Designing a hospitality distribution channel begins with. Hotel product distribution channels

In 1991, Little Caesar's, a small restaurant company, entered into a strategic alliance with Kmart, one of the largest chain stores in the United States. According to this agreement, Kmart stores were required to replace all food outlets in their stores with 1,200 Little Caesar restaurants over the next five years. "s. Instead of cafeteria-snack bars, Kmart stores now have a network of branded restaurants for their customers. In turn, Little Caesar's restaurants received additional channels to stabilize their sales and the hope that, having once visited a Little Caesar's restaurant at Kmart, the customer would prefer to go to Little Caesars restaurants located outside these stores. Kmart also agreed to share the cost of national media advertising for Little Caesars, thereby providing it with better distribution opportunities. Little Caesar's management was delighted.

However, some executives (franchisors) were unhappy. Although the agreement included outside sales, they expected that the agreement would only allow customers to eat at the Kmart restaurant stores themselves. They felt that these take-out sales were in direct competition with their restaurants. They formed the Association of Little Caesar's Franchisors (ALCF), which represented the 70 franchisees who operate more than 550 of the chain's 4,000 restaurants. The ALCF claimed that some of its members saw their sales drop by as much as 20% after they opened restaurants in Kmart stores The ALCF also complained that Kmart stores located in the same pedestrian area as other Little Caesar's restaurants had become competitors. For example, in a city of 5,000 residents in North Carolina, there were two Little Caesar's franchise restaurants: a new one in a Kmart store and a regular one that had been operating in this city for a long time. The ALCF Association also expressed dissatisfaction with the fact that the agreement provided for Kmart's investment of money in a national, rather than local advertising. Some members felt that Kmart had stolen customers from them by using their money for local advertising. Members were so embittered that they raised an amount equal to their monthly membership dues to create a legal fund to bring legal action against the main Little Caesar's company.

However, all franchisors were disappointed. Many believed that the agreement with Kmart was successful, as it served to successfully promote their sales and thanks to it, the name of the Little Caesar's restaurant was recognized by millions of Kmart store customers.

The case of Little Caesar's shows that distribution systems are delicately balanced: what is acceptable to one member of the channel may not be acceptable to another, and this can lead to conflict and active struggle. Managers must be very careful when choosing distribution channels, as this can have long-term consequences.

Summary of the chapter

Chapter 15 provides an overview of key concepts in the design and operation of distribution channels and provides a brief overview of the major distribution channels in the hotel, restaurant and tourism industries.

First we will look at the entity distribution channels and functions, which channels perform. Then we will discuss the activities market intermediaries, used in the areas of hotel, restaurant and tourism business.

Let's end the chapter with an explanation of the method selection, motivation and evaluation members of distribution channels.

The essence and significance of distribution systems
If you imagine property as the heart of a hotel management company, then the distribution systems, the sales channels, appear as a circulatory system - its arteries. Distribution systems ensure a steady flow of customers. A well-managed distribution system can differentiate a market leader from a struggling company. Many companies in the hospitality industry make extensive use of the market distribution channels available to them. For example, Ritz-Carlton hotels receive a significant share of business from travel agents due to the active development of this channel. Marriott entered into a marketing alliance with New Otani, allowing it to welcome Japanese travelers to North America. In turn, New Otani was able to receive Americans traveling in Japan. In today's competitive environment, it is not enough to take into account a central reservation system and your own sales capabilities. Companies must develop increasingly complex, integrated networks and distribution systems.

Competition conditions, market globalization, electronic distribution methods and the short shelf life of goods (services) increase the importance of the distribution network. New and existing markets require creative approaches. Globalization means that many hoteliers must find foreign partners to help them expand their business in many regions. Sheraton has signed an alliance agreement with the Welcome Group in India, which operates Sheraton hotels in the Indian subcontinent. New electronic distribution methods have led to the growth of international reservation systems such as Utell. Finally, the importance of distribution has increased, since the "product" of the hotel business has a short shelf life .

RCI, a timeshare exchange company 1 , uses its large number of members to regulate hotel rates for club members. The agreement is equally beneficial for both parties: hotels can sell rooms during the low season, and RCI can offer club members favorable terms of the deal.

1 Timeshare (time-share) - purchase and sale of time spent staying in a hotel (usually in a resort area). (Approx. scientific editor)

The essence of distribution channels
Distribution channel- a set of independent organizations involved in the process of production of a product or service, - available to individual consumers or firms in user industries. The development of a distribution system begins with the selection of distribution channel participants. Once these are selected, the focus of work shifts to channel management. Distribution networks in the hospitality industry are formed through contractual relationships and through loosely organized alliances between independent organizations.

Why are market intermediaries used?
Why does Shenago China sell porcelain tableware to restaurants through intermediaries? After all, this means no control over the final price of their products. But Shenago gains the advantage of organizing sales through intermediaries: it does not need to maintain special premises for displaying products and large sales forces in every major city. An intermediary - a supply company - displays their products, promotes their sales and prepares personalized sales proposals directly for restaurants. The intermediary company sells hundreds of other products, the wide range of which makes it a convenient regular supplier for restaurant businesses. The commercial potential of the range of products offered allows it to prepare and send personal sales inquiries, send catalogs and provide other support for the marketing of the products it represents. Selling through wholesalers and retailers is usually much more effective than direct selling.

Intermediaries are highly effective in promoting goods to target markets. Thanks to their established connections, experience, specialization and scale of action, they can provide wider sales than the company itself. Rice. 15.1 will help you understand how intermediaries can provide savings in organizing sales for a company that produces goods or services. Part A shows the work of three producers, each of whom uses direct marketing to reach three customers. This system requires nine different contacts.

Rice. 15.1. How a distributor reduces the number of sales deals

Part B shows three manufacturers working through one distributor.

The second system requires only six contacts. A restaurant manager only needs to place one order with a restaurant supplier and receive a French knife, a dozen plates, a set of candles, a dozen oyster forks, a set of glasses and a set of cocktail napkins. Each of these products is manufactured by a different company, but they are all available with one phone call to an intermediary company. For the buyer, this is an opportunity to purchase small quantities of products that become part of a larger order, which reduces the need for goods, the number of deliveries and the number of invoices processed.

Distribution Channel Functions
The distribution channel moves goods from producers to consumers. It overcomes the barriers of time, distance and ownership that separate goods and services from those who will use them. Market channel participants perform the following key functions:

- Information- collection and provision of marketing research results and information regarding the marketing environment.
-Promotion- creation and dissemination of convincing information regarding the offer for advertising purposes.
- Contact- finding prospective buyers and establishing appropriate relationships with them.
- Adaptations- forming and adapting the offer to the needs of the buyer, including such activities as production, sorting, assembly and packaging.
- Negotiation- Negotiating price and other offer items in order to transfer title or ownership.
- Physical distribution- transportation and storage of goods.
- Financing- purchasing goods and using funds to cover costs and ensure the operation of the channel.
- Taking risks- taking financial risks, for example, due to the inability to sell goods at full profit.

The first five functions help to conclude transactions, the last three - to execute concluded transactions.

Typically, all these functions have the following three characteristics: they use limited resources, operate more efficiently on the basis of specialization, and can move from one member of the distribution channel to another. Changing functions allows the intermediary not only to reduce the manufacturer's costs and keep prices low, but also to add his own price to cover the cost of his work. To keep costs low, functions should be assigned to those channel members who can perform them most effectively. For example, many airlines encourage passengers to use the services of travel agencies - they answer passengers' questions, issue tickets, accept payment, and when passengers' plans change, reissue tickets. The convenient location of many travel agencies allows them to deliver tickets to customers on the day of order. The introduction of such a ticket distribution system into the work of the airlines themselves would be economically unprofitable for them.

Number of channel levels
Distribution channels can be characterized by the number of levels. The distribution channel level refers to any level at which certain work is performed to deliver goods from the manufacturer to the final buyer. Since both the producer and the final consumer perform some work, they are part of each channel in the distribution system. We use the number of intermediary levels to indicate the length of the channel. Rice. Figure 15.2 illustrates several options for constructing sales channels.

Channel 1, called direct marketing channel, has no intermediary level. It is represented by a manufacturer who sells the product directly to consumers. For example, an entrepreneur who owns a restaurant may buy food directly from a farmer. Channel 2 contains one intermediary layer. In the consumer market, this is usually the retailer level. Fisherman's Pier Restaurant in Geelong (near Melbourne, Australia) buys its fish from a fishermen's cooperative, allowing fishermen to focus their work on catching fish rather than selling and marketing.

Many of the agricultural products purchased by hospitality businesses come from cooperatives. For example, in the United States, the Sunkist, Diamond Walnuts, and Land o' Lakes cooperatives are all production cooperatives. The New Zealand Dairy Products Company is also a cooperative that sells milk powders and cheeses in Southeast Asia and Latin America.

Channel 3 contains two levels. In consumer markets, this is typically a wholesaler and a retailer. This type of channel is used by small manufacturers. Channel 4 consists of three levels. A small wholesaler buys product from large wholesalers and sells it to small retailers that are not served by large wholesalers. From the manufacturer's point of view, a large number of intermediaries in the channel means less control over the distribution system and creates additional complexity.

All organizations in the distribution channel are connected by several types of flows. These are the physical flow of goods, the flow of property, the flow of payments, the flow of information and the flow of promotions and incentives. These flows can make channels with even just one or a few levels very complex.

Market intermediaries
Many specialized channels are available to tourism and hospitality organizations. Consider the following intermediary links in the hospitality and tourism sales system: travel agencies, tour operators, tour wholesalers, specialists, hotel sales representatives, travel agent incentives, government travel associations, consortia, reservation systems and electronic service distribution systems. The manager must select the intermediaries who will make up the distribution system and the number of its levels.

Travel agents
One of the ways to conquer a geographically diversified market is through travel agents (travel agents). There are more than 32,000 travel agents in the United States, which in 1993 alone handled more than $93 billion in travel, $56 billion in air travel, $14 billion in cruises, $10.4 billion in hotel services, and $6.6 billion in travel. car rentals and $0.5 billion in other services. Travel agents handle more than 95% of cruises, 90% of airline tickets, 50% of car rentals and 25% of hotel stays.

