Understanding the distribution systems, recommended rates of commission and the roles of various booking agents is essential for a successful business.
Reaching time-poor consumers in an increasingly competitive market remains the greatest challenge facing tourism enterprises. The tourism distribution system provides various channels, from travel wholesalers to retailers, agents and inbound tour operators, each requiring time and resources from enterprises to secure their services and support.
The boom in online travel planning and booking has created a growing new channel to reach customers; however, the internet presents even more complexity to travellers who are now looking to search, compare and book a range of products.
To buy your product, visitors could either:
- Buy direct with you by phone, increasingly via the internet, or maybe walk-ins
- Go to a travel agent
- Buy through online travel agent sites such as Wotif, Booking.com, Viator and Expedia
Understanding which distributors are right for you is complex but essential.
Tourism distribution example:
A TOURIST (based anywhere in the world) has heard about Tasmania and decides to find out more.
The tourist visits his local RETAIL TRAVEL AGENT and ends up booking an eight-week adventure, including accommodation.
The travel agent plans a comprehensive itinerary using the brochure of a TOUR WHOLESALER and then proceeds to book all tour operations through them.
Tour wholesaler contacts the INBOUND TOUR OPERATOR (ITO) to book each individual element of the tour itinerary, such as accommodation and tours.
Inbound tour operator contacts individual LOCAL TOUR OPERATORS to book accommodation and tours directly.
Benefits to operators of being included in a wholesale program:
- A comprehensive brochure is produced and distributed to travel agents in Australia and often overseas. Plus, an industry launch is usually held to promote the brochure.
- The wholesaler’s representatives will conduct sales calls on retail travel agents to promote the program and its operators.
- Wholesalers have computerised, often global, reservation systems to record bookings.
- Familiarisation visits for the retail industry and media are conducted to allow staff to experience the product first-hand.
- Wholesalers undertake advertising campaigns aimed at both consumers and retail travel agents.
Major domestic wholesalers working with Tasmanian products and experiences include Infinity Holidays (Flight Centre), AOT (Sunlover), Qantas Holidays (Helloworld) and Tas Vacations (Tasmania’s Travel Company – focussed on the Australian & NZ markets).
If you have a commissionable product (see Commissions section below) and want more information on working with these wholesalers, speak to the DST team.
Benefits to operators of being packaged by an inbound tour operator (ITO):
- Inbound tour operators conduct several activities to attract the interest of overseas wholesalers and retail agents.
- They create individually tailored packages. For example, farm-stay, self-drive, nature-based tourism, special events and so on. They can be for Free Independent Travellers (FIT) or Group Inclusive Tours (GIT).
- They attend trade workshops, missions and shows, and they provide international exposure for your product.
The Australian Tourism Export Council (ATEC) provide members with a list of ITOs and the markets in which they operate.
Packaging your product (be your own inbound tour operator)
Packaging involves combining several product components together to form a holiday experience for the consumer. Before you develop a package or packages, it is important to do some research to determine your target market/s and the types of experiences that appeal to your target market/s.
A package can include components such as accommodation, transport, tours, meals and event/theatre tickets. For example, you may be a regional accommodation supplier who wishes to encourage visitors to your area to stay for one or two nights. Your package may include a local tour and a meal at a local restaurant.
Developing packages often make your product more appealing for wholesalers and travel agents to book your product and region, particularly if you are a single attraction or accommodation provider with a small number of rooms. A central booking number for the package makes it attractive for the travel industry, as it only means one call is required to secure all package elements.
Packages can assist in driving business to your product during low seasons or off-peak periods. Attractive pricing can drive consumers to book packages during these times. Packages can also help drive new markets by offering products that appeal to a new market segment.
Ideally, you should give it a special name to distinguish it from your usual product, appeal to a particular market and make it stand out from the crowd.
Commissions
Packages make it easier for travel agents and wholesalers to sell them and earn a commission. Packages distributed through the travel trade will need to be fully commissionable. The cost of covering commissions on top of operating costs may seem daunting to some operators. However, it is important to remember that you only pay a commission on those bookings actually made through the wholesaler or travel agent.
