In order to effectively evaluate the effectiveness of involving only retail travel agencies instead of a combination of travel agencies and tour operators, one must first examine what constitutes a tour operator and a travel agency: Tour operators are businesses that specialize in manufacturing and selling holiday travel packages for large groups. Due to the fact that tour operators operate by booking hotel rooms and creating packages in advance of the consumption date, they cannot cater to the business segment and therefore focus on the leisure market. This is because business travelers require flexible itineraries on short notice, which cannot be provided by tour operators for reasons just explained. Thus, a tour operator makes profit by selling in large numbers, and is therefore considered a wholesaler. In order to make the packages attractive to customers, tour operators are given discounted hotel room rates that may then be combined with aspects such as flights, transportation and food. These packages are kept at as low a cost as possible in order to maintain this attractiveness. Once the package has been created, it is then sold according to demand to hospitality retailers such as travel agents.
A travel agency is a business that sells a wide range of hospitality related products and services to end-user customers on behalf of third party travel suppliers. Travel agencies are without their own product, and tailor the packages offered by producers to the needs of the consumer. They are arguably more impartial to offer something to suit the traveler as they are independent agencies. They retail to consumers on an individual basis. Thus, they are considered intermediaries in the hospitality distribution channel and are responsible for bringing customers to a product (as opposed to intermediaries in other channels who bring the product to the customer).
In a distribution channel that involves only a retail travel agency, the hotel will pay a fixed...
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