LEARNING UNIT 1: THE CHANNELS OF DISTRIBUTION IN

THE TOURISM INDUSTRY

LEARNING OUTCOMES

After working through this learning unit, you will be able to

explain distribution as a component of marketing

discuss the characteristics of the distribution of tourism

distinguish between direct and indirect distribution

classify the different types of intermediary used in travel and trade

illustrate distribution channels

explain the tourism distribution model

PRESCRIBED MATERIAL/ARTICLE

In order to complete this learning unit, you will need to work through
the following articles:
• Douglas, A. 2016. A customer-focused approach to
distribution: the case of SANParks. South African Journal of
Economic and Management Sciences 19:413-431.
• Pearce, DG. 2008. A needs-functions model of tourism
distribution. Annals of Tourism Research 35(1):148-168.
• Tom Dieck, MC, Fountoulaki, P & Jung, T. 2018. Tourism
distribution channels in European island destinations.
International Journal of Contemporary Hospitality
Management 30:326-342.
1.1 A SYSTEMATIC OUTLINE OF THE LEARNING UNIT

Tourism
distribution
channels
Channel performance from the
customer’s perspective
Introduction:

Distribution explained
A needs-functions model of
tourism distribution

Information communication
Conclusion technologies and tourism
distribution channels

The tourism distribution channels model

1.2 INTRODUCTION: DISTRIBUTION EXPLAINED

“Distribution” is a term used in tourism to explain “place” in the marketing mix. We use
the term "distribution", because tourism is intangible and differs from other industries
in the sense that tourists are taken to the product rather than the product being
delivered to them. Technological advances impact on tourism businesses and
destinations, which means that they should be aware of the latest technological
advances and, thus, design their products according to the changing preferences of
tourists, which will be covered in greater detail in learning unit 2. This learning unit
clearly indicates that technology has actually increased or expanded the number of
channels that the tourism industry can use to distribute its “products” to tourists. These
channels are the means of distribution or the bridge between the supplier (tourism
business or destination) and the consumer (tourist) and therefore make the "product"
available to the tourists. A hotel, for instance, may use various distribution channels to
reach potential tourists. Hotels may reach potential tourists directly, through their
website, or a travel agency may sell the services of the hotel indirectly to tourists. Since
a tourism supplier may have many market segments, you should understand that the
channel used for each market will also differ. Clearly, an effective distribution strategy
for each market is vital for a tourism business to maintain a competitive edge.
Activity 1.1
Watch the following video to gain a foundational understanding of
tourism distribution. The video will assist in setting the scene of what is
tourism distribution and explain the key role players in tourism
distribution:
URL: https://youtu.be/AzdudvBftm0
Source: McGahey, S. 2015

1.3 TOURISM DISTRIBUTION CHANNELS

Study the following article for this section:

Douglas, A. 2016. A customer-focused approach to distribution: The case of
SANParks. South African Journal of Economic and Management Sciences 19:413-
431.

The table below will help you to familiarise yourself with terms
frequently used in the tourism industry, which are also useful to
understand the study material in the rest of the learning units.

Watch the following video to get an overview of the tourism

distribution process.
Tourism channels explained:
URL: https://www.youtube.com/watch?v=sSiB1oUBl-o
Source: Talk Tourism Mzansi, 2021

Table 1.1: Terms used in travel and trade/Types of operators

Term Definition
Inbound An inbound company focuses primarily on serving travellers from other
company destinations (countries and regions).
Example: South Africa Vacation, which offers tailor-made South African
tours and travel arrangements.
Outbound An outbound company focuses primarily on serving travellers in their
company domestic or regional market, who wish to travel to foreign destinations.
Short haul Short-haul travellers arrive from a nearby market.
Long haul Long-haul travellers arrive from far away (travellers, who would travel over
six hours to reach their destination).
Operators Operators are companies that supply their own services or products.
Example: Selftours
Resellers These are companies that market and sell the products and services of
others, usually charging a mark-up or taking a commission.
Type of
operator
Travel A travel agency's primary business is to resell accommodation,
agency transportation services, individual services and packaged services. Travel
agencies focus on either inbound or outbound trade, and they generally
serve a mix of long- and short-haul markets.
Example: Tourvest Travel Services
Online travel An online travel agency, or OTA, is a website or online service, which sells
agency travel-related products to customers.
Example: Booking.Com
Outbound Outbound tour operators create and market travel products to tourists in
tour operator their own markets, usually for long-haul travellers seeking an experience
at a foreign destination. Outbound tour operators may design and operate
their own trips, work with partners at the destination, or they may choose
trips already designed by inbound operators, and simply market these to
their own clients.
Example: Thompsons Holidays
Inbound tour Inbound tour operators create and market travel products and services to
operator tourists mainly in long-haul markets. These tourists generally do not have
knowledge of the destination or service providers, may not speak the local
language or may not feel comfortable making their own arrangements.
Example: South Africa Vacation, which offers tailor-made South African
tours and travel arrangements.
Ground A ground operator is a provider of travel products and services in its own
operator country or region. Inbound tour operators are sometimes also referred to
as ground operators, but the term is usually applied to companies that do
not actively market their services directly to overseas customers.
Example: Forever Events and Tours
 Local service This term is frequently used to refer to ground operators, but is also more
providers commonly applied to operations that provide local services. The terms
“local service providers” and “ground operators” may be used
interchangeably.
Travel Travel resellers and portals offer tourists the convenience of being able to
resellers and evaluate and compare many travel options in one catalogue or on one
portals website. This makes it easy to find, book and pay for travel packages.
They earn commission from the operator, whose package they sell, and
may resell trips from both inbound and outbound operators.
Example: Travelstart

