What is the Travel Trade?

The travel trade is a term that refers to those companies and organizations whose business revolves around managing, packaging, organizing, or reselling travel products, such as airfare, car rental, hotel or cruise accommodation, tours, and more. The players in this field are the intermediaries between the travel product suppliers (hotels, airlines, etc.) and the consumers who purchase the final travel product.

Chapter 3 discusses the concept of tourism products, which are the elements tourists consume during a travel event. The term ‘travel product’ has essentially the same meaning, however, it is used more often than ‘tourism product’ in the travel trade industry. The term ‘tourism product’ is more commonly used in destination management and strategic planning. It is not necessarily something that can be bought and sold and can therefore include hiking trails, the people and culture at the destination, scenic views, or other activities or sites of interest to tourists. The term ‘travel product’ is more often used in association with elements that require a financial transaction to consume.

Understanding the travel trade can be complicated because travel products can potentially go through many hands without the traveler’s knowledge before the products are purchased by the traveler. If a person is traveling for business, they may purchase their airfare from a corporate travel agent or travel management company, but the plane ticket might actually be sold by an airline consolidator who obtained discounted rates from the airline. If a person is traveling with a group on a tour, such as a school or church, the tour may have been packaged by a tour operator and sold through the group leader to the traveler. Or, if the consumer is traveling for leisure, they may purchase their hotel room through an online travel agent (OTA), who resells rooms on behalf of a hotel. These paths of travel product distribution will be described in further detail in this chapter.

Travel Product Distribution

The diagram below outlines the path travel products can take, from production to distribution, to reach the ultimate end consumer—the traveler. Generally, there are four links in the travel distribution chain, the supplier, the wholesaler, the retailer, and the consumer.

Travel suppliers sell travel products to consumers, to wholesalers, or to retailers. Wholesalers (described below), such as B2B (business to business) tour operators and consolidators, do not sell directly to consumers, but instead resell travel products to retailers, such as B2C (business to consumer) tour operators, travel agents, and online travel agents. These companies earn revenue at each stage through markups on the travel products, commissions on products sold, and through service fees.

While the above diagram shows a simplified travel distribution chain, travel products can take alternative paths before reaching the traveler. The chain may be shorter if the traveler buys directly from the supplier. Travel agents and B2C tour operators may buy and sell travel packages from other B2C tour operators. Or, wholesalers may purchase packages from B2C tour operators to resell to other B2C tour operators, in which case the flow takes a step backwards before moving forward again. In addition, conglomerates like HelloWorld Travel Group encompass subsidiaries from multiple links in the chain. The various companies work together to provide travel product rates, booking tools, and packaged travel across the network.

Fact

Helloworld Travel Group (2022) dominates the travel distribution market in Australia and New Zealand. Subsidiaries include wholesalers and air consolidators, leisure and corporate travel agents, travel management companies, inbound and outbound tour operators, receptive and ground tour operators, destination management companies, and even technology companies. Below is a list with descriptions of Helloworld Travel Group subsidiaries (2022, reprinted with permission).

The Helloworld Travel Group (2022) has over 2,000 travel agencies throughout Australia and New Zealand, including ‘bricks and mortar’ stores and home-based agents. Helloworld agents have the advantage of utilizing Helloworld’s wholesale and consolidation subsidiaries. VivaHolidays, for example, is a large consolidation company that offers travel agents wholesale rates booked through an online platform.

Helloworld has tour operating companies that offer wholesale, receptive, ground and DMC services. AOT Inbound, ATS Pacific, and Experience Tours Australia work with agent partners globally to sell tours to Australia, New Zealand and the South Pacific. ATS Pacific, for example, provides inbound services to UK, European, Scandinavian, American, and Japanese markets for both the fully independent traveler (FIT) and group segments (to be described later). Agents across the globe have the choice of booking via an online portal with over 4,000 products in the region. Entertainment Logistix primarily works with the entertainment industry, managing complex freight and logistics for a range of customers across various sectors including the performing arts, live music, theater and stage, media, production, sports and large national festivals, and corporate events, all with demanding tour schedules across Australia and New Zealand. Ground operator, Tourist Transport Fiji (TTF), services over 100,000 passengers each year, offering airport and group transportation, day tours, adventure travel and sightseeing in Fiji exclusively.

