International Travel Distribution

One of the trickiest aspects of selling your product offshore is negotiating the international travel distribution process. Travel distribution is slightly different in each country, but the product development pages in our Market Guide section will be of use to you in understanding these flows.

Different products will suit different booking methods. Some may use all steps in the distribution chain while others bypass one or more of the links. It is important to identify the most cost-effective and appropriate distribution method for your business.

There are a number of ways for customers to buy your tourism product. Some are direct - over the phone or internet; others are indirect - through a third party, who may be in New Zealand or overseas.

The traditional channels in the distribution process are retail travel agents, wholesalers, inbound tour operators and booking agents. With traditional channels, bookings are usually made in advance and paid for by the agent after the visit.

Traditional distribution channels involve a cost to the operators called a commission - this should be factored into your pricing.

Different Elements of the Distribution Channel

Inbound tour operators (IBOs)

Inbound tour operators are based in New Zealand. They are responsible for preparing itineraries and booking the ground arrangements on behalf of internationally based wholesalers.

Travel wholesalers

Wholesalers provide retail travel agents with brochured travel packages, usually offering transport, accommodation and activities. Most wholesalers are based offshore. Some own retail agencies or sell directly to the public.

Retail travel agents

Selling directly to the public, retail travel agents will either use product offered by a wholesaler or deal directly with the product supplier - especially for short break holidays.

Visitor Information Network/booking agents

The Visitor Information Network of i-SITE Visitor Centres handles bookings around New Zealand. Many regions also have other independent booking agents. Each will often offer brochure display space at a cost.

Brochures

Brochures are a key tool used for tourism products. They are particularly used by booking agents, inbound tour operators, retail travel agents and wholesalers. They are also used in direct mail campaigns.

Guidebooks

National and regional guidebooks may be used as references by wholesalers, inbound tour operators and retail agents. Independent travellers use them to plan their own holidays. Guidebook writers usually travel incognito to ensure they are treated like ordinary holidaymakers.

Internet

The internet has become one of the most comprehensive and easily accessed sources of destination information. Internationally, travellers are becoming increasingly comfortable making bookings online.

Commissions

Each sector of the distribution channel receives a commission payment at the rate you have negotiated with them.

Levels of commission may vary, but a general guide to rates is:

• Retail travel agent/visitor centres - retailers who sell directly to the customer - 10%.
• Wholesalers - who sell to retailers, who then sell on to customers - 20%.
• Inbound tour operators - who sell to wholesalers - 25%.

Although commission rates for wholesalers and inbound operators are higher, these selling channels are likely to get your product placed in brochures and databases with long-term benefits in terms of sales outcomes.

Creating a Distribution Plan

You should not attempt to engage with all elements of the distribution channel, and some will be more appropriate for certain products than others.

For example, a B&B in rural New Zealand may find the best way to sell to international visitors is once they are in New Zealand. The best distribution methods in this case are local guidebooks, i-SITE Visitor Centres and brochure displays.

On the other hand some large New Zealand suppliers may sell most of their products offshore. For this reason, they may find it useful to appoint a sales agent in an offshore market to call on wholesalers and agents and undertake sales campaigns on their behalf.

When looking at your distribution plan, consider:

• What distribution channels do your customers use to purchase product?
• Do your customers purchase your product while in New Zealand or before they arrive?
• What distributors are likely to sell and promote your product?

Packaging Products

To sell your products in the international marketplace they need to be visible - and the best way to do this is to get featured in offshore brochures.

However, international trade generally will not feature lower-priced products as the commission rates generated are not high enough.

Occasionally wholesalers will feature products in return for a ‘production fee’. Another way to get into brochures is to combine your product with others to form a package or cluster or marketing group to create a product with a higher dollar value (and subsequently a higher return for the agent).

Combining products to form a package allows customers to enjoy a range of experiences with minimum effort
on their part.

What to consider:

• Combining with other product suppliers. Before you team up with other suppliers, check out their products thoroughly. You need to be confident that their quality and professionalism are similar to yours.

• Sales and marketing. Once you have developed your package it should be marketed in its own right. The operators involved should share the cost of developing promotional material.

• Bookings and administration. It’s best that one business be responsible for all the bookings and financial processing for the package. They will need to be responsible for sharing earnings from the package to the other operators involved - at previously agreed levels.

• Pricing. As with a stand-alone product, pricing should be agreed for a 12-18 month period.

• Product development. Expect it to take at least two years to establish your package internationally. Assign one person to be the front-person for the package to save confusion.

• Legalities. It’s a good idea to draw up a legal agreement between the companies involved in the package.