Source: Adapted from USAID (2007:2-3)

The tourism industry's distribution differs from the distribution used in other industries,
because the tourism industry's "products" are intangible and need to be at the disposal
of the tourist. In the article, you learn that distribution can be direct or indirect, but
interestingly, a variation in the direct/indirect dichotomy can also be found. The
following figure is a general illustration of the tourism distribution channel:
 SUPPLIERS
Carriers (Air/Sea/Rail, etc.)
Lodging (Hotels/B&Bs/Self-catering, etc.)
Car rental
Other (Visitor attractions, events, restaurants, etc.)

ONLINE
ONLINE OFFLINE
− Brand website
− Pegasus − GDSs (Amadeus/
− E-mail ODD Sabre/Galileo/
INDIRECT

− Internet
DIRECT

− Extranet WorldSpan)
booking OFFLINE
engine − Voice (call
centres) Incoming tour
− Mobile operators
− Social media

OFFLINE
ONLINE OFFLINE
− Phone
− OTAs (Expedia, − Retail travel
− Walk-in Orbitz, Travelocity agencies
etc.) − Tour
− Tour operators operators

END USERS
Consumer tourist markets
Corporate
Other travelers

Figure 1: Tourism distribution channel

Source: Miller, Kattiapornpong, Woodbridge & McDonnell (2010)

Figure 1 illustrates that tourists may purchase tourism products directly or indirectly
from the destinations and principals (primary business). An example of direct
distribution would be a tourist purchasing his or her flight ticket directly from the airline.
However, the tourist may choose to buy a flight ticket through a travel agency – this is
referred to as indirect distribution. You will note, in figure 1, that the greater the number
of intermediaries involved in the process of a tourist buying a flight ticket, the longer
the distribution channel will be. Bookings are considered to be offline if the tourists
contacts a booking agent, who then makes a booking for them via the global
distribution system (GDS).
Figure 1, in the prescribed article (Douglas 2016:415) of this section, provides an apt
illustration of direct and indirect distribution for SANParks. Note that figure 1 is based
on SANParks’ use of both traditional and electronic distribution channels, that is, a
supplier website, a head-office reservation office, a call centre, a number of satellite
reservation offices and satellite call centres. This figure is also a good example of
customised distribution channels for SANParks. Bear in mind that each tourism
destination or business will have to design its own distribution channels, according to
the market segments to which it delivers a product or service.

Activity 1.2
Use the scenario below to answer the questions that follow. Make an
effort to answer the questions before you look at the feedback,
because this will give you a good idea of whether you understand the
study material and will also help you prepare for the formal
assessment.
Scenario

Linda and Karabo are friends, who share an apartment in Centurion, South Africa.
They want to be adventurous this year and have decided to travel to Italy for their
annual holiday. Since neither of them is familiar with the country, they needed to
book their holiday through a company with more knowledge on holidays abroad.
Once Linda and Karabo had made a few enquiries about different travel companies,
they decided that the following three companies would be most suitable to arrange
their holiday for them:

(1) Dream Tours

Linda and Karabo can book their accommodation at the Viscanti Palace Hotel
and Ca' dell' Orto Apartments and use Dream Tours – a company which markets
a product, whereby they are responsible for transporting their clients between
the hotels and arranging visits to various attractions.
(2) Magnificent Tours
Magnificent Tours is based in Johannesburg and they will arrange flights, on
behalf of Linda and Karabo, with Alitalia; book accommodation at the Boscolo
 Hotel; and arrange with an Italian company, Ciao Italy Tours, to organise day
tours to various attractions in Italy – the clients can choose which attractions
they would like to visit.
(3) Andiamo Tours
Andiamo Tours is currently advertising a packaged tour to its own country, Italy.
This packaged tour provides air transport with Alitalia and transports tourists
from the airport to hotels and between hotels; books the tourists'
accommodation at the Ambrosiano Milano Hotel and Nova Domus Hotel; and
transports tourists from the hotels to attractions in Florence, Pisa and Chianti.