Examples of commissions are as follows:
- International or domestic retailers who sell directly to a customer (includes TVINs): 10%-15%
- International or domestic wholesalers who sell to retailers, who then sell to a customer: 20%
- Inbound tour operators who sell to wholesalers, who then sell to retailers, who then sell to a customer: 25-30%
Pricing your product for wholesalers
To work out the price of your package:
- You need first to work out what your costs are and factor in extra for administration (for example, if you are going to book the components that you are not providing yourself);
- Then look at what competitors are charging and what you think the market might pay; and
- Then factor in commissions
Does it add up OK? If not, try adding more value for the customer that might justify a higher-end price or decreasing costs by negotiating harder for the components. Just don’t make the mistake of giving up on the concept of paying commissions because you think you can’t afford them, as this is often a false economy.
Businesses also need to honour their distribution systems by not selling their products at a discounted price (minus commission) through other avenues such as their own website.
NOTE:
Net rate = rate excluding commission. This is the price that you receive after the commission.
Gross rate = rate inclusive of commission; the price charged to the consumer. This is the rate that should be used for all marketing. This rate should not differ whether you sell directly to the consumer or through a wholesale distributor.
Are you export-ready?
Retail Travel Agents, Tour Wholesalers and Inbound Tour Operators are looking for quality products that they can package and sell to international clients.
Answer the questions below to determine if your product is ‘export ready’; the more ‘yes’ answers you can give, the closer you are to working with international distributors.
- Have you been operating for at least 12 months?
- Can you provide quick confirmation of a booking?
- Do you fully understand the concept of commission and net rates?
- Do you fully understand the roles within the tourism distribution channels?
- Is your product reliable with consistent opening times and regular schedules?
- Do you understand the cultural needs of different markets?
- Is your pricing consistent across all levels of distribution?
- Are your rates set for at least 12 months in advance?
- Is it easy to make a booking with you via email or phone?
- Is there a demand for your product from overseas markets?
- Have you identified which international markets your product appeals to?
- Do visitors from this market already visit your region?
- Can you always deliver what you promise in your brochure and website?
- Do you attend industry briefings and updates?
- Have you joined the Australian Tourism Export Council (ATEC)?
- Can your product be packaged with other products?
- Do you have a credit management system in place if needed?
- Do you monitor your cash flow?
- Are you an accredited business?
- Is your public liability insurance relevant and up-to-date?
For more details, read the introductory guide to inbound tourism in Australia. This toolkit has been produced by the Australian Tourism Export Council (ATEC) in
partnership with Tourism Australia and as a result of collaborative participation from all State and Territory Tourism Offices.
Selling through an online travel site such as Wotif or Viator (Trip Advisor)
An increasing number of visitors are using the internet for all of their travel planning needs, including information seeking, holiday/route planning and booking transport, accommodation and tourism-related products. Choosing the right online partners is at least as complex (if not more) than the traditional distribution system and requires an equal investment in time and resources.
But online booking and reservation systems can definitely increase overall bookings if a website is user-friendly, regularly updated, and search engine optimised (see info on the Tourism E-Kit and Tasmanian Digital Ready program in Section 10: Media & PR).
These days many online booking systems make it easy for the operator to connect and be sold through online travel agents (see below).
Just a few examples of online booking systems for tourism operators:
SiteMinder
An Australian company that provides cloud-based software to the travel and hospitality industry. Its main focus is helping you to reach, attract, and convert guests with its online platform. For operators that are accredited with TICT, SiteMinder offers a 4-week free trial period.
Rezdy
Designed specifically for tour operators and attractions, this independent booking software provider was created in Australia and allows operators to sell their products directly to consumers and through thousands of travel distribution channels worldwide.
Bookeasy
Australian company originally developed for the visitor information centre market, Bookeasy now delivers a complete solution for any size tourism business and integrates with numerous online travel agents.
Tip: a comparison of the features of the most popular booking systems for tourism businesses can be found in the relevant Tourism E-Kit module OR use the services of a specialist consultant (see Who can help – special consultants).
Working with the Cruise Ship Industry
After a long pause on Cruise in Australia, cruising has restarted on the mainland, and Tasmania is preparing for the 2022/2023 cruise season. With over 10 million passengers having cruised in 82 overseas countries since August of 2020, Cruising is certainly back. By the end of December 2022, 95% of cruise line fleets will be back in service.
Discover more Cruise Industry Resources.