Hotels that cooperate with travel agencies are listed in airline reservation systems and hotel directories. Hotels also send information packages to travel agencies, including information about hotels and changes in services, advertising of special events, etc. Hotels also invite travel agents on study tours. Airlines offer them introductory flights, providing invitees with free air tickets. Such trips must be well organized. Finally, these promotional materials can be sent by travel agents to printed publications for travel agencies such as Travel Weekly, Travel Trade and Travel Agent. Conducting advertising campaigns aimed at travel agents will be discussed in Chapter. 16.

Hotels that work with travel agents should make it easy for them to make reservations. Free (for travel agents) reservations by telephone (i.e., payment of the cost of the telephone conversation for them) makes the booking process easier for them. Hotels that receive a lot of business from travel agents have a certain number of rooms available for business travelers. Travel agents prefer quick payment for their services, so hotels that want to work with them must pay commissions quickly. For example, Hyatt hotels guarantee payment to travel agents within one week of the guest's departure date. Now international hotel chains pay travel agents' commissions in their local currency, and they don't have to go through the costly currency conversion process - out of a $50 commission, agents can lose almost all of it, because most banks usually charge $30-40 for processing and converting funds that are transferred to foreign bank.

Hospitality providers working with travel agencies should remember that agents match hotels with clients. In the 1994 review of the transport services market of the weekly Travel Weekly Travel agents rated the ability and reputation for providing room reservations as the most important factor in their hotel selection. Other important factors are given in table. 15.1. Hotels should do everything possible to create a positive experience for guests who make reservations through travel agents to ensure future business with them. When orders are received through an intermediary, hospitable hotel or cruise ship owners have two consumers: the client and the intermediary.

Most cruise lines will not sell services directly to the end consumer, but will insist on bookings through travel agents or tour operators.

Travel agents are currently changing the way they book hotels. They are gradually moving from making free phone calls to booking hotel rooms directly through computer systems. Computer systems for travel agents, formerly called computer reservation systems, are now called global distribution and distribution systems. These systems allow hotels to display their room availability information for use by travel agents when making reservations. In 1992, 377 thousand travel agents worldwide used this system.

Companies are the main source of bookings for travel agencies. Total American tourism reached $130 billion in 1994. Every cent of that represents a cost that corporations would like to reduce. Therefore, companies, in an attempt to reduce their costs, enter into agreements with travel agencies and, in some cases, open their own travel agencies.

Table 15.1

_______________________________________
* Percentage of the number of agencies that took part in the survey

Many organizations sign exclusive agreements with one travel agency and require employees to book hotels only through that company. In such a case, the travel agency takes on special responsibility for choosing the most economical options in a manner that is beneficial to them. Computerized programs such as Prelude, Dacoda, Maestio, PDQ and Maximizer allow companies to overcome employee preferences for one or another airline if they can use cheaper services from another carrier. It is estimated that if the lowest fare is not used, corporations lose an average of $141 per trip. The software also allows companies to identify which employees frequently violate general travel policies by booking travel and hotel accommodations at higher prices.

Marketing Beacons 15.1

Ten main rules for working with travel agents

1. Pay commissions quickly. Meet your agents' demands for timely payment and take steps to ensure their interests are respected.
2. Make broad commitments to the agent market, starting with the most important ones.
3. Train your staff to understand the importance and special needs of the agent market.
4. To promote a better understanding of each other's needs and responsibilities, implement a dedicated room sales program for your hotel staff and travel agents.
5. Encourage and reward agents who make frequent bookings at your hotel.
6. Sales brochures, electronic listings and a hotel advertising directory will provide your agents with detailed information about the facilities and services your hotel offers. Include information about the procedure for booking rooms and the procedure for paying commissions.
7. Work with local tourism organizations to conduct study tours for travel agents.
8. Make sure you give agents a free or discounted visit.
9. Conduct educational sessions for agents, organize seminars, schedule meetings and conferences, or offer them various sales incentives.
10. Provide agents with information about special events, service packages and special sales promotions as early as possible so that agents can sell to their clients. If you have last-minute “special offers” to consumers, let your agents know about them as well.

Travel wholesalers
Wholesale travel companies collect so-called “travel packages” that are in good demand in the leisure market. These packages typically include not only transportation and hotel accommodations, but also meals, ground transportation, excursions and entertainment. To expand the service package, wholesalers enter into contracts with airlines and hotels for a specified number of seats and rooms, receiving quantity discounts. The wholesaler will also arrange transport services between the hotel and the airport. Retail travel agents sell these packages to individual consumers. The travel wholesaler must secure a commission for the travel agent and provide consumers with a travel package that is perceived as a better, more cost-effective option than what consumers could put together themselves. In addition, tour operators must make a profit for themselves. The net profit from the sale of each package is small, so wholesalers must sell 85% of the relevant packages to receive the balance. This high break-even point leaves little room for error. As a result, tour wholesalers often do not reach the level of cost recovery. Thus, it seems important that providers 1 in the hospitality industry verify the details of the tour operator itself, receive advance payment and full payment for services provided. Additional security is provided if they deal with tour operators that are members of the United States Tour Operators Association (USTOA). Members of the association contribute $100,000 to the association's account to create a fund to support the consumer payment protection program. This guarantees monetary compensation in the event of financial failure of any member of the association.

1 Providers are agencies that develop packages of new tourism services. Often providers perform functions similar to wholesale travel agencies. (Approx. scientific editor)

With the increasing number of international resorts, tourism wholesalers are becoming a powerful player in the distribution channel. Regular travel agencies cannot know about all resorts. They rely on catalogs offered by travel wholesalers. If a couple wants to holiday on Saipan, they will be given a directory of a tour operator covering Micronesia. The catalog offers luxury hotels, four-star hotels, three-star hotels and tourist class hotels. The wholesaler will give a full description of each. The hotel can provide him with any information about himself, but the tour operator selects those characteristics that correspond to his goals and which are then entered into the catalog.

Therefore, if, for example, someone wants to stay in a luxurious luxury hotel, and only three hotels of this level are included in the catalog, then others not included in the catalog will not be offered to the client. The couple will select the resort they feel offers the best holiday option based on information provided by the travel wholesaler. Thus, the importance of a tour wholesaler for resorts, especially for distant international markets, is enormous.

Specialists: travel brokers, motivational houses 1 and representatives of gaming establishments
1 Motivational houses - specific shopping tours for employees of companies and organizations (Approx. scientific editor).

Travel brokers sell coach tours that appeal to a variety of markets. Tours of New England just to see the leaves fall, trips to college and sporting events, tours built around Mardi Gras, and regularly scheduled tours of Washington, D.C. are examples of popular bus tours. Some bus tours are seasonal, others are dedicated to an event, and others are year-round. For hotels located on such routes, bus tours are the most important source of income.

Bus tours for both museums and historical sites (eg Colonial Williamsburg in Virginia) are extremely important. Providers of travel services such as visits to reconstructed historical sites, hotel accommodations and trips to famous cities typically participate in travel conferences sponsored by the American Bus Association. A conference venue is rented and sales professionals representing their providers compete for the tour bus companies that serve their territory.

Motivational houses develop incentive trips offered to employees or distributors as a reward for success in their work. Companies often use incentive trips as a reward for employees who achieve their goals or for sales employees who achieve the highest results. An incentive trip typically offered to a resort area includes first-class or deluxe accommodations. For resorts or luxury hotels in cities such as New York, San Francisco, Chicago or Boston, incentive houses serve as an effective marketing channel for their services.

You can contact tour brokers and motivational houses through special magazines and associations, such as the National Travel Association and the Society for the Encouragement of Travel Agents.

Representatives of gaming establishments serve the casino business as intermediaries for premium players. They maintain lists of players who like to visit certain entertainment areas (Reno, Las Vegas or Atlantic City). As a rule, such representatives work with one or more casinos. They receive commissions based on the amount of money the casino makes from the players they refer, or in some cases based on the player. Players attracted by representatives of gaming establishments receive free or low-cost services, including air travel, ground transportation, hotel accommodation, food, drinks and entertainment. The number of services received as a gift depends on the number of gamblers in the casino.

Hotel representatives
Hotel representatives sell hotel rooms and hotel services in a specific market area. This method is effective for hotels that hire an in-house representative and do not use their own sales force, and is especially effective for distant markets and cultural differences that make it difficult for an outsider to penetrate the market. For example, it may be more efficient for a hotel in Houston to hire a representative in Mexico City, the capital of Mexico, rather than send its sales manager there.

Such hotel sales representatives must represent the interests of non-competing hotels. They receive direct commission or commission plus salary or a combination of both. It will take time for the hotel representative to study the services offered by the company and communicate them to the market. The choice of a hotel representative must be deliberate. Frequent replacement of the hotel representative is not advisable.

National, state and local travel agencies
THESE agencies are an excellent way to inform the market and increase bookings. National associations promote tourism within their own countries. And for hotel chains with branches across the country, their impact could be important. Government agencies promote their services both abroad and within their own state. They usually have numerous information centers located even at entry points into the country. Regional associations can also help independent operators and hotel chains.

Consortiums and reservation systems
Reservation systems such as Loews Representation International, Steigen-berger Reservation service and International Reservations and Information Consortium are expanding their services. Room reservation systems are a centralized room reservation system for hotels. They typically provide a system for smaller hotel chains or overseas reservation services, allowing overseas guests to call a local phone number to contact the hotel.

Ski resorts may also use a hotel reservation system. The resort may book reservations at independent hotels or motels for a commission of approximately 15%. Since the resort typically operates its own lodgings at independent hotels, motel managers are sometimes afraid of the influence of this organization and may refuse to cooperate with it because they do not want to share their customer database.

