You've heard it before. Multi-channel is the way forward for tour and activity operators.
As well as being one of the main talking points at ITB and Arival (where we joined in with the panel discussion Working with OTAs - so it works for you), we have seen echoed opinions by industry experts Joshua Oakes and Kelsey Tonner from 7-Figure Tour Business in our latest webinar How to distribute tours and activities to maximise profits.
To recap, the main principles of a balanced distribution system is to let your direct website act as the main booking channel - alongside support from third-party marketplaces. Although OTAs can be a great source of advertising, reach and brand building, they come with a considerable commission scheme which can eat into your profit margin if not planned carefully. You can speak to a booking solution expert for best practice guidelines.
As you may have figured out already, the way you do business on your website becomes crucial in order for it to perform the number of direct sales required.
In essence, you would want to make it as easy and encouraging as possible for customers to book an activity directly from you. However, there are - more or less obvious - hurdles to overcome which otherwise could become deal breakers.
Related reading: 3 ways your website could be losing bookings
This blog looks specifically at charging your customer booking fees and how this can interfere with your efforts of creating more direct bookings.
Should you charge your customers a booking fee?
Whether you call them booking fees, transaction fees, resort fees or service fees - when being used, they often become an unpleasant surprise for a customer at the end of any booking process.
In the first instance, charging your customer a percentage fee might not sound like much. But as a tour business owner, entrepreneur and profit hunter you will soon recognise its value. And so will your smart customers.
Customers booking a standard tour (something affordable and offered by your competitors in the area) could chose another company based on price.
Those looking for a once-in-a-lifetime, tailored or multi-day tour in a higher price range will be hit with a large booking fee, which may sway their decision.
With travellers having more choice than ever, a 4-6% booking fee could be the one thing that makes an almost-customer turn around and pick another option. Tour operators are competing - not only with each other - but also against OTAs for direct bookings.
In a shifting marketplace, we can not ignore a (near) future scenario of best-price-guarantees offered by OTAs, making your website stand out as the expensive option. In such position, creating a balanced stream of direct and indirect revenue can become even more challenging.
It's more profitable if you have a free booking system. Right?
Although you aren't directly paying for your booking system, just think of what the system is receiving from your customers. If your business turnover is €300,000 per annum, you are paying €18,000 to your booking system provider. That's over double of what you would pay for our booking system.
Some customers, mainly in Europe, would be unwilling to pay a booking fee especially if there is more than your business offering the same tour. This could mean a loss of potential business hence a cost of using this booking system.
If your customers are willing to pay a booking fee (still we wouldn't recommend as high as 6%) then imagine the profit your business could make if you increase your prices slightly. This additional profit would go in your pocket, not to a booking system.