Translate

Friday, October 05, 2012

Top 10 Travel Distribution Fallacies - #9 Direct Distribution


“Going direct” is always the cheapest distribution channel 


It is dangerous for travel suppliers to make this assumption without considering all their costs.

Direct distribution may indeed offer lesser costs than some other channels, as clearly you do not need to pay commissions and overrides, or GDS fees.  But it is not free.

Suppliers should take into account all of the costs of driving traffic to their web site (keyword buys, online and offline advertising as an example) and also the cost of the call center, as often online shoppers look first online, but then pick up the phone to make a reservation.   Don't forget to look at the conversion rate and the cancellation rate, plus the average transaction value.

Bottom line is that you must look through both lenses (revenue and cost) before you make your distribution decisions.  You can't look at just "cheapest".  You need to instead focus on what is "most profitable".

This means that your back office reporting systems must be able to deliver information about booking source so that you can calculate your average revenue per transaction for each channel that you derive business from.

Higher touch channels, such as travel management companies (TMCs) and traditional travel agencies provide a consultative service offering which yields a higher average sales than their online counterparts.  This is not because they can't match the price offered online, but because they service the whole need of the client (who, what, when, where, why and how they are traveling are front and center in the discussion during the planning process versus just how much the traveller wants to pay).

Bottom line is that the customer is multi-channel and understanding how they want to buy from you is just as important (if not more important) as how you want to sell to them.



Post a Comment

Popular Posts

TripPlanz - Intelligent Trip Planning right from your website or blog