(1) Illustrate the different distribution channels used in all three cases, and that are
required for Linda and Karabo to obtain accommodation in Italy.
(2) Distinguish between the different types of intermediary in the scenario.

ACTIVITY FEEDBACK

Students typically struggle to answer questions that should be applied to a scenario.

This is actually easy, if you know how to approach the question. Sometimes, it helps
to read the questions first and then the scenario. While you are reading, you will
then be aware of the facts in the scenario and what you will need to answer
questions based on them. Also focus on what is required of you – factual information,
language and flow of argument.

Question 1

You had to illustrate the different distribution channels, in all three cases, in
order for Linda and Karabo to acquire accommodation in Italy. A typical error
students make, is to illustrate the tourism distribution from the tourist's perspective.
You should remember that it is the tourism business or destination, and not the
tourist, who is responsible for distribution.
Answer

• In the case of Dream Tours:

• Viscanti Palace Hotel → Linda and Karabo
• Ca' dell’ Orto Apartments → Linda and Karabo

There are two distribution channels, because Linda and Karabo had to book their
own accommodation at two different hotels. No intermediary participated and they
therefore dealt directly with Viscanti Palace Hotel and Ca' dell' Orto Apartments.
However, if the question had stated that you should have illustrated the distribution
channel for Linda and Karabo to visit attractions in Italy, your answer would have
looked like this:

Attractions → Dream Tours → Linda and Karabo

• In the case of Magnificent Tours:

Boscolo Hotel → Magnificent Tours→ Linda and Karabo

If the question had required you to illustrate the distribution channel in order for
Linda and Karabo to visit attractions in Italy, your answer would have looked like
this:

Day tour to attractions → Ciao Italy Tours → Magnificent Tours → Linda and
Karabo
• In the case of Andiamo Tours:
•
o Ambrosiano Milano Hotel
Andiamo Tours → Linda and Karabo
o Nova Domus Hotel
To illustrate the distribution channel to enable Linda and Karabo to visit attractions
in Italy, your answer would have looked like this:

Attractions in Florence
Attractions in Pisa Andiamo Tours → Linda and Karabo
Attractions in Chianti

Question 2

You had to distinguish between the different types of intermediary in the

scenario.

Answer

• Dream Tours is an inbound tour operator, because it is situated in Italy and

delivers a product to a long-haul market (represented here by Linda and Karabo,
who live in South Africa) and because the business markets a product, whereby
it delivers transport and various attractions to Linda and Karabo.

• Magnificent Tours is an outbound travel agency, because it is based in

Johannesburg, South Africa, and resells flights and accommodation to
customers like Linda and Karabo. Since Linda and Karabo are based in South
Africa, and wish to travel to Italy, they are long-haul travellers.

• Ciao Italy Tours is a ground operator, or a local service provider, based in Italy,
that provides travel products and services in its own country.

• Andiamo Tours is an inbound tour operator in Italy that created and now markets
a packaged tour through Italy to tourists, mainly in long-haul markets (Linda and
Karabo live in South Africa).
1.4 CHANNEL PERFORMANCE FROM THE CUSTOMER’S PERSPECTIVE

In this section, you will see that various authors state that, instead of focusing on the
supplier for a generalised model of distribution, one should focus on the demand (the
tourist). As you know, the tourism “product” is intangible and cannot be physically
distributed in the same way as other industries' products. It is thus important to place
the “product” at the disposal of the tourist. Consequently, distribution in tourism occurs
in situ, where various services are used. Hence, the different services that the different
target markets require have to be determined (see table 1 of the prescribed article).
When the needs are determined, certain channel functions or activities can be applied
to design the correct distribution channel, in order to fill the gap between the different
markets and the tourism destination or business. You should also understand that
tourists’ needs determine the level of services they require; thus, determining the role
of their involvement and, by implication, the roles of the different channel members
and the distribution strategies employed to services this demand.

1.5 A NEEDS-FUNCTIONS MODEL OF TOURISM DISTRIBUTION

Study the following article for this section:

Pearce, DG. 2008. A needs-functions model of tourism distribution. Annals of Tourism
Research 35(1):148-168. Read through the text under the heading, “A needs-functions
model of distribution”, on pages 151 to 158.

The first two pages (pp 151-152), in this section, give you the background on how the
author came to realise that a needs-functions model needed to be developed.
However, you do not have to incorporate this into your learning material. Your study
material starts with the last paragraph, on page 152.

