Understanding travel distribution
What is travel distribution?
Travel distribution refers to the methods through which tourism products are made available to customers. There are two primary avenues for selling your tourism product: direct sales, accomplished through your own marketing and sales efforts, and indirect sales facilitated by third-party entities known as travel distributors. These distributors act as intermediaries, distributing or reselling your product to their customer base.
Travel distributors encompass a diverse array of entities, including:
- Retail Travel Agents
- Inbound Tour Operators (ITOs)
- Online Travel Agents (OTAs)
- Visitor Information Centres
- Local tour operators
- Other establishments such as large hotels offering concierge or tour booking services
Benefits of working with travel distributors?
Working with travel distributors offers a range of advantages for tourism businesses. These distributors have access to customer segments that may be challenging to reach independently. By forging partnerships with these distribution partners, you can effectively broaden the reach of your product.
Travel distributors earn commissions by selling tourism products and services. Their primary objective is to generate sales on your behalf. Establishing a partnership often involves a contractual agreement where you agree to terms and provide attractive rates, which the distributor can mark up to cover its own sales-related costs.
Working with travel distributors can provide the following benefits:
Expand your global reach: Distributors can help you tap into international markets, reaching customers around the world.
Diversify your market portfolio: By partnering with various distributors, you can diversify your customer base and reduce reliance on a single market.
Localized services: Distributors can sell your product in the local language, offering valuable advice and insights to international customers.
Year-round sales: Distributors can assist in selling your product or service consistently throughout the year, filling gaps in occupancy, especially during mid-week or weekends.
While tourism operators can generate their own sales, the constraints of time, resources, and budget often make it more practical to work with specialised travel distributors that have larger marketing budgets and broader customer outreach capabilities.
Types of travel distributors
There are a range of travel distributors that you can establish partnerships with via agreements or contracts. These distributors include:
- If your business offers on-site experiences or attractions, collaborating with local tour operators can be advantageous. They often incorporate your product into pre-packaged tour itineraries.
- Local tour operators cater to varying group sizes, from large bus charters to private small groups or chauffeur-driven vehicles.
- Distinguish your product by offering exclusive special activities or value-added experiences to increase the likelihood of inclusion in their tours.
- Commission structures with local tour operators vary and can be negotiated based on the number of guests they guarantee to bring to your business.
- Examples of Local Tour Operators in Tasmania include Experience Tasmania, Premier Travel, and McDermotts Coaches.
- Retail Travel Agents act as intermediaries, booking and purchasing holiday packages, flights, transfers, accommodations, tours, and more on behalf of customers.
- RTAs typically operate through physical shop-fronts, but some may provide services over the phone or via email.
- RTAs attract a diverse customer base, often supported by highly visited websites.
- Some agents serve the Australian domestic market, while others have a global reach.
- RTAs engage in cooperative marketing with wholesalers and airline partners, resulting in targeted marketing campaigns with substantial budgets.
- The average commission that RTAs expect from the sale of your product is typically around 10-15%, but this can vary.
- Examples of Retail Travel Agents in Australia include TasVacations, Flight Centre, and HelloWorld, among many others worldwide.
- Some Visitor Information Centres facilitate bookings for customers, while others provide advice and referrals at no cost.
- VICs may be motivated to sell your product if you offer a commission.
- VICs often serve customers seeking last-minute bookings.
- The average commission that VICs expect from the sale of your product is typically around 10%, but this can vary.
- A list of Visitor Centres in Tasmania is available on the Tasmanian Visitor Information Network (TVIN) website.
- Customers use OTA websites to research and book travel online, similar to platforms like Booking.com, Airbnb.com, or Expedia.com.
- These websites offer a range of travel options, including flights, holiday packages, tours, attractions, and car rentals to domestic and international audiences.
- OTAs create a direct link between tourism operators and customers, heavily investing in online advertising and paid media.
- Be vigilant about affiliate sites through which an OTA might sell your product. Keep track of where your product rates may appear online.
- You may need to upload and maintain your product information for each OTA, which can be time-consuming, depending on the number of sites you are listed on.
- The average commission expected by OTAs from the sale of your product is typically around 7-25%, varying based on your product type and their marketing reach.
- Examples of Online Travel Agents include Expedia, TripAdvisor, Booking.com, and GetYourGuide.com.
- Wholesalers may sell directly to customers and also supply Retail Travel Agents (RTAs) with itineraries, such as touring, flight, and accommodation packages.
- Wholesalers create itineraries featuring complementary products to appeal to specific markets, promoting these packages through websites, brochures, and other channels.
- Internationally based wholesalers often book tours, attractions, and accommodation through Australian-based Inbound Tour Operators (ITOs).
- The average commission expected by wholesalers from the sale of your product is typically around 20%, but this can vary.
- Examples of domestic wholesalers include Infinity (Flight Centre), Viva Holidays (Helloworld), and TasVacations.
- Note: Some wholesalers also function as RTAs, so it's essential to clarify through which mediums your product will be sold to determine the appropriate commission rate to offer.
- ITOs serve as intermediaries connecting your business with overseas agents.
- These ITOs are typically based in Australia and handle travel reservations and payments on behalf of international wholesalers and RTAs.
- Many ITOs catering to non-English speaking countries also translate your product information for their overseas agents.
- ITOs develop programs, itineraries, and provide product advice for wholesalers to market through their international networks.
- Flexibility and customization of your products to suit ITO requirements may be necessary.
