In the last 12 months my understanding of the tours and activities industry has been shaken. The path that I was dutifully walking ended up not being the path that the rest of the industry was taking.
But after so many years of being in this space, advocating for it, educating it, following the trends, helping to push forward connectivity, how could I have got things so wrong?
When I first started working in this space is 2005 there were very few if any software solutions designed specifically for tour and activity businesses.
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There were definitely no SaaS solutions - heck, “SaaS” wasn’t even a term yet.
What did exist at that time was an undercurrent of need that had not yet expressed itself in a meaningful way.
Tour and activity businesses were just starting to realize the opportunities with e-commerce, but it would take another five to seven years before demand would grow enough to make the rest of the travel industry pay any attention to the space.
Somewhere along the way, I had focused too much effort on trying to get the rest of the industry to take the tours and activity space seriously and not enough effort on the suppliers that make the space possible.
Experience but not wisdom
Now it seems, the tour and activity space has finally "Come of Age," according to Phocuswright.
Businesses have been educated, investment has increased, more supply systems have come online and at long last the major online travel agencies have decided to jump in with both feet as opposed to just giving tours and activities a passing glance.
The suppliers and their systems are connecting to the OTAs and together everyone is selling more tours and activities to consumers.
If OTAs are going to continue being part of the tour and activity landscape, they’ll need to offer suppliers something that they can’t get from their own marketing efforts.
OTAs are focusing on marketing to consumers who are out of reach of suppliers and in return, suppliers are paying healthy commissions to the OTAs for these incremental sales.
That’s what we all believed anyway.
The situation now, however, is that suppliers are getting distracted by the magic show and not paying enough attention to what is waiting for them if they take their eyes off the magician’s hands.
With the purchase of supply systems by two major OTAs (Bokun by TripAdvisor; FareHarbor by Booking Holdings), the distribution side of the industry has made its intentions very clear: It wants to own supply AND demand of tours and activities.
By giving preferential listing placement to suppliers who use their owned systems, these OTAs have made it clear that they have no intention of being fair to all connected partners, partners that have invested significant money, time and effort to build and support connectivity.
By replacing traditional website links with proprietary "Book Now" buttons that only go to their own website, businesses are giving away customers to OTAs without even realizing it.
This strategy is not so different from what the OTAs did with the hotels in the early 2000s. Ask any hotelier now how they feel about that.
A well-trodden path
Over 70% of hotel revenues are driven by OTAs, compared to only 4 to 6% for tour and activity revenues.
Tour and activity businesses are currently in a much different position than hotels were 20 years ago. Tour and activity businesses don’t need OTAs to thrive or even survive.
But the bulk of the supplier community doesn’t know this, and the OTAs have made it clear that they want the same hold over tours and activities that they have over hotels.
It’s important to keep perspective, though. The OTAs are only doing this because it is what is best for their businesses.
This strategy is not so different from what the OTAs did with the hotels in the early 2000s. Ask any hotelier now how they feel about that.
Stephen Joyce
They are trying to increase market share, drive new business and build shareholder value. Tour and activity businesses consequently need to do the same.
When it comes to contracting, suppliers need to negotiate terms rather than blindly accept agreements as presented.
These terms include the ability for an OTA to use a supplier’s brand in advertising, which cannibalizes direct sales for suppliers by pushing customers searching for a specific brand to an OTA site instead of the supplier’s own website.
Another is the requirement that the OTA always be provided with the best rate available, thus eliminating the ability for suppliers to negotiate rates with other distribution channels. And finally the ability for OTAs to sell a supplier’s tours at any retail price they want, effectively removing price integrity and de-valuing the supplier’s brand.
Suppliers should reject all of these terms or, if they are non-negotiable, simply walk away from the OTAs.
Why? Because the research clearly shows that suppliers don’t need them.
Rethinking the new thinking
By focusing on their own websites, suppliers can increase direct bookings by improving their organic search results, spending on targeted advertising campaigns and using tools like Google My Business to ensure they are present in Google Map results when travelers are in-destination.
The research is clear: 76% of users in a destination use Google to search for local businesses first.
Search has allowed businesses to become much more discoverable, to the point that listing and review sites - and OTAs - add incrementally less value.
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As suppliers become more educated, sophisticated and focused on building their own brands, consumers will be presented with more choice in the marketplace.
If OTAs are going to continue being part of the tour and activity landscape, they’ll need to offer suppliers something that they can’t get from their own marketing efforts.
They’ll also need to realize that the relationships they have with their supplier partners and their technology providers are a two-way street.
At present, the revenues driven by the OTAs are not enough to make any significant dent in any one supplier’s bottom line or close to covering the investments made in connectivity thus far.
The burden to provide value lies squarely in the laps of the OTAs, and suppliers ought not to forget that.
The advantage that OTAs have is scale and deep pockets. It’s hard for a small local business to compete with a large global brand. But what the supplier community has is numbers.
Thousands of suppliers around the world learning, working and advocating together could be a powerful voice for the industry.
Maybe it’s time for the supplier community to step up, come together and work to develop the industry in a way that benefits all participants.