Make sure you understand the needs-functions model (figure 1 in Pearce 2008:154).
A thorough description is provided on page 154 up to the first paragraph on page 158.
Each segment regarding the service they might need before they travel, while they
travel and while they are at the destination, is comprehensively explained.
Activity 1.3
Scenario:
Ryan Winchester lives in the UK and has decided to take his wife to
South Africa to celebrate their tenth wedding anniversary. Ryan and
his wife will purchase a packaged tour, marketed by Magnificent Tours,
that includes their flight tickets, six nights’ accommodation at various
hotels, a safari through the Kruger National Park, wine tasting at
Robertson Wineries and a Robben Island tour.

(1) By referring to the needs-functions model of tourism distribution,

discuss the functions the destination should provide, before and
at the destination, for the package tour segment.

ACTIVITY FEEDBACK

Students typically think they have to draw the package tour segment's section of the
needs-functions model of tourism distribution. This question does not require you to
do that, but to discuss that segment. You have to provide a drawing, only if the
question asks you to illustrate or draw that segment on the needs-functions model
of tourism distribution. Note that you are required to discuss only the functions that
should be provided to the particular segment before and at the destination. You
therefore did not have to discuss the en route functions.

1.6 INFORMATION COMMUNICATION TECHNOLOGIES AND TOURISM

DISTRIBUTION CHANNELS

Study the following article for this section:

Tom Dieck, MC, Fountoulaki, P & Jung, T. 2018. Tourism distribution channels in
European island destinations. International Journal of Contemporary Hospitality
Management 30:326-342.

In the previous section, you learnt that it is necessary to determine the needs of the
different market segments to design the correct distribution channel for each segment.
Determining the needs of the different tourist markets is only one of the factors on
which the distribution strategy is based. The supplier's needs should also be taken into
account, and then the best possible fit between these two should be determined.
In learning unit 2, you will learn, in greater detail, that technology has changed the way
in which the tourism industry does business. In this section, you will see that
technology has increased the number of channels that can be used in distribution.

1.6.1 The tourism distribution channels model

Study the following article for this section:

Tom Dieck, MC, Fountoulaki, P & Jung, T. 2018. Tourism distribution channels in
European island destinations. International Journal of Contemporary Hospitality
Management. 30:326-342. Read through the following section: “The tourism
distribution channels model”

The needs-functions model you learnt about in the previous section should also be
studied in conjunction with this section. This section re-evaluates Kracht and Wang’s
(2010) tourism distribution channels model, as it includes all the important role players
and dynamic relationships that were previously confirmed by a number of studies, but
not integrated in the needs function model by Pearce (2008). It is important that you
understand the major difference between the tourism distribution channels model
originally developed by Kracht and Wang, in 2010, versus the proposed distribution
channels model for the European island context, developed in 2016. Although the
newer model is developed for European island destinations, the identified changes are
applicable in the South African context, as they relate mainly to enhanced online
distribution and the consequent disappearance of small tour operators. Critical for this
section, is for you to know who the key role players are in tourism distribution as well
as the current and future trends that impact on this role players.

1.7 CONCLUSION

In this learning unit, we looked at distribution as a component of marketing. Since

tourism is intangible, and since the tourism “product” should be placed at the disposal
of the tourists, distribution here differs from that of other industries. This implies that
tourism distribution has certain characteristics. We also saw that distribution may
occur directly with the tourist or indirectly by using intermediaries in the channels of
distribution. It is thus important to determine the tourists’ needs to design the
appropriate channels of tourism distribution. The next three learning units focus on
distribution in specific tourism businesses or destinations.

REFERENCES

Buhalis, D. 2001. Tourism distribution channels: practices and processes, in Tourism

distribution channels: practices, issues and transformations, edited by D Buhalis & E
Laws. London & New York: Continuum:7-32.

Douglas, A. 2016. A customer-focused approach to distribution: the case of

SANParks. South African Journal of Economic and Management Sciences 19:413-
431.

Miller, KE, Sood, S, Kattiapornpong, U, Woodbridge, M & McDonnell, I. 2010. Global

tourism and travel distribution: Changes, impacts and opportunities for Australian
tourism. Australia: CRC for Sustainable Tourism.

Pearce, DG. 2008. A needs-functions model of tourism distribution. Annals of Tourism

Research 35(1):148-168.

Tom Dieck, MC, Fountoulaki, P & Jung, T. 2018. Tourism distribution channels in
European island destinations. International Journal of Contemporary Hospitality
Management 30:326-342.

United States Agency of International Development. 2007. The business of inbound

tour operators: Tour operators manual. http://pdf.usaid.gov/pdf_docs/PNADL945.pdf
(Accessed on: 18 May 2021).