May 24, 2019 |

Here's what we'll be working on till September 2019

At the end of 2018, we published a blog post about our commitments to our customers. We detailed the ways we plan to grow our booking platform and how we want to deepen our relationships with our customers. 

Staying true to these commitments, we'll be transparent and honest about our progress with the previous roadmap, acknowledge our short comings and share our plans up till September 2019. 

All Posts
Published by Stephanie Kutschera | Mar 13, 2019 | | 4 MIN READ

Arival Workshop: How to work with OTAs... So it works for you

We were delighted when TrekkSoft was offered the opportunity to host a workshop at the first Arival [The in-destination event] in Europe.

When it came to choosing a topic, we knew that this should be about distribution. It's something we regularly post about at TrekkSoft, and we had a lot of interesting data to share. After a call with Douglas Quinby (Co-founder Arival) the title was confirmed: "How to work with OTAs... So it works for you." 

This workshop was held in March 2019, hosted by TrekkSoft CEO, Olan O'Sullivan. We also welcomed two industry experts to provide operator perspectives; Peter Syme, Managing Director at 1000 Mile Journeys and Christian Landis, General Manager of Best of Switzerland Tours. 

This blog post contains some of the key takeaways from the workshop. We have also have a link to the presentation slides and handout materials to download here

Watch Olan, Peter & Christian summarise this workshop:

Love them or hate them, OTAs are an ever-growing part of the tours and activities sector. When used well, they are an additional source of advertising, a way to reach new markets and a way to build your brand. Used without a distribution plan or with just one OTA, and you could find your business in trouble quite quickly.

In 2018, TrekkSoft processed over 1.6 million bookings for tour and activity operators mainly concentrated in Europe, Latin America and The Caribbean. Total bookings were analysed by turnover per sales channel to provide an overview of the average tour operators distribution split.

The split per average operator was: 

72.5% Direct Bookings

16.6% Agent & Partners

10.9% Online Travel Agents

Currently, OTAs reflect just 6% of overall bookings of tours and activities. But, with the rising importance and dominance of online marketplaces, tour and activity providers will need to have a strategy in place that focuses on a variety of different booking channels to complete a balanced distribution strategy.

 

The Tours and Activities Sector Technology Value Chain

Source: TrekkSoft

We had seen value chains for different industries, and thought it was about time we created this for the tours and activities sector. We have the suppliers / tour operators who are offering various types of tours, activities or excursions. Next is the reservation systems which are used to process the bookings of the suppliers and to offer live availability to OTAs. Between, more recently we have channel managers with one API connection to OTAs. This is a part of this technology value chain we expect to keep growing. Lastly, we have the sellers, the Online Travel Agents. 

 

Who are the key players?

We arranged OTAs into 3 areas. Core Market, Region Specific and Vertical Specific. 

Core Market: The OTAs who h2-26ave the largest market share or who have global coverage.

Region Specific: These OTAs are leaders in a specific region and can help grow your presence in that area. 

Vertical Specific: For OTAs that are dedicated to part of the market. For example; multi-day tours or food tours. 

There has been a strong evolution of OTAs within the tourism sector. We've seen previous market domination in the airline and hotel sector. Currently for the tours and activities industry, OTAs have a marketshare of just 6% but are already requesting a commission rate between 20-30%.

 

What does this mean in the digital travel sector? 

1. OTAs are fighting it out for consumer eyeballs pushing up acquisition costs, primarily on Google.

2. This will increase your advertising costs and a squeeze your margins.

3. OTAs follow a 'winner takes all' strategy by winning the advertisement war with scale, earning the right to charge higher commissions. It's an endless cycle.

 

Understanding your Gross Profit Margin

With increased commissions, and customers expecting increased quality, it is vital for tour and activity operators to calculate the Gross Profit Margin for each tour. Understanding this will show what movement (if any) you have for increased costs or payouts. 

  • Fixed Costs - Office, equipment, staff, storage, Varies for each vertical - Average 50%

  • Commissions - Commission paid to OTAs, channel manager, software provider

  • Marketing Costs - Marketing agency, booking engine, channel manager and advertising

  • Gross Profit Margin - WHAT YOU ARE LEFT with after you pay for the above

The revenue figure above is based on a return in advertising spend of 700%.

 

3 key points to consider for working with OTAs

1. What are your revenue targets by segment?

Do you have different margins per tour? How do you want to distribute those products?Your approach should be different for every customer segment, whether by location, language, type of tour etc. For each, define a distribution strategy and select the best advertising route to reach this segment. 

2. What is the tour life-cycle?

Will your customers only visit once or will they be repetitive? Will they share their experience? Ultimately, you need a solution to turn all bookings, regardless of the source, into direct long-term relationships. 

If you want to launch a new food tour, then to generate brand awareness offering discounts and higher commission rates to OTA partners works because it generates booking levels, reviews, etc. If you have a mature tour and can already fill that tour, why would you pay a high commission rate or offer discounts when you can already sell the tour yourself?

This is a fragmented and diverse industry so there is not a distribution strategy you can stand up and present and tell operators that is how you do your distribution strategy, because it is different for every single operator. 

You need to really understand your business and who your customers are, before you design your distribution strategy.

Peter Syme, Managing Director, 1000 Mile Journeys

3. How much revenue are your marketing activities responsible for?

When deciding your marketing spend you need to consider your return and marketing approach. Think about how can you track the spend in your market, and how your marketing is generating growth. If the profitability of your tour is declining, ask yourself is there really a ROI?

Ultimately, you will need to decide the best strategy and advertisement route for your business, that will give you strong return and allow your business to grow. 

Download the slides and handout from this workshop

 

At it's core, it's still about a quality product. If you focus on having a really good tour, you'll have consistent customers and you'll have a great business. And we [at TrekkSoft] want to work with people who are going to be around for a longtime. 

Olan O'Sullivan, CEO, TrekkSoft

 

Check out this ebook comparing six leading OTAs in one place:

New call-to-action

All Posts
Stephanie Kutschera
Published by Stephanie Kutschera
Stephanie is Head of Marketing at TrekkSoft. She has worked in marketing for over 8 years in various business sectors across the UK. She loves exploring and taking part in tours & activities around the world.
Succefully booking system used in 130+ countries
Free tourism resources to download
Download the Large Marketplace Comparison guide today!

The ultimate booking solution for you

If you're a tour or activity company or a tourism board, we have the perfect plan for your business.

Get a Demo