- Building rapport is crucial when working with ITOs, as it often takes several years of relationship-building to see consistent bookings.
- The average commission expected by ITOs from the sale of your product is typically around 25-30%, but this can vary.
- Examples of Inbound Tour Operators include Abercrombie & Kent, Pan Pacific, The Tailor, Pacific Destinations, and Australia & Beyond Holidays.
Understanding this intricate network of the distribution system and the diverse roles fulfilled by various types of distributors can be challenging. Therefore, gaining a comprehensive understanding of this system is crucial before making the decision to engage in the travel distribution industry.
Frequently Asked Questions
In the travel industry, just as there are costs associated with selling directly to customers through your own marketing efforts, you also incur expenses when collaborating with travel distributors who assist in selling your products or services. These travel distributors, often referred to as distributor partners, typically charge a fee for their services. The commission they receive is calculated as a percentage of the recommended retail price, also known as the 'rack rate' or 'shelf price.'
It's important to note that different types of distributor partners play varying roles in the distribution chain, which can impact the commission rates they require. The commission amount can fluctuate depending on factors such as the specific distributor partner you are working with, the complexity of the distribution network, and the extent of marketing efforts involved.
In many cases, various types of distributors collaborate to promote and sell your tourism products. For instance, an international travel agent interested in offering your product to their customers may choose to contact you directly to make a booking. However, for their convenience, they may often prefer to purchase your product through a wholesaler in their country, who, in turn, has an established contract with an Inbound Tour Operator in your country. This collaborative approach ensures a smoother and more efficient distribution process for your tourism offerings.
The first step toward successfully selling your tourism product through travel distributors is ensuring that you are Travel Trade Ready. Being Travel Trade Ready entails several key components, including effective pricing, established business systems, bookable capacity, and an appealing proposition for both overseas customers and travel trade distributors. It also involves a solid understanding of how the tourism trade operates, including the varying commission rates associated with different entities, as well as the ability to price and produce your product accordingly while maintaining consistent quality standards.
At Tourism Tasmania, we collaborate closely with a select group of Tasmanian tourism businesses that have been identified as 'Trade Trade Ready.' This designation is sometimes referred to as 'trade ready,' 'export ready,' or 'internationally ready,' depending on the context.
If you aspire to become Travel Trade Ready, you should be able to answer affirmatively to the following questions:
- Does your business have an active profile on the Australian Tourism Data Warehouse?
- Do you possess a comprehensive understanding of the distribution system and its various travel distributors?
- Can you articulate your unique selling points and align them with your specific target markets?
- Are you willing to invest in building relationships with distribution partners through activities such as trade shows, sales missions, sales calls, or networking events?
- Have you conducted research to understand the current visitor statistics for your region?
- Is your business already contracted with at least one domestic distribution partner?
- Are you prepared to invest in both trade and media to effectively showcase your product or experience?
- Do you have a thorough comprehension of the concept of commission and net rates?
- Do you have suitable booking systems and credit management processes in place?
- Have you established your details and rates for at least 12 months in advance?
If you answered 'no' to any of the above questions, we recommend dedicating time and effort to further educate yourself about the distribution system and deciding whether you want to engage with it. Australian Tourism Export Council (ATEC) runs a comprehensive training program that we highly recommend for operators new to this space. This online training program provides extensive information on understanding the travel distribution system and effectively collaborating with travel distributors.
Once you have completed the training and feel comfortable working with travel trade, please don't hesitate to reach out to Tourism Tasmania at email@example.com to discuss your plans and explore your options for participation in our programs.
Becoming Travel Trade Ready opens a multitude of opportunities for your tourism business. At Tourism Tasmania, we actively collaborate with our own Key Distribution Partners (KDPs) and provide support to our tourism operators to foster meaningful partnerships.
Here are some of the opportunities available to you:
Invitations to present at agent training webinars: share your expertise and offerings with travel agents through specialized webinars.
Representation by Tourism Tasmania: gain visibility on the global stage by having Tourism Tasmania represent your business at international trade events and include your business in travel agent training as part of our Tassie Specialist Program.
Invitations to attend special trade networking events: network with industry peers and potential partners at exclusive trade networking events.
Opportunities to attend international trade events in person: receive invitations to apply for attendance at international trade events in person, further expanding your reach.
Offers to host trade famils (link to Experience Program page when live) in Tasmania: showcase your business to travel professionals by hosting familiarisation trips in Tasmania.
Referrals to key distribution partners, including Tourism Australia: benefit from our referrals to our KDP’s, including Tourism Australia, for their programs and initiatives.
Inclusion in access and aviation campaigns with conversion partners: participate in campaigns that promote access and aviation services alongside conversion partners.
Listing on our travel trade-specific website: tassietrade.com.au: be featured on our dedicated travel trade website, increasing your online visibility.
Inclusion in suggested itineraries for KDP’s and agents: get your business included in recommended itineraries for KDP’s and travel agents.
Feature in e-newsletters to our travel trade mailing list: benefit from exposure to our travel trade mailing list through featured articles and updates.
For more comprehensive information about international market opportunities, Tourism Australia publishes market profiles and hosts an Industry events calendar. These resources can provide further insights and opportunities to expand your presence in the global travel market.
If your business is already working with travel distributors and paying commissions, it's essential to ensure that Tourism Tasmania is aware of your presence and your business operations. This awareness will enable us to extend invitations to you for various travel trade activities and events, providing you with enhanced opportunities to connect with new partners in the travel industry. Connect with us via email firstname.lastname@example.org