The chain of distribution is an important concept to understand when studying or working in travel and tourism. Whilst the title may sound complicated, it is actually very simple. In this article I will provide you with an explanation of what is meant by the term chain of distribution and I will explain the different levels of the chain. I will also provide some examples of travel and tourism companies that you might find at each level.
What is the chain of distribution?
The chain of distribution is the series of companies or businesses that are involved in transporting, storing and providing goods and services to customers.
The chain of distribution is often represented visually using a chart. This chart demonstrates the different elements of the chain of distribution at different levels. The levels are typically given the titles of: principals, wholesalers, retailers, consumers.
The chain of distribution helps us to understand horizontal and vertical integration.
Elements of the chain of distribution
There are four key elements within the typical chain of distribution that are commonly noted.
However, it is important to note that not all businesses and business structure will follow this ‘chain’. Sometimes there will be only one element and sometimes there may be more than four. Each business system is different and is designed in order to ensure that business operations are as efficient and effective as possible. As such, the chain of distribution is more of a guide than a rule!
Principals
The principals are the core elements that are being sold to the consumer.
Within the tourism industry this includes a wide variety of products and services including accommodation, transport, attraction tickets and ancillary products and services.
Examples: Marriott hotel room, Airbnb apartment, easyJet flight booking, ticket to Disney, Jordan pass
Wholesalers
The wholesalers are the people who packager the product.
Within the travel and tourism industry, the biggest wholesaler is represented as a tour operator. A tour operator is the organisation who takes various aspects of the travel experience and packages them together. This is then traditionally sold by a travel agent.
Many organisations choose to undertake their tour operations and travel agents elements together, so it may not always be transparent to the consumer that these are actually two separate stages in the chain of distribution.
Nowadays, many tourists are moving away from booking package holidays organised through tour operators. Many people are now putting together their own holiday packages online; known as dynamic packaging.
Examples: TUI, Expedia, Kuoni, Kox and Kings
Retailers
The retailers are the organisations that sell the products and/or services.
Within travel and tourism, we often refer to travel agents as being the most common retailers.
Traditionally, travel agents would have high street shops. However, in recent years many of these have been closing down. Instead, people are using these travel agent’s online provisions.
People are also frequently choosing to avoid travel agents altogether and book their holidays independently.
Examples: TUI, Travel Supermarket, STA Travel
Consumers
The consumers are the customers who purchase the products and/or services.
There are many different types of tourists. The most common types of tourists include business travellers, leisure tourists, domestic tourists, international tourists and people who a visiting friends and relatives (VFR).
Examples: Families, employees, relatives, students
To conclude: Chain of distribution
When studying travel and tourism it is important that you understand the chain of distribution. This chain includes four key elements, however it is important to remember that this is not a rigid rule, rather it is a guideline for understand how different organisations interact and work together in the travel and tourism industry.
Further reading
If you’re studying travel and tourism then I highly recommend the following texts to support your learning:
- An Introduction to Tourism: a comprehensive and authoritative introduction to all facets of tourism including: the history of tourism; factors influencing the tourism industry; tourism in developing countries; sustainable tourism; forecasting future trends.
- The Business of Tourism Management: an introduction to key aspects of tourism, and to the practice of managing a tourism business.
- Tourism Management: An Introduction: gives its reader a strong understanding of the dimensions of tourism, the industries of which it is comprised, the issues that affect its success, and the management of its impact on destination economies, environments and communities.