Consortium- a group of organizations in the hospitality industry, which is based on an alliance for the purpose of obtaining mutual benefits for its members. The main reason for organizing consortia is marketing. The consortium allows the hotel to be independently owned and operated while benefiting from combined marketing efforts. An example of a consortium is Leading Hotels of the World. The distinction between consortia and room reservation services is becoming less pronounced as reservation services such as SRS, Utell and Supranational have now extended their scope to include marketing activities. This is a natural path for the development of redundancy systems.

The top five consortia, defined by the number of hotel rooms provided, in 1990 were Utell, Supranational, Logis de France, Leading Hotels of the World and Golden Tulip. As a reservation service, Utell has provided more than 1.3 million beds in 6,500 member hotels. The UtellVision system provides agents in different countries with booking information on their computer screens. Utell also uses Hotel and Travel Roadshows. This organization represents hotels in the tourism market for conference organizers, tour operators, general meeting organizers, travel agents and tourism wholesalers. Logis de France is a consortium of more than 4,000 small hotels in France with one, two and three stars. Logis de France hotels have distinctive signs and road signs.

Consortia and reservation systems make it possible to expand the influence of marketing on the organization of hotel activities. Franziska Martin, editor-in-chief of the magazine Hotels, reports that 25 major consortia more than tripled (to 1 million 995 thousand 486) the number of hotel rooms provided from 1989 to 1990. Membership in an organization such as Logis de France can be the main way to promote and network sales of rooms in the small hotel market, while Utell is part of a sophisticated marketing program used by the major chains.This allows them to increase collaboration with travel agents and international markets.As business becomes more globalized, consortia are becoming a more powerful marketing tool.

Regions are also creating consortia to increase their region's attractiveness to tourists. For example, tourism organizations in the Bath area in the UK have created the Association of Bath and District Leisure Enterprises (ABLE), which allows them to develop and distribute promotional material. In turn, travel agents have formed consortiums to negotiate hotel rooms, airlines and other travel services at discounted prices. One of the largest travel agency consortiums is Woodside Management Systems. Consortia can also develop vertical marketing systems by setting special prices for orders for their members.

Reservation systems based on airline computer networks
Another type of computerized reservation system is a travel product catalog for travel agents and other distributors of hospitality services. This system was developed by airlines to stimulate their sales by entering flights into a database according to aircraft departure times. In the United States, 96% of travel agents are affiliated with at least one computerized reservation system. The most popular systems in the United States are Apollo (United Airlines), Saber (American Airlines), System One (Continental Airlines), Worldspan (Delta Airlines and Northwest Airlines), and TWA.

British Airways has combined with Apollo the system they developed - Galileo, which is one of the main international systems. Another major international system, Amadeus, was developed by Lufthansa and Air France. Hoteliers, car rental companies and other travel companies can obtain information about themselves from these reservation systems, creating a good opportunity for travel agents to sell their services.

Airlines can also operate as tour operators. For international independent travelers, Air New Zealand offers ranch or bed and breakfast options, car or campervan rentals, and accommodation bookings through specialist accommodation providers.

Internet
Many firms in the hospitality industry are now using the Internet as a channel to distribute their services. The Internet system can help millions of travelers - in the system they will find well-known booklets and prospectuses of various hotel chains.

Internet users can not only view various brochures on the monitor screen, but also save the information that interests them on their computer. And they can place an order without leaving their computer. Thus, with the help of the Internet, Best Western receives 72% of customers who do not use the services of travel agents.

Restaurant owners are also using the Internet as a distribution channel. Pizza Hut developed PizzaNet, a conversational ordering system in California. The TerraNet network was developed in Boston to deliver restaurant food to customers' homes. The database allows the user to search for information by restaurant names or types of food. The Internet user receives information about the menu, including color photographs of dishes. The client can pick up the completed order himself or have it delivered to his home. After the choice is made, the client receives all the necessary information for calculating the cost, including delivery prices. The ability to transmit color photographs to millions of people around the globe makes the Internet a new and exciting channel for the distribution of goods and services.

Electronic distribution systems "From client to supplier"
Clients can now book rooms and functional space using specially designed software packages. For example, the Meeting Services Network (MSN) contains detailed descriptions of rooms, meeting spaces and amenities at 7,500 hotels, meeting centers, convention centers and resorts. Using such a system, conference organizers do without direct contacts with hotel sales services.

The International Association of Conference Planners has an online database that allows conference organizers to select venues. Thanks to the additional capabilities of the reservation service of such systems, direct communication with reservation services and sales departments is possible.

By operating global distribution systems, large corporations and conference organizers avoid travel intermediaries and, using electronic systems, make direct reservations in all regions of the world.

Technology that allows guests to interact directly with hotels, airlines, car rental companies and other service providers is available to many today. One possible application is to use an airline seat as a work station, entertainment center, and reservation point. In the future, passengers on the San Francisco-Hong Kong airline (while in flight) will be able to get an on-screen view and description of Hong Kong hotels with their prices, book a room and receive confirmation of their reservation.

However, the use of the latest technologies in the “From client to supplier” system can radically affect the interests of travel intermediaries such as travel agents (see Marketing Beacons 15.2).

Marketing Beacons 15.2

Hilton model
Hilton hotels have introduced a variety of programs designed to evaluate and reward agents' performance. Effective initiatives include:

- Centralized telephone line for booking seats by Hilton Travel Agents helps agents request information and make reservations at Hilton hotels nationwide. Staffed by 40 reservation specialists trained to work with travel agents, the line offers 24-hour service every day. Other Hilton centralized system services include ovia's Inside Availiability automated systems; expanded categories; rate returns; testing and other marketing information.

- Centralized payment of commissions. Hilton pays agents commissions for booking rooms at its hotels in all regions of the world. Biweekly for hotels enrolled in the Hilton Central Commission Program, commissions are paid within 48 hours of the guest's departure. The receipt includes the amount of the commission, the personnel file number, the name of the hotel, the number of nights of stay and the name of the guest. At the time the order is accepted, Hilton determines the rates at which commissions are calculated. Hilton Introductory Club. Recognizing the importance of travel agent introductory trips, Hilton has developed an "introduction policy" for its hotels, which provides agents with a 50% discount on the minimum room rate at any Hilton hotel.

Straight line. Hilton provides agents with free telephone calls and a meeting management system, offers them information on availability and rates for space and hotel conference facilities within 24 hours upon any request. Travel Agent Help Desk- free. She advises agents on commission payments, assists with CRS bookings and pricing, and provides comprehensive support for Hilton's travel agent marketing and sales programs. Consultation system for travel agents. Nine travel business specialists and five Hilton executives work specifically to provide advice and feedback to the company's travel agents, strengthening the relationship between them and hotels.

Behavioral systems of distribution channels and their organization
Distribution channels are more than simple associations of firms connected by various streams. These are complex behavioral systems in which people and companies interact to achieve their goals. Some systems are built on formal relationships between loosely organized firms, others are built on formal relationships governed by strong organizational structures. Distribution channel systems are constantly evolving, creating new types and new systems. Let's consider the behavioral systems of distribution channels and the way they organize their work.

Behavioral systems of distribution channels
The distribution system of goods and services consists of various firms united for their common good: Each channel member, dependent on others, plays a role in the distribution channel and specializes in performing a particular function.

Because the individual success of a channel member depends on the overall success of all channel members, ideally all channel firms should work together in a coordinated manner. They must understand and accept their roles, coordinate their goals and actions, and cooperate in achieving major goals. By collaborating, they can more effectively understand and serve the target market.

However, channel members tend to be more interested in achieving their own short-term goals and are concerned about the state of their affairs with the firms closest to them in the distribution channel. Collaborating to achieve overall channel goals sometimes means reducing the importance of individual company goals. Although each channel member is dependent on the other, they often act on their own, guided by their own interests. They often disagree about the roles they should perform: who should do what and what rewards they should receive for doing it. Such disagreements about goals and roles lead to conflict in the distribution channel.

Horizontal conflict- conflict between firms at the same level of the distribution channel. For example, some privileged members of Pizza Inn's distribution channel may complain about others who cheat them by providing poor product components or poor service, thereby harming Pizza Inn's image.

Vertical conflict- more common, it is a conflict between different levels of the same distribution channel. At the beginning of this chapter, we mentioned the agreement between Little Caesar's restaurants and Kmart stores. For Little Caesar's, this agreement increased the sales volume and the number of new points in the distribution system to 1200. However, the sales volumes of other members of the distribution channel of the Little Caesar restaurant chain "s have decreased.

Some conflicts in a distribution channel take the form of healthy competition: without them, the channel becomes passive and uncreative. But sometimes controversy can hurt a channel. For the overall channel to work well, the role of each channel member must be defined and channel conflict must be resolved. Cooperation, distribution of roles and conflict management are ensured only by strong leadership - a company, agency or mechanism.

Of course, due to the complexity of distribution channels, it is quite difficult to manage the participants and their work while maintaining the interests of all participants in the distribution channel. For example, Embassy Suites Hotel was forced to change a promotion system it had developed with Hertz that offered cash payments to Hertz customers who rented cars and stayed overnight. Customers were offered a cash voucher along with their confirmed hotel reservation if they stayed and redeemed at the Embassy Suites Hotel. The opportunity to get Embassy Suites customers who made immediate purchases and the opportunity to do business for Hertz by offering customers a cash bonus seemed like a good idea to both companies. However, the American Society of Travel Agents protested against this agreement, believing that commissions were unfairly taken away from the travel agents who made the initial reservation. Both Embassy Suites and Hertz failed to appreciate the negative impact that their promotions would have on one of their channel members, the travel agent.

In a large company, a formal organizational structure defines the roles of channel members and provides the necessary leadership. But in a distribution channel composed of independent firms, leadership and power are not formally established. Traditionally, distribution channels have lacked the leadership needed to assign roles and manage conflict. Therefore, new types of channel organizations have emerged in recent years that truly provide stronger leadership and better channel performance.

Sales channel organization
Historically, distribution channels have developed as loose associations of independent companies, each of which has demonstrated little interest in the success of the channel as a whole. These conventional distribution systems lacked strong leadership and were plagued by dangerous conflicts and poor quality of service.

