In the tourism industry, travel agents, tour operators etc. are considered the intermediaries (distributors). Their main task is to bring buyers and sellers in the field together and reduce transaction and supply/ownership costs between buyer and seller, instead of completely eliminating an intermediary (such as a distributor). Benefits of Tourism Intermediaries? For the producer: * they are able to sell in bulk (for example: hotels) and might be able to transfer a certain risk to the * tour operator depending on the contracts made * reduce promotion costs
For the Consumer: * avoids search and transaction costs (by purchasing inclusive tour) * gain from specialist knowledge of tour operator * often gain most from lower prices Disadvantages of Tourism Intermediaries? The use of intermediaries by producers, such as hotels, will result in the loss of margins and in the loss of influence in the distribution process. ?For the consumer choice may be reduced and prices increase, especially with the further concentration and consolidation of tourism intermediaries. 1. 2 Integration, consolidation and concentration
The term integration is an economic concept to describe formal linking arrangements between one organisation and another. (Cooper – Fletcher 2005) Horizontal integration? This occurs when two tour operator or two travel agents amalgamate, either through merger or takeover. The main reason is to ensure the extended geographical spread of outlets to ensure representation in al regions ? Vertical integration? A certain linking occurs along the production process. For example airlines establish their own tour operating company (British Airways. But the most common form of vertical integration within tourism intermediaries is when a wholesaler/ tour operator purchase or merge with a travel agency chain. ?One good example of wide range of integrated activities is the French conglomerate Groupe Accor: 3. 4 Integration strategies as means of expansion strategies Tour wholesaler or tour operator can strengthen their market position by integration. Integration takes place whencompanies merge or one company buys another. As it was outlined in Chapter 1 already, there are two main forms of integration: 1.
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Vertical integration It takes place when two companies of different levels on the distribution chain merge. Examples could be, when a supplier merges with a wholesaler/tour operator or a tour wholesaler merges with a retail agent.? We speak of backward vertical integration, when a wholesaler merges with or buys an airline or with a hotel. With this move a greater control over the source of supply is desired. ?We speak of forward vertical integration, when a tour wholesaler merges or buys a travel agency. In this case greater control over the distribution network is wanted.? Lubbe 2000) 2. Horizontal integration It means that tour wholesalers/ tour operator merges on the same level of distribution. For example a tour wholesaler buys another tour wholesaler to improve their market share and reduce competition. In general, horizontal integration always leads to economics of scale, in functions such as human resources, purchasing, and thus to cost savings and price reductions. Through cost savings an organisation may become more cost effective, allowing them to develop a better range of products and to achieve better quality control.? (Lubbe 2000)
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