks (less than four nights
away) or long holidays (more than four nights)
5. distance, where market is divided into short
haul and long haul
6. Destination type (eg. City breaks, beach holidays,
adventure holidays)

28. RESPONSIBILITIES OF THE TOUR OPERATOR
Providing general and specific advice about different
travel destinations
Drawing up complicated travel itineraries and ensuring
that all the needs of the customers are met
Making arrangements for transport, accommodation,
tours, and activities
Contacting airlines, hotels, and ground transport
companies such as coach operators to make suitable
arrangements

29. RESPONSIBILITIES OF THE TOUR OPERATOR
Advising the customer about travel issues including
required documentation and financial matters, such
as appropriate exchange rates
Using the computer database to research information
about hotel accommodation fares and hotel ratings
Dealing with payments
Performing general administration tasks
Dealing with and documenting complaints in an efficient
and diplomatic manner

30. RESPONSIBILITIES OF THE TOUR OPERATOR
Planning and advertising different promotions
Making alternative arrangements for customers who
have had their trips interrupted by unforeseen issues
Evaluating customers’ holidays and issuing appropriate
feedback forms
Every now and then, tour operators travel abroad for
research purposes
Making presentations to travel groups
Creating and putting up displays at trade shows

31. FACTORS AFFECTING THE TOUR OPERATING SECTOR
• Declining profits
• Globalization
• Safety & security
• Mergers
• New market
• Rise of e-travel
• Rapidity of innovation
• Wider use of the
internet
• Tourism sustainability
• Infrastructure devt
• Greater regulation
• Global terrorism
• Increased use of
technology
• Diversity
• Late booking trends
• New consumers
Tourist as
Consumer
Government
Business
Environment
Technology
ICT

32. TOUR OPERATION CYCLE
Planning
Contracting
Costing
Quotations
and Tariffs
Reservation
Field
Operation
Accounting
Evaluation

33. THE ROLE OF THE ‘NEW’ CONSUMER AND
FUTURE TREND IN TOUR OPERATING
• ‘New’ tourism is characterized by more experienced travelers
who have growing environmental concern about the impact of
their holidays on the place they visit and require more
individualized products rather than the mass products that are
less predictable, products that are full of surprise, discovery
and memorable experiences rather than simply a repetition of
last year’s beach holiday.
• “New” tourism offers the tourism industry many growth
opportunities given that tourism businesses can react to the
demand for increased flexibility through the greater use of
ICTs.

34. TRENDS IN TOUR OPERATION
• Future growth in internet-only low-cost air
travel sales
• Online Travel
• Continued direct selling by tour operators
• Shifting consumer preferences
• New markets
• Integration, Consolidation and Concentration

35. THE TRAVEL AGENCY

36. TRAVEL AGENTS AND RETAILING
The travel agent’s role in tourism is to recognize and highlight
that tourism is:
 Intangible
 Perishable
 Dynamic
 Heterogenous
 inseparable

37. Since the consumer is transported to the
product, it is an unusual form of
distribution. There is a need for timely
information on all of the elements as
outlined in the brochure.
TRAVEL AGENTS AND RETAILING

38. 1. The cost of setting up in business is relatively small
compared to that of other retail business
2. Agents are only able to sell products made available
by the tour operator or principals, so in times of
peak demand, they may be competing with other
agencies to find the products that the consumers
wish to purchase.
3. Agents are not seeking to dispose of products that
they have already purchased so they may display
less brand loyalty towards a particular product or
company.
IMPLICATIONS OF BUSINESS TRAVEL DISTRIBUTION

39.  The structure of travel agents has changed in recent years as
consolidations has led to greater pressure on independent
agents and less choice for the consumer, as multiple
dominate the retailing of product
 Travel agents have no stock, acting in behalf of the tour
operator, and so have little financial risk and do not
purchase products themselves.
 Travel agents receive a commission for each sale and as such
do not become part of the contract of sale, which is between
the tour operator and the consumer.
TRAVEL AGENTS: ROLE AND ACTIVITIES

40. TRAVEL AGENT – CLIENT PURCHASE PROCESS
THE HOLIDAY
Commitment
Agent presents choices
Understand the client’s needs
Establish Rapport with client Lost
Client

41.  Making reservations
 Planning itineraries
 Calculating fares and charges
 Producing tickets
 Advising clients
 Communicating with clients
 Maintaining accurate records on reservation
 Ensuring racks are stocked with supplies of brochures
 Acting as intermediary when clients complain
TRAVEL AGENTS: TASKING

42.  Individual business travel (corporate
travel) involving business trips related to
employer needs.
 Occasional work activities – such as
conferences, conventions, events and
incentive programs.
BUSINESS TRAVEL AGENTS

43. The impact of ICTs on the travel agency
sector is likely to see a reconfiguration of
the existing market into three segments.
The market will be categorized by:
1. Larger global players
2. New forms of travel agencies
3. Reduction of convention high street travel
agents
ON LINE TRAVEL REVOLUTION

44. Travel agents will face competitive pressure in
the areas of:
 E-tailing
 Internet-only low cost air travel sales
 Direct selling by tour operators
 Shifting consumer preferences
THE FUTURE OF TRAVEL AGENTS

46. REFERENCES
http://protectedtravelservices.wordpress.com/2
012/12/06/tour-operator-or-travel-agent/
http://www.morefunphilippines.co.uk/touropera
tors/#philippine tour operators
PRINCIPLES OF TOURISM II: Student Learning
Guide
11/14/12