The Rise of Vertical Marketing Systems
One of the most significant achievements in building distribution channels is vertical marketing systems, which have replaced conventional marketing systems. The distinctive properties of the two types of channels are illustrated in Fig. 15.3.

A typical distribution channel for goods and services consists of one or more independent manufacturers, wholesalers, and retailers. Each of them is a separate business, trying to maximize its own profit even at the expense of the profit of the system as a whole. No one channel member has much control over the other members, and there are no formal means for assigning roles and managing conflict in such a distribution channel. For example, most hotels pay commissions to travel agents. No formal contract is signed between the hotel and the agent. The hotel simply declares a policy of soliciting their services and may, if it wishes, at any time not offer accommodations for sale to travel agents at all.

A vertical marketing system (VMS) involves manufacturers, wholesalers and retailers operating as an integrated system. One channel member either controls the others by entering into contracts with them, or has such power that they all cooperate with him. The BMC can be managed by either the manufacturer, the wholesaler, or the retailer. The BMC was originally developed to manage channel behavioral systems and channel conflicts. Another big benefit of BMC is economies of size, bargaining power, and elimination of duplication of services. BMC came to dominate consumer marketing, serving 64% of the market.

Now let's look at the three main types of IUDs (see Fig. 15.3). Each type uses different means to achieve leadership and power in the distribution channel. In a corporate BMC, coordination and conflict management are achieved through common ownership at various levels in the channel. In a managed BMC, leadership is exercised by one or more dominant channel participants; in a contractual BMC, leadership is exercised through contractual relations between the participants in the distribution channel.

Corporate Navy combine successive stages of production and distribution under a single ownership. For example, Red Lobster has its own food processing plants and distributes food products to restaurants. Breweries in the UK have pubs that only serve their own beer.

Gallo, the world's largest wine producer, doesn't stop at just processing grapes into wine:

The Gallo brothers own Fairbanks Trucking, one of the largest heavy-duty trailer trucking companies in California. 200 trucks and 500 trailers regularly transport wine and raw materials (return trips), including lime from Gallo's east quarry in Sacramento. The company - alone among wine producers - produces two million bottles of wine a day, and Midcal Aluminum makes caps as fast as bottles are filled. Most winemakers in the country concentrate their efforts on production, neglecting marketing. Gallo, on the other hand, is involved in every aspect of the sale. The company has a network of distributors in a dozen markets and would likely have more if laws in most states did not prohibit it.

Managed BMCs coordinate successive stages of production and distribution not through a system of common ownership or contractual relationships, but through the extent of influence and power of the parties. For example, in the 1970s, a popular beer brand received the exclusive right to supply restaurants and bars with fresh draft beer. The manufacturer did not allow bars offering this beer to serve any other beers, claiming that other beers on the same line would reduce the quality of their product. The manufacturer argued that other beer companies may be using dirty line cleaning tools and applying pressure improperly. Thus, the manufacturer used the strength and power of its brand to suppress competitors.

Guided Navy have impacted the global airline industry since its birth. Many states continue to subsidize national transport, known as flag transport. These airlines often have a strong influence on the reservation system, on the work of tour operators and transport agencies within the borders of the respective states.

Negotiated Navy unite independent firms at various levels of production and sales, which are linked by contractual relations in order to obtain discounts or increase sales volume. A contract with a hotel representative is an example of a contractual IUD. An important form of contractual IUD is franchising.

Franchising
Franchising is a method of doing business in which a franchisee is given the right to engage in the offering, sale or distribution of goods or services under the direction of a marketing model developed by the franchisor. The franchisor allows franchisees to use its trademark, name and advertising. Franchising has become the fastest growing form of retail organization in recent years. More than 500,000 franchised businesses now account for approximately a third of all retail sales. In the United States, this figure by 2000 may be half.

Franchising is the most popular form of sales organization for both hotels and restaurants. The most famous franchise chains in the hotel business are Choice Hotels, Days Inns, Holiday Inns, Sheraton and Hilton hotels, and in the restaurant business - McDonald's, Burger King, Kentucky Fried Chicken, Pizza Hut and T.G.I. Friday's. They are responsible for the transition of the restaurant business from individual operators to multi-unit operations. Franchised restaurants had sales of $79 billion in 1991, or more than half of all restaurant sales, through an extensive network of 106,000 branches.

For the right to use the names, practices, and other benefits that franchising provides, franchisees are charged an initial fee, a royalty fee, and a marketing fee. Hotels are also charged a fee for using the centralized room reservation system. For example, Embassy Suites charges a starting fee of $500 per room with a minimum payment of $100. Royalty payments for marketing services and the reservation system are 4%, 2% and 1% of gross revenue per room, respectively. Using gross income in calculations allows the franchisor to charge fees to unprofitable businesses as well. The franchisor can verify gross receipts information using tax reports.

The following information from the Hospitality Franchise System's 1993 Annual Report demonstrates how profitable franchising can be.

Oh!...What a year!

1993 was the year of the Hospitality Franchise System, the company became the largest and most successful hotel franchisor worldwide. This was the year we acquired two hotel authority systems, set domestic industry growth records, entered into strategic alliances with other travel service providers as well as their merchants, and developed our business into a booming entertainment industry. As the company that brought together Days Inns, Howard Johnson, Park Inn, Ramada and Super 8, HFS has demonstrated a unique combination of financial stability and rapid growth, primarily due to the fact that royalty payments, calculated as a percentage of hotel room revenue, make up the majority of company income. Marketing and reservation system fees paid by our preferred franchisees cover all of our marketing and reservation system expenses. These characteristics create such a high operating level that virtually every dollar of royalty increase generated $32 million in 1993, an increase of 111% over 1992.

The stock market showed that the company's success in 1993 caused the company's stock price to rise from $9.63 to $26.56.

The initial fee and royalty payments depend on the brand recognition of the authorized member. For example, McDonald's is recognized as a fast food restaurant all over the world. It is known in London, Paris, Hong Kong and New York. The stronger the market position of the company, the higher the price of its brand name. Thus, the authority McDonald's provide more value than Mr. Quick. Other benefits of an authorized member relate to management assistance, quality control, accounting systems, marketing, access to capital, architectural planning and group purchasing.

Owned by Courtyard Marriott, Marriott Hotels embarked on an aggressive franchising program in 1990. Mike Ruffer, Marriott's executive vice president, says, "We expect our own brand recognition and service penetration to increase in the 1990s, but we can't do it on our own." Marriott sought additional distribution opportunities, including central business districts and resorts. In 1992, the Courtyard Marriott in Chicago became the first Courtyard to develop in the central business district.

Franchising is used by small chains of small restaurants to help them retain managers. It is difficult for a small network to compete with the opportunities that a large network offers managers. Some small chains offer great career opportunities for their top managers to own their own business through the franchise system. Well-designed credentials provide benefits to both the franchisor and the authorized channel member. Tab. Figure 15.2 shows the costs of franchised restaurants.

Table 15.2
Costs of franchised restaurants

Unions
Unions are another form of contractual relationships. They are created to provide the opportunity for mutually beneficial cooperation between the parties involved. We have already mentioned the alliance between Welcome Group and Sheraton Hotels. It was almost impossible for Sheraton to enter the Indian market given the country's foreign business regulation system. Welcome Group offered Sheraton an Indian partner. In addition, Welcome Group had a good reputation in India and knew how to do business there. Sheraton offered Welcome Group its name, widely known to business people around the world, and its training and management support systems. And both partners benefited from such an alliance.

Unions of two or more firms that are not competitors are a very popular and effective way to expand the market. For example, restaurants form alliances with stores and hotels to distribute their products more efficiently. 7-Eleven Stores sells Dunkin' Donuts in 2,000 of its stores. Embassy Suites has Red Lobster restaurants located in its hotels. In-store quick-service restaurant chains offer name-brand food and gain additional distribution opportunities for their products. In addition, the opening of famous restaurants in hotels will allow visitors to get good quality food at reasonable prices.

Airlines are forming alliances to gain additional capacity in other parts of the world and provide customers with new services. For example, SAS's alliance with Continental Airlines provided it with access to the American market. SAS lines, which previously served only a small part of American cities, began to be used for subsequent transfers to Europe. Continental received passengers from SAS flying to Newark and other American cities.

National Network Motorcoach, a marketing consortium of bus operators, has developed an affiliate program to deliver charter passengers to their desired hotels. Tour operators are now extending their trips by staying overnight in a hotel, whereas previously they preferred to complete the trip in one day. Representatives of the network of bus operators visit all the hotels wishing to participate in the agreement before they are accepted. This alliance provides additional business to hotels and provides bus operators with preferential negotiated rates at hotels that meet the standards of their requirements.

The rise of horizontal marketing systems
Another type of organization of distribution channels is horizontal marketing systems, uniting the sales networks of two or more companies at one level in order to exploit new marketing opportunities. Companies that combine their capital, production capabilities, and marketing resources will achieve better results than companies operating independently. For example, Seaworld offers discounted tickets to a car club, which provides them as an additional benefit to its members. In return, Seaworld gains access to several hundred thousand members of this car club. In another example, Sears and McDonald's joined forces to promote their products in the McKids "fun clothes for small fries" clothing market. McDonald's restaurant franchises and Sears stores collaborated to develop local sales incentive programs. This kind of joint marketing has been widely developed in recent years and it is clear that it will continue to improve.

American Express, Coeur D Alene and K2 Skis worked together to offer skiers free skis if they booked a Ski Week Holiday with American Express.

The Rise of Multichannel Marketing Systems
In the past, many companies used a single distribution channel to sell to one market or market segment. Today, with the rapid growth of consumer segments and distribution channel capabilities, an increasing number of companies are adopting a multi-channel system for distributing their products and services, that is, an individual firm establishes two or more market channels to capture one or more consumer segments.

