P3 review the different types of interrelationships and provide examples
What do those big words mean? • Interrelate- connect (two or more things) or (of two or more things) to become connected to each other. • Channels of distribution-Comprises all of the businesses and people involved in the physical movement and transfer of ownership of goods and services from producer to consumer.
Big words continued • Integration – this is the bringing together of organisations. • Interdependencies- This is when companies depend on one another.
Interrelationships in the T&T industry • No single component of the travel and tourism industry can operate alone without relying on other parts of the industry. • For example who does a hotel rely on? • Transport links • Visitor attractions to bring tourists into the local area.
Chain of distribution • This is the way of getting a product to a customer. • Can you think of the chain of distribution for milk? • A traditional chain of distribution in the travel and tourism industry might look like this:
Accommodation Transport Tour operator Travel Agent Customer
However chains of distribution are now a lot more complicated! • Example – many airlines with the exception of British Airways, EasyJet and Ryanair, rely on tour operators and travel agents to sell seats on their aircraft. • The tour operator often owns the airline such as Tui and Thomas Cook . These companies have their own aircraft s to fly their customers as part of their package holiday. • Even if the tour operator may not own the airline, they rely on the tour operator to use their services in their holiday packages. • Tour operator packages, as we saw before are sold through various travel agents
Fully integrated chains of distributions • This is where the chain is owned by the same company E.G: Thomas Cook Airlines Thomas cook tour operators (Thomas Cook, club 18-30 ETC). Thomas Cook Retail Thomas Cook Ancillary Services (Currency exchange, travel insurance ETC)
TUI chain of distribution MyTravel airlines Going Places retail MyTravel ancillary Services (Insurance, Exchange, Parking ETC.)
There are simpler chains. For example, accommodation holidays, such as villas in France, are sold through businesses that promote France as a destination for a holiday. The properties appear in the business’ brochure and bookings are made via the business, which then handles the payment.
Integration • Until recently booking a holiday could mean having to deal with different businesses, which provided different parts of the package. • Now, as we saw before chains of distribution are changing and businesses are starting to expand their area of operation. This process is known as integration. • The advantage of one business offering all elements of a holiday is that the business is able to control its cost and ensure that their customers receive a guaranteed high standard of service.
There are 2 types of integration: • Horizontal integration- where businesses at the same level in the chain of distribution merge together or are purchased by another. • Vertical integration – where a business at one point on the chain of distribution purchases or acquires a business at a higher or lower level of the chain of distribution.
Accommodation provider Accommodation provider • Tour operator Tour operator • Travel agency Travel agency Vertical Integration Horizontal Integration
Example • In 2000, the tour operator, Manos, which specialises in holidays to Greece and Turkey, was brought by another tour operator, MyTravel. A press release issued at the time described Manos as “a well-known and successful specialist tour operator, which will add to the Group’s existing product portfolio and provide opportunities for cost savings and distribution benefits.
Example • The tour operator Thomson, brought Lunn Poly, a chain of travel agents in 1972. The Lunn Poly brand name was kept until 1994, when the company was rebranded Thompson Holidays.
Interdependencies • Organisations can not work in isolation, each are dependent on the other for its effective operation. • For example Visitor attraction reply on transport industry to bring customers to the attraction. • Tourist boards (local and regional)
Businesses enter into arrangements like this with one another so that they can all benefit from a single booking. If a customer has purchased a flight, they may also need accommodation or a car. • By providing booking services for these two components of the trip, Easyjet can earn more from the initial booking of a flight. The customer benefits from these arrangements because of the convenience.