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.