For example, McDonald's sells through a network of independent firms in its franchise system, but owns more than a quarter of their total profits. Thus, McDonald's wholly owned restaurants compete to some extent with restaurants that have received the right to use the trademark. McDonald's through the franchising system.

The omnichannel marketer, although gaining additional sales opportunities with each new channel, risks affecting the interests of existing channels. After all, they can claim “unfair competition” and threaten to remove such a specialist if he does not soften the competition policy or compensate them for losses in another way. For example, franchised channel members have sometimes brought legal claims against franchisors who have developed competition in their market territory.

Making distribution channel design decisions
Now let’s look at what problems merchants must solve in distribution channels for goods and services. When designing distribution channels, entrepreneurs choose between the ideal and the practical. Before designing distribution channel systems, it is necessary to analyze the requirements and demands of the consumer, identify and analyze the goals and limitations of the channel, as well as the main channel alternatives and their evaluation.

Analysis of consumer needs and requests in the field of services
Designing a service distribution channel begins with identifying the services that consumers in different market segments need. Victoria House in Belize serves clients from the United States. Customers don't want to call Central America to make a reservation at Victoria House - they want an easier way to contact the hotel. So Victoria House was connected to a travel agency in Houston with a toll-free telephone line. Representatives of this agency make reservations for guests and other travel agents located throughout the United States.

Large resorts such as the Fiesta Americana in Puerto Villarta, Mexico, may rely on a wholesaler who assembles a travel package including flights, hotel reservations, and ground transportation, and distributes it through travel agents. Such a wholesaler provides a package of services that gives travelers everything they could do without when traveling abroad.

But to develop an effective distribution channel, the company must not only understand what services the customer needs, but also provide more customer needs and opportunities to satisfy them and the costs of satisfying them. The hotel must be able to cover the costs associated with operating the distribution channel and maintain an attractive price level.

Defining the goals and limitations of the distribution channel
Through distribution channels from the manufacturer, the product is delivered to the consumer. Distribution channels for the hotel and tourism business bring the customer to the hotel, cruise ship or restaurant. They provide the right information to the right people at the right time and enable them to make purchasing decisions about goods and services. Those interested in booking a Caribbean cruise in February can go to the travel agent's office in Atlanta, get information about the various Caribbean cruises and make a reservation.

Most hotels have identified several different (according to needs) customer segments. The company must decide which segment to serve and which distribution channels to use. The company strives to minimize the total costs of operating the channel. A company's distribution channel objectives are also influenced by the products and services themselves, company characteristics and policies, characteristics of intermediaries, and factors in the marketing environment.

Product characteristics. A large hotel hosting meetings and conferences requires sales channels that can provide technical information to host this range of events. A hotel may hire a representative to distribute its services in cities not covered by its sales system. A hotel chain with limited food and beverage offerings has a simple product aimed at the mass market. It may decide to distribute services by developing horizontal systems with the Automobile Association or an association like the AARP (American Association of Retired People).

Characteristics of the company and its policies. The size of the company determines the design of the distribution channel. An independent or small hotel chain joins a consortium to increase the impact of its marketing efforts. A large company can benefit from developing a controlled vertical marketing system. Thus, some airlines have conference departments or companies that meet customers in the cities they serve, thereby creating internal reserves in the business travel market.

Characteristics of an intermediary. The company must find intermediaries willing and able to perform the tasks required by the company. Intermediaries must have the ability to organize promotional activities, establish contacts with clients and provide credit. For example, hotel representatives will offer low prices to customers, as several customers will add up to a large total cost. However, the efforts of intermediaries to increase sales of goods and services are less effective than the company's own commercial sales force.

Marketing environment factors also influence decision-making on the formation of a distribution channel. For example, the increased use of home computers and the development of online consumer databases have opened up new distribution channels for travel agencies and hotels. Consumers can make and pay for travel reservations using their computers. They can also receive information on travel routes via the Internet, including color illustrations of attractions and hotels.

Responsibilities of Channel Members
The company and intermediaries must agree on the rules and responsibilities of each member of the distribution channel. For example, hotels explain to travel agents what room rates will pay commissions and how much, as well as what specific days commissions are guaranteed to be paid. McDonald's provides restaurants in its franchise system with an accounting system, appropriate training and general management assistance. Restaurants must embody the company's image and brand standards in the design and construction of their premises, work with new sales promotion programs, and provide required information and purchase the specified food products.To avoid disputes and conflicts, companies and distribution channel participants must have a specific written agreement.

Evaluating the main distribution channel alternatives
Let's assume that the company has identified several alternatives for building a sales channel and intends to choose the one that can best achieve its long-term goals and objectives. The firm must evaluate each alternative according to economic, adaptability, and control criteria.

Economic criterion
Each channel has a different level of sales and costs. For example, a hotel is considering hiring an independent sales representative to serve a specific market segment. First of all, she needs to determine the expected level of sales within the company itself and compare it with the expected level of sales of the potential sales representative. The work of a hotel's own sales department can be more effective if there is a trend of increased activity in the department based on superior knowledge of goods and services, if the hotel's sales policy is usually more aggressive, since the future of the company depends on the success of the market; If department employees are patriotic, they are proud of their company's products and services and enthusiastically offer them to customers.

An independent sales representative is more useful in markets that are unfamiliar to the company. For example, a Mexican sales representative in Mexico City has a better understanding of the cultural characteristics of the market and how to approach it. Clients in Mexico City may prefer to deal with a Mexican than with a foreigner.

Some clients prefer to deal with a company that represents several different hotels.

The possible level of sales that a distribution channel participant achieves must be assessed in relation to the costs of its creation and operation. Contracting with a sales representative in Mexico can be much more efficient and cost less than sending a salesperson to Mexico City. Through a sales representative, the hotel has telephone contact with the office in Mexico City. Maintaining a commercial office in Mexico would be ineffective for most hotel chains. Although the largest hotel chains based in the United States can afford to have their own sales office in New York due to the large size of the market.

Control criterion
An important criterion when choosing the structure of distribution channels is the degree of its control. The work of sales representatives involves less control than the work of an in-house sales department. Commercial representatives will prefer work that requires less effort from them. They may prefer to work with large companies that can use the services of most of the hotels they represent.

Control is also an important criterion in the franchising system and in the selection of participants in the combined distribution channel structure. A company that works with its franchisees sacrifices some control for greater distribution opportunities for its products and services. The company may get into trouble by forcing franchisees to increase product offerings or engage in sales promotions. Franchisees have problems meeting quality control standards.

If a company includes new channels in its distribution system, it must take into account the rights of existing distribution channel participants. Often existing channel members limit their work with the arrival of new members. Let us recall the situation with the conclusion of a sales promotion agreement between Embassy Suites and Hertz. The promotion policy was canceled because it did not meet the interests of other channel participants - travel agents.

Adaptability criterion
The long-term commitments of each distribution channel make it inflexible. A hotel that uses a sales representative in Mexico City will likely have to sign a five-year contract. During this period, the hotel could enter into an alliance with an airline or hotel affiliate in Mexico and would not need a sales representative in Mexico City, but the company would not be able to end its relationship with him until the contract expired. Typically, the benefits gained from developing a long-term alliance are replaced by a loss of flexibility. Understanding the meaning of deals and the potential for future market changes can help a manager decide on the duration of agreements with channel members.

Making decisions on distribution channel management
Once the company has considered alternative options for building a distribution channel and has chosen the best one, it begins to operate and manage the selected channel. Channel management requires the selection and motivation of individual intermediaries and the evaluation of their performance.

Teamwork, organizational management actions, effective marketing policies, close cooperation with all participants in the sales channel ensure high quality customer service.

Selection of distribution channel participants
Companies have varying abilities to engage qualified intermediaries. Hotels that have a good reputation, promptly pay commissions and seamlessly provide reservation services to travel agents do not have any difficulties or difficulties in attracting agencies. A new chain with a small number of hotels may struggle to sell its rooms through its 32,000 travel agents. It would be better for her to choose one network of transport agencies or work in those cities where the sale of tourist services is most likely.

A company's selection of distribution channels for goods and services must be as careful as its selection of employees. After all, these firms will represent the company on the market and be responsible for maintaining its image. When selecting channel participants, company management must evaluate the development opportunities of each applicant company and its profits over the past period, income level, cooperation opportunities and reputation. When entering into an agreement with its sales representative, the company should research the number and type of other hotels that the company represents. You will also need to know the quantity and quality of the workforce.

Motivating Channel Members
The company must continually encourage channel members to perform effectively. It must motivate not only its own employees, but also independent intermediaries. Most firms use positive incentives during periods of low demand for their services. For example, a hotel or car rental company increases the commission percentage it pays to agents. Informing channel members about the company's new offerings and services is another way to motivate their efforts. Hotels must inform sales representatives of changes in equipment, facilities and services.

Assessing the performance of sales participants
The company should regularly evaluate the performance of intermediaries. McDonald's, for example, has about 300 consultants who visit franchisees every day, rewarding them if they do their job well and making suggestions for eliminating shortcomings (for example, rounding the corner of a cookie a few degrees). Checking the work of intermediaries is a matter of business subtle.Sometimes problems can arise due to insufficient support from the supplier.Companies must evaluate the support that one channel member provides to another and adjust these relationships as necessary.

Modification of the distribution channel structure
The manufacturer must not only design a good distribution channel system, but also put it in motion. However, to better meet market requirements, periodic modifications are necessary. The consumer model is changing, markets are expanding, the goods and services themselves are becoming more complex, new competitors and new, innovative, creative distribution channel structures are emerging.

There are three levels of modification of the distribution channel:

Increase or decrease in the number of individual channel members
- increase or decrease in the number of specific market distribution channels
- development of a completely new way of selling goods in all markets. Modification of the channel structure requires careful preliminary analysis. It is necessary to solve the question of how the company’s profit will change when moving from the existing system of distribution of goods and services to a modified one.

The hotel can replace representatives who do not provide adequate results. These may be new employees or employees of the hotel sales department. An independent hotel may decide to become a member of, for example, Leading Hotels of the World to gain access to new markets. Another may switch to a new reservation system, etc.