Helloworld Travel Group embodies nearly all levels in the distribution chain, exemplifying the interconnectivity of travel business sectors. By consolidating these companies under one umbrella, Helloworld Travel Group influences the travel marketplace through high-volume purchasing of travel products from suppliers and controls each link along the chain of travel product distribution.

Technology

Technology has proven to be the biggest instigator of change within the travel trade. Technology-driven innovations, such as online booking, have drastically affected every link along the travel product distribution chain. Technology connects each stage of product distribution identified in the diagram above. Whether using a computerized network system such as the Global Distribution System (GDS) that connects travel product suppliers with retailers or working with online travel agents (OTAs) that offer consumers travel products online, people primarily buy and sell travel virtually today. Technological innovations have affected the travel trade industry on all levels, and future technological development promises to continue to reconfigure how travel trade segments interact.

Challenges with the Travel Trade

Retailing travel can be challenging due to the lack of control of the travel product and worldwide instability. Travel professionals sell another company’s travel products. For example, a retailer might sell a hotel room to a traveler. The retailer has no control over the level of customer service provided by hotel staff, the cleanliness of the room, or the myriad of other issues that may arise. Dissatisfaction with the hotel may transfer to the retailer, which may result in a financial or reputational loss. Retailers often research travel product suppliers and conduct site visits of the hotels, restaurants, and destinations they resell to travelers. However, they cannot vet every travel product they resell nor can they control alterations in the suppliers’ daily operations.

Uncertainty in global travel accessibility presents many challenges for the travel trade. Destinations are not always stable and can be subject to climate change, political upheaval, social unrest, or changes in travel policy. Global interruptions, such as the COVID-19 pandemic and the September 11, 2001, terrorist attack in the United States, remove the travel product from the hands of the retailer when travel is locked down. Travel trade businesses are subject to disrupted business operations, resulting often in financial losses.

History of the Travel Trade

As discussed earlier in this textbook, one of the most influential early travel firms was founded in 1841 by businessman and Baptist preacher Thomas Cook. The company started by organizing and selling railway excursions and packaged tours to Europe, combining multiple travel products such as hotel stays, rail passage, and other activities into one product that was then marketed and sold to tourists. Cook’s operations steadily expanded and served nearly 20 million travelers across 16 countries prior to its liquidation in 2019. Its demise, after 178 years in operation, was brought on by global factors affecting tourism, including Brexit (UK’s withdrawal from the European Union) and the company’s refusal to embrace the new, evolving online marketplace (Hernandez, 2020). Cook, nonetheless, led the way for growth of the travel trade.

Other travel firms, mainly independent travel agents, emerged in the marketplace to act as brokers selling tickets to travelers for rail and sea as well as booking accommodation. In the mid-twentieth century, when air travel became less expensive and less exclusive, travel agents played a key role in selling airline tickets. In fact, agents had specialized systems and connections to airline booking systems and the airline companies relied heavily on agents to book passengers on their flights. In the 1980s and 1990s, larger travel agency chains grew through mergers and acquisitions and some of these companies became more involved in organizing and operating tours and selling cruise passage (Page, 2019).

Today, many travel companies have found success specializing in certain destinations or travel products. Some have incorporated different travel segments and products into their business models, such as planning independent travel, packaging travel, operating tours, reselling wholesale travel products, and counseling travelers on options. Some, such as destination management companies (DMOs), simultaneously specialize and generalize. In particular, DMOs specialize in opportunities within a certain destination but also offer a wide variety of expertise in planning everything from flights and hotels to sightseeing, meetings, and events. The variety of business models showcase the complexity of the travel trade as businesses have found ways to navigate an ever-changing market landscape.

Significance of the Travel Trade

The travel trade is interconnected, meaning that each link along the travel product distribution chain needs the other segments to succeed in order for the travel product to get to the consumer. Suppliers looking to diversify their sales channels may choose to utilize a wholesaler or retailer to maximize sales. Each segment plays an important role along the chain, which contributes to the growth of global travel. The travel trade and distribution chains keep the travel economy open, dynamic, and competitive.

Attributions

1. Figure 4.1: Travel Product Distribution by Meagan McGuire, for WA Open ProfTech, © SBCTC, CC BY 4.0
2. Figure 4.2: Helloworld Travel Limited’s Brand Portfolio © Helloworld Travel Limited Used with permission.