Replacing channel members is not always easy. In some foreign markets, especially markets like El Salvador, there is the issue of potential monetary compensation for independent representatives who have been fired. In the United States and Canada, an independent representative who receives only a commission is not considered an employee of the company. In some countries, courts may rule that the independent representative was actually dependent (for his livelihood) on the foreign firm, although he was paid in the form of commissions. Therefore, replacing such a representative may cause serious economic difficulties and the foreign company will be forced to pay tens of thousands of dollars to terminate the agreement.

Business location
Waldorf Astoria advertises its location. Waldorf Astoria is located in the heart of the world's meeting place; Hilton's flagship hotel is a stunning and relaxing place where the service quality of the past still exists today. Walk up to Park Avenue and stop for a moment and look around. You are in the center of this area, surrounded by Broadway theaters, the most fashionable shops on Fifth Avenue, the United Nations building, and the world's finest shopping destinations.

One of the most important aspects of the distribution and marketing system for hospitality organizations is the location of the business. Convenient location is of great importance for the level of profitability of a business. Many retailers will say that there are three secrets to successful retailing - "location, location, location." There is no one formula for a great location. A good location for a Ritz-Carlton will be different from a Motel 6 or Burger King. Restaurant sites are typically priced differently depending on the business opportunities in the area. Hotel locations are rated by the attractiveness of their location to people traveling there. In both cases, the location depends on the firm's marketing strategy. Each firm has its own set of characteristics for assessing location.

There are usually four steps to selecting a location.

The first is determined by understanding the company's marketing strategy and target market. La Quinta Motels build their business on serving commercial travelers and other middle-class guests arriving by car. These hotels are traditionally located along highways outside the main metropolitan areas. They are close enough to the CBD to offer easy access, yet far enough away to save on site costs. Hyatt, on the other hand, caters primarily to tour groups and business travelers who most often arrive by air. Hyatt hotels are typically located in the heart of the central business district. The location decision, like other marketing decisions, cannot be separated from the marketing strategy.

The second stage of selection is regional analysis, which involves selecting a geographic market. A restaurant chain may be planning to expand its sales and enter a new market in a major city. Initially, they will have to find a region that will support at least five new branches. A business hotel chain expanding into Southeast Asia could include cities like Singapore, Bangkok, Kuala Lumpur and Jakarta. The chain intends to have branches in the main cities of the region so that business people traveling through the region can stay at the chain's hotels.

The firm must ensure that the area has sufficient and sustainable demand to ensure occupancy of the hotel or restaurant. The most attractive is a rapidly developing region with a diversified economic structure. Houston hotels and restaurants, which opened in the 1980s, suffered when oil prices plummeted due to the area's heavy reliance on one industry. Within 10 years, many hotels were taken over by creditors. Regions supported by a single industry are often attractive when that industry is booming, but highly vulnerable when it declines.

This is equally true if tourism and hospitality are the main business sectors of such regions. Miami's beaches were in trouble when several European tourists were attacked and killed. The health of ski resort towns' businesses depends largely on the whims of nature—too little or too much snow can create big economic problems.

The next stage is the selection of territory within the internal region. If a restaurant chain intends to open five restaurants in a metropolitan area, it must select sites to locate its restaurants. Network management must analyze the demographic and psychographic characteristics of the area, evaluate the competitive conditions and development potential of various areas, and select five areas within the region that seem most promising.

Finally, the firm selects specific sites. A key consideration when analyzing a site is the compatibility of different business areas. The restaurant or hotel will look for potential sources of demand. For a hotel, this could be major office complexes, airports or integrated retail, residential and business developments. The restaurant will target locations in apartment complexes, shopping centers or motels that do not provide food and beverage services. Sources of demand depend heavily on the nature of the business's target markets. If firms are looking to source clients within a given territory, it is important for them to have a good understanding of the client profile of their business market.

When choosing, a company must take into account the presence and characteristics of competitors. If there is a similar offer from similar restaurants or hotels, the site will be rejected. Hotels are entering saturated markets to have a presence in a given city. Competition is not always a negative factor. Restaurants often tend to merge to create a series of restaurants. This can be beneficial. Customers who come to one restaurant have the opportunity to visit others in this chain.

The assessment of a location site includes the concept of reachability. Is there unimpeded access to this site from public transport routes or do uncrossed roads create a barrier? Does the area allow the driver of the car to turn around? Travel speed is also an important factor. The slower the movement, the longer the time during which the area can be observed. Restaurant locations at intersections with traffic lights are also beneficial because waiting drivers can get a closer look at the restaurant.

The desired environment is another aspect of choice. Is this place attractive? If the site is in a shopping center, is it well maintained? Other considerations for site selection include drainage, wastewater, utilities and site size.

Often companies develop their own set of requirements for their chosen sites. For example, the fast food restaurant Carl's Jr., which offers hamburgers, defined the following selection criteria:

Self-contained location in a shopping center
- autonomous location on the corner (with a traffic light at the intersection)
- interior area minimum 125 feet wide
- shopping center included in the complex
- population over 12,000 within a 1 mile radius (developing areas preferred)
- free access to the restaurant
- heavy traffic of vehicles and pedestrians
- an area where the income level of the population is assessed as average or above average
- proximity to offices and other sources of demand
- size from 30,000 to 50,000 square feet
- distance of at least 2-3 miles from other existing branches of the company.

Site selection is often determined by a checklist, statistical analysis, or a combination of these. The checklist usually contains the items above as well as specific requirements for the buildings themselves. Items such as building code, restriction designations, utility facilities, parking and drainage availability are also included on the checklist. The main type of statistical analysis used in site selection is regression analysis. The dependent variable in the equation is sales, and the independent variables are the factors that contribute to sales growth. Typically, independent variables may include population within a market area, market size, presence of competitors, and location characteristics.

Location is a key aspect for a hotel or restaurant. The location must not only be suitable now, but must remain so throughout the life of the business.

Chapter Summary

I. The essence of distribution channels. Distribution channel - a set of independent organizations involved in the process of making a product or service available to a consumer or business user.

II. Reasons for using market intermediaries. The use of intermediaries is necessary for greater efficiency in marketing products, making them accessible to the target market. Through their contacts, experience, specialization and scale of operations, intermediaries can usually offer more than the firm itself.

III. Functions of the distribution channel.
1) Information. Collection and presentation of marketing research results of information about the marketing environment.
2) Promotion. Creation and dissemination of persuasive information regarding the offer for advertising purposes.
3) Contact. Acquiring prospective customers and establishing appropriate relationships with them.
4) Adaptation. Formation and adaptation of offers to the needs of customers.
5) Negotiations. The process of negotiating price and other offer items in order to transfer title or occupancy rights.
6) Physical distribution. Transportation and storage of goods.
7) Financing. Purchasing goods and using funds to cover the costs of running the channel.
8) Taking risks. Taking financial risks, such as not being able to sell a product at a full profit.

IV. Number of channel levels. The number of channel levels can vary - from direct marketing, when a manufacturing company sells a product directly to the consumer, to complex distribution systems that include four or more channel participants.

V. Market intermediaries. Market intermediaries in the hospitality and tourism industry include travel agencies, tour operators, travel wholesalers, specialists, hotel sales representatives, travel agents, government travel associations, consortia, reservation systems and electronic distribution systems.

VI. Behavioral systems of distribution channels
1) Conflict in the distribution channel. Although channel members depend on each other, they often act alone in their own interests. They often do not agree on the roles that are assigned to them - who should do what and for what reward.
a) Horizontal conflict- conflict between firms at the same level of the distribution channel.
b) Vertical conflict- conflict between different levels of the same distribution channel.

VII. Organization of a sales channel. There are various distribution channels: from loose associations of independent companies to unified systems.

1) The usual traditional marketing system. Consists of one or more independent manufacturers, wholesalers and retailers. Each represents a separate business, trying to maximize its own profit even at the expense of less overall profit for the system as a whole.

2) Vertical marketing system (VMS). Includes manufacturers, wholesalers and retailers operating as an integrated system. BMC was designed to manage channel behavior and conflicts, achieve savings through high volume sales, trading power, and eliminating duplication of services. There are three main types of IUDs: corporate, managed and contractual.

a) Corporate- unites successive stages of production and distribution under the auspices of a single ownership.
b) Controlled- coordinates successive stages of production and distribution, but not through systems of common ownership or contractual relations, but through the size and power of influence of the parties.
c) Negotiated- consists of independent firms at various levels of production and distribution that combine through contracting to achieve savings or influence sales.

- Franchising - a method of doing business in which franchisees are given the right to participate in the offering, sale, or distribution of goods or services under a single marketing strategy developed by the franchisor. The franchisor allows franchisees to use its trademark, name and advertising.
- Unions- allow two organizations to benefit from cooperation.

3) Horizontal marketing system. Two or more companies at the same level of the distribution channel merge to exploit new marketing opportunities. Companies can pool their capital, production capabilities, or marketing resources to operate more efficiently.

4) Multi-channel marketing systems. One firm establishes two or more marketing channels to reach one or more market segments.

VIII. Making decisions about the structure of the distribution channel

1) Analysis of consumer needs and requests. Designing a distribution channel begins with determining the set of services for which consumers are in demand.

2) Definition of distribution channel goals and restrictions. Factors taken into account include the characteristics of the product or service, the characteristics of the company and market intermediaries.

3) Responsibilities of distribution channel participants. The producing company and sales intermediaries must agree on the rules and responsibilities of each participant in the distribution channel.

4) Determination of the main alternative distribution channel options. The company must evaluate all alternative distribution channel options based on economic criteria, control capabilities and adaptability.

IX. Making decisions on distribution channel management

1) Selection of channel participants. When selecting distribution channel participants, company management must evaluate the potential development opportunities of each channel participant, its profits, profitability, ability to cooperate and reputation.

2) Motivation of distribution channel participants. The company must continuously motivate its distribution channel members.

3) Assessment of distribution channel participants. The company should regularly evaluate the performance of its intermediaries and provide them with recommendations.

4) Modification of the distribution channel structure. It is necessary when consumer purchasing patterns change, markets expand, products and services become more complex, new competitors emerge, and new, creative distribution channel structures emerge.

X. Location of business. There are the following aspects to choosing a business location:

1) Understanding the marketing strategy - the company's target market.
2) Regional analysis - selection of the geographic region of the market.
3) Choosing a market territory within a region - taking into account demographic, psychographic, and competitive factors.
4) Site Selection - Business compatibility, competitors, site accessibility, drainage, wastewater, utilities and size are factors influencing site selection.

Issues for discussion.

1 . How do you think technology will change distribution channels in the hospitality and tourism industries?
2. Explain how international tourism has changed the distribution channels of hospitality and tourism businesses.
3. What are the main differences between the distribution channel of a physical goods company and a tourism or hospitality company?
4. Can a business have too many channel members? Explain the answer.
5. Explain the difference between a travel wholesaler and a travel agent.
6. Why is franchising a rapidly growing form of retail organization?

Key terms

Agent. A wholesaler who represents buyers or sellers on a (more or less) permanent basis and performs several functions without having ownership of the goods.

Broker. A non-owned wholesaler whose function is to connect buyers and sellers and assist in negotiations.

Vertical marketing system (VMS). A distribution channel structure in which manufacturers, wholesalers, and retailers operate as an integrated system, or one channel member owns or has contracts with the others, or has such power of influence that they all cooperate.

Horizontal marketing system (HMS). It is a contractual channel in which two or more companies at the same sales level come together to obtain new marketing opportunities.

Negotiated VMS (administered VMS). A vertical marketing system in which independent firms at different levels of production and distribution come together by contract to achieve greater savings or influence sales levels.

Integrated direct marketing. Direct marketing companies that use multiple links and multiple stages to raise prices and increase profits.

Intensive distribution. Accumulating inventories of goods in order to sell them as much as possible.

Direct-marketing channel. A marketing channel that does not have a level of intermediaries.

Distribution channel, marketing channel. A collection of independent organizations involved in the process of making a product or service available to a consumer or business user.

Channel conflict. Disagreements among members of the distribution channel regarding goals, distribution of roles and compensation.

Corporate VMS. A vertical marketing system that combines successive stages of production and distribution under the auspices of a single ownership; channel leadership is established on the basis of common ownership.

Marketing of direct sale of goods by mail, direct mail marketing (direct-mail marketing). Direct marketing through individual mailings, including letters, advertisements, samples, etc., sent to mailing lists.

Marketing database. A specially compiled list of data about individual customers or prospects that is used to identify customer categories, sell products and services, and maintain customer relationships.

Multichannel marketing. Multichannel distribution is when an individual firm establishes two or more marketing channels to serve the needs of one or more market segments.

Wholesale trade (wholesaling). All activities involving the procurement of goods and services and their subsequent resale or business use.

Wholesalers. Firms primarily engaged in wholesale trade.

Direct marketing. Marketing using various advertising media that ensures that the manufacturer interacts directly with consumers by reaching out to the consumer to obtain a direct response.

Retailing. All activities involving the sale of goods or services directly to the end consumer for their personal, non-business use.

Retailers. A business that derives its profits primarily from retail trade.

Telemarketing. Selling goods and services directly to the consumer using the telephone.

Controlled IUD (contractual VMS). A vertical marketing system that coordinates successive stages of production and distribution not through common ownership or contractual relationships, but as a result of the size and power of one of the parties.

Channel level. A layer of intermediaries who carry out certain work to promote goods and services and ownership of them to the final buyer.

Franchising. A contractual association between a manufacturer, wholesaler, or authorized service organization (franchisors) and independent companies (franchisees) that purchase ownership and operate independently or together with a large number of enterprises under systems of authority.

Franchise organization. A contractual vertical marketing system in which a channel member, called the franchisor, is responsible for several stages in the production-distribution process.

Exclusive distribution. Granting a limited number of dealers the exclusive right to sell company products in a given territory.

Electronic commerce (electronic shopping). Direct marketing through a two-way system linking consumers to the retailer's computerized catalog via cable or telephone lines.

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The choice of a distribution channel is a complex marketing decision, since it most directly affects the effectiveness of the implementation of the marketing concept in the enterprise.

A sales (distribution) channel is a set of firms or individuals involved in the process of promoting a product from manufacturer to consumer.

The formation of a distribution system begins with the selection of distribution channel participants. Once sales channels have been identified, marketing efforts concentrate on managing that channel. The sales network for the distribution of services in the hospitality industry is formed on the basis of contractual relations. A significant difference between the distribution channel of hotel services and the distribution channel of goods is that the distribution channel moves the consumer to the place where the service is provided, while the product itself moves through distribution channels to the consumer.

Participants in the market distribution channel, when marketing hotel services, perform a number of functions:

• - formation and adaptation of the offer to the needs of the clientele, including the provision of additional services, coordination of length of stay, etc.;
• - quotas, i.e. transfer of quotas of hotel rooms to intermediaries and wholesalers;
• - collection, analysis and provision of necessary information about products and services;
• - promotion and dissemination of convincing information regarding the services offered for advertising and propaganda purposes;
• - finding potential buyers of these services and establishing appropriate contacts with them;
• - negotiating price and other elements of the hotel offer;
• - organizing payments for sold hotel services and covering the costs of ensuring the operation of the sales channel.

Sales organization is a key element of the hotel business, and therefore the sales departments of hotel enterprises are striving to make their sales strategy more active and diversified. To achieve these goals, extensive contacts are established with clients, including regular guests, the actions of competitors are carefully analyzed, and direct marketing techniques are widely used. However, a hotel cannot do without carefully developed sales channels, since the transfer of sales functions to intermediaries allows the hotel to focus on the quality and competitiveness of its products and somewhat reduce its costs for the production of its services.

The distribution channel of hotel services covers various types of sales activities of the hotel.

Direct sale. This type of sale is carried out by the hotel directly to customers, without the involvement of intermediaries. In hotel practice, it is usually called free occupancy. Free accommodation is the accommodation of tourists directly, but it is possible to pre-book accommodation through the sales department. Most of these clients settle in without making a reservation in advance. As a rule, discounts for free accommodation are not provided. These are the so-called "counter" customers who pay the full rate for their stay and are therefore a valuable clientele for the hotel. In large hotels, the average annual vacancy rate is 8-10%, and the share of direct bookings is 10-15%. Hotels are interested in developing this sales channel because they save money on intermediary fees. To enhance the direct sales policy, many hotels have contractual relationships with various clubs, whose members have discount cards that give them certain discounts during their stay at these hotels.

Agency sales. This type of marketing of hotel products is carried out through intermediaries in the field of tourism and hospitality. These links include: travel agents and tour operators, tourist clubs and professional associations, resort bureaus, individual agents, airlines and other transport organizations. Hotels build relationships with them on a contractual basis and a balance of interests. The most important agents for the sale of Rooms are tour operators and travel agents.

Tour operators are tourism organizations that sell packages of tourism services, including transportation and accommodation, to legal entities and individuals. A tour operator can act not only on a commission basis, but also at his own expense. Tour operators, as a rule, have an agent network and also conduct direct sales.

The system of relationships and sales tactics are built by hotel enterprises based on the sales volumes of tour operator companies, i.e. annual tour turnover. Hotel companies, when selling large blocks of rooms to tour operators, provide them with discounts, usually 15-20%; in addition, for large groups, discounts can be higher. Higher discounts can also be provided for the widespread sale of additional services (meals, transfers, excursions, business center services, etc.).

Relationships between hotel enterprises and tour operator companies are built on a mutually beneficial basis while respecting the interests of the parties.

Interests of tour operators:

• - ensure high sales volume;
• - have minimal risk with high supplier liability;
• - have reliable suppliers;
• - get high profits on sales;
• - receive a variety of offers of products and services;

In turn, hotel enterprises develop their own sales policies, in which they define their own business interests and tactics for working with tour operators.

Interests of hotel enterprises:

• - to obtain from tour operator companies with large discounts the publication of catalogues, booklets, advertising materials, and the conduct of advertising campaigns to popularize the hotel;
• - tour operators must have their own agent network and regularly send tourists to the hotel;
• - work with large tour operators only on the basis of a large advance payment;
• - when negotiating and signing an agreement, it is necessary to obtain from the operators and record in the agreement the expected quantitative and financial sales volumes.

Currently, large tour operators are moving towards creating large blocks of hotel rooms. Travel agencies negotiate in advance with hotels on the price and number of rooms to be purchased, thereby providing their clients with the opportunity to get a good room at a reasonable price. Some travel agencies buy entire floors in hotels in their name. The profitability of such a sales scheme is obvious; blocks of rooms are sold in advance at an agreed price, and this reduces the risk for the hotel to be unoccupied.

If tour operators are, as a rule, wholesale sellers of tourism services, then travel agents are tourism organizations that sell hotel accommodations, acting on a commission basis, and usually conduct direct sales.

Travel agencies act as intermediaries between tour operators, hotels and consumers and play an important role in the tourism market, since the bulk of retail sales pass through them.

Interests of travel agents:

• · quickly receive commissions;
• · satisfy customers;
• · ensure the planned sales volume;
• · receive a special offer in the form of promotional tours;
• · get high profits on sales;
• · have a diverse price-quality ratio;
• · receive a wide range of offers of hotel products and services.

Hotel enterprises, when developing sales policies, pay special attention to travel agents. Many hotel enterprises rightly believe that this category of partners is the main one and requires close attention, since successful travel agents become tour operators. In this regard, the task of sales managers is to find stable travel agency companies and strengthen partnerships with them through a wide range of discounts (10-15%). In addition, sales managers must deeply study the business reputation of travel agents, their financial stability, the level of professionalism of employees, feedback from clients and business partners in order to get a true picture and properly build relationships with them.

Corporate sales. The corporate sale of hotel rooms refers to the process of receiving applications from corporate clients: trading companies, banks, industrial and other organizations and enterprises to accommodate their employees. Corporate clients are collective customers who do not carry out travel agency or tour operator activities. Corporate clients, due to late booking deadlines and limited stay periods (usually 3-4 days), cannot count on significant discounts, usually 5-10%, but if blocks of rooms are booked and purchased regularly, they can count on more favorable corporate rate. Corporate clients are cost-effective for hotels.

Firstly, they provide hotels with a guaranteed occupancy of business people in the planned period of time during business activity.

Secondly, corporate clients purchase more expensive rooms and a wide range of additional services and are not paid a commission.

Thirdly, corporate clients are of additional interest to hotels. Large companies and corporations, creative unions annually hold conferences and seminars for their partners; such events attract hundreds and thousands of participants, which, in addition to accommodation, require the development of stay programs and the provision of a wide range of services. Therefore, there is intense competition between hotel companies for such customers, and the one who has a well-thought-out marketing and sales policy wins.

In modern conditions, it is impossible to imagine the hotel business without the introduction of modern reservation systems. An increasing number of consumers are obtaining travel information via the Internet. Many potential tourists are even willing to neglect the benefits of face-to-face communication with a travel agent for the vast variety that the Internet provides them.

Advanced information technologies enable consumers to directly access databases and make reservations from their home computer using special marketing programs or Internet access. Recently, the Internet has firmly entered our lives, and the cost of its services has been steadily decreasing. All this affects the situation in the hotel market. Companies specializing in hotel management systems are ready to develop in this direction. In the current situation, a number of companies have announced that they are able to provide hotels with hotel management systems running on ASP (Application Service Providers) technology. This system uses a simple browser. ASP technology lies in the fact that all data about the hotel (room availability, guest history, rate management, reservations, etc.) and the hotel management system program itself are located outside the hotel itself - on a specially dedicated server. Such a server is located in the equipped service center of the Internet provider. Perhaps in the near future, any programs or applications for hotel operations will be available thanks to the companies providing these applications. All these new features will provide hotels with speed and clarity of work with travel agencies and partners, centralized tariff management, and consolidated reporting. Direct communication with booking sources will allow hotels to sell their entire room stock, and the presence of specialized centers and database storage facilities will allow them to have a minimum of computer equipment, which will accordingly lead to a reduction in the costs of supporting and maintaining information systems.

Acoustic channels for leaking confidential information

An analysis of distribution policy is carried out in order to select the effectiveness and cost of distribution channels and advertising.

Analysis of the provision of services to the population of the State Budgetary Institution “Zhilishchnik of the Golyanovo District”

Analysis of the rhythm of production of products (works, services)

The sales channel for hotel services is a set of independent organizations involved in the process of selling hotel services, which is available to individual or corporate consumers.

The formation of a distribution system begins with the selection of a distribution channel and its participants. After this, marketing efforts

concentrate on managing them. The sales network of hotel services is formed on the basis of contractual relations. A significant difference between the sales channel for hotel services and the distribution channel for goods is that the distribution channel moves the consumer to the place where the service is provided, while the product itself moves through distribution channels to the consumer.

Participants in the market distribution channel, when marketing hotel services, perform a number of functions:

Collection, analysis and provision of necessary information about hotel services;

Finding potential buyers of these services and establishing appropriate contacts with them;

Formation and adaptation of the offer to the needs of the clientele, including the provision of additional services, coordination of length of stay, etc.;

Negotiating prices and other elements of the hotel offer;

Quoting, that is, transferring quotas of hotel rooms to intermediary wholesalers;

Organizing payments for sold hotel services and covering expenses to ensure the operation of the sales channel. Sales organization is a key element of activity

hotels, and its sales team should strive to make its sales strategy more active and diversified. For these purposes, extensive contacts are established with clients, including “old” clients, the actions of competitors are carefully analyzed, and direct marketing techniques are widely used. However, a hotel cannot do without carefully developed sales channels, since transferring sales functions to intermediaries allows the hotel to focus on the quality and competitiveness of its services and somewhat reduce the costs of providing them.

Direct sale

The hotel carries out this type of sale of services directly to customers, without the involvement of intermediaries. In hotel practice, it is usually called free occupancy. If accommodation is available, pre-booking of accommodation is possible. Big

Some of these clients check in without making a reservation in advance. As a rule, discounts on accommodation for free accommodation are not provided. These clients pay the full rate for their stay and are therefore a valuable clientele for the hotel. In large hotels, the average annual vacancy rate is 8-10%, and the share of direct bookings is 10-15%. Hotels are interested in developing this sales channel because they save money on remuneration for intermediaries. To enhance the policy of direct sales, many hotels have contractual relationships with various clubs, whose members have discount cards that provide them with certain discounts during their stay at these hotels. Discounts can be provided both on weekends and on weekdays. A differentiated approach is used: if on weekdays discount cards give a 10-20% discount, depending on agreements with hotels and clubs, then on weekends and holidays the discount can be 5%.

Agency sales

This type of sales of hotel services is carried out through intermediaries in the hotel industry. These include: travel agents and tour operators, hotel clubs and professional associations, resort bureaus, individual agents, airlines and other transport organizations. Hotels build relationships with them on a contractual basis and a balance of interests. The most important agents for selling hotel services for hotels are tour operators and travel agents.

Hotels that sell large blocks of places to tour operators usually provide them with discounts of 15-20%. In addition, for larger groups, discounts may be higher. Travel agencies agree in advance with hotels on the price and number of rooms that are purchased, thereby ensuring the opportunity for their clients to get the desired room at a certain price. Some travel agencies buy out entire floors in hotels. The profitability of such a sales scheme is obvious; blocks of rooms are sold at a pre-agreed price, and this reduces the risk for the hotel of being unoccupied.

Travel agencies are intermediaries between tour operators, hotels and consumers and play an important role in the hotel market, since the bulk of retail sales of services pass through them.

Hotels, when developing a sales policy, should pay special attention to travel agents, since this category of partners is the main one and requires close attention. In this regard, the task of sales managers is to find stable travel agencies and strengthen partnerships with them through a wide range of discounts. In addition, sales managers must deeply study the business reputation of travel agents, their financial stability, the level of professionalism of employees, feedback from clients and business partners in order to form a fair idea and properly build relationships with them.

Corporate Sales

Corporate sales of hotel services refers to the process of receiving applications from corporate clients: trading companies, banks, industrial and other organizations and enterprises to accommodate their employees. Corporate clients are collective customers who do not carry out travel agency or tour operator activities. Corporate clients are usually not given significant discounts as a result of late bookings and due to limited stay periods (usually 3-4 days). These discounts are typically 5-10%, but if blocks of rooms are booked and redeemed regularly, they will qualify for a better corporate rate. Corporate clients are cost-effective for hotels. Firstly, they provide hotels with guaranteed occupancy by business people in the planned period of time during business activity. Secondly, corporate clients purchase more expensive rooms and a wide range of additional services and are not paid a commission. Thirdly, corporate clients constitute an additional interest for hotels, as a result of large companies and corporations, creative clubs, etc. holding annual conferences and seminars for their partners, which attract hundreds and thousands of participants, that, in addition to accommodation, they also need development of stay programs and provision of a wide range of services. This leads to intense competition between hotels for such clients, and the hotel that has a well-thought-out marketing and sales policy wins this fight.

If you imagine property as the heart of a hotel management company, then the distribution systems, the sales channels, appear as a circulatory system - its arteries. Distribution systems ensure a steady flow of customers. A well-managed distribution system can differentiate a market leader from a struggling company. Many companies in the hospitality industry make extensive use of the market distribution channels available to them. For example, Ritz-Carlton hotels receive a significant share of business from travel agents due to the active development of this channel. Marriott entered into a marketing alliance with New Otani, allowing it to welcome Japanese travelers to North America. In turn, New Otani was able to receive Americans traveling in Japan. In today's competitive environment, it is not enough to take into account a central reservation system and your own sales capabilities. Companies must develop increasingly complex, integrated networks and distribution systems.

Competition conditions, market globalization, electronic distribution methods and the short shelf life of goods (services) increase the importance of the distribution network. New and existing markets require creative approaches. Globalization means that many hoteliers must find foreign partners to help them expand their business in many regions. Sheraton has signed an alliance agreement with the Welcome Group in India, which operates Sheraton hotels in the Indian subcontinent. New electronic distribution methods have led to the growth of international reservation systems such as Utell. Finally, the importance of distribution has increased, since the "product" of the hotel business has a short shelf life .

RCI, a timeshare exchange company, uses its large number of members to regulate hotel rates for club members. The agreement is equally beneficial for both parties: hotels can sell rooms during the low season, and RCI can offer club members favorable terms of the deal.

The essence of distribution channels

A distribution channel is a set of independent organizations involved in the process of production of a product or service, accessible to individual consumers or firms in user industries. The development of a distribution system begins with the selection of distribution channel participants. Once these are selected, the focus of work shifts to channel management. Distribution networks in the hospitality industry are formed through contractual relationships and through loosely organized alliances between independent organizations.

Why are market intermediaries used?

Why does Shenago China sell porcelain tableware to restaurants through intermediaries? After all, this means no control over the final price of their products. But Shenago gains the advantage of organizing sales through intermediaries: it does not need to maintain special premises for displaying products and large sales forces in every major city. An intermediary - a supply company - displays their products, promotes their sales and prepares personalized sales proposals directly for restaurants. The intermediary company sells hundreds of other products, the wide range of which makes it a convenient regular supplier for restaurant businesses. The commercial potential of the range of products offered allows it to prepare and send personal sales inquiries, send catalogs and provide other support for the marketing of the products it represents. Selling through wholesalers and retailers is usually much more effective than direct selling.

Intermediaries are highly effective in promoting goods to target markets. Thanks to their established connections, experience, specialization and scale of action, they can provide wider sales than the company itself. Part A shows the work of three producers, each of whom uses direct marketing to reach three customers. This system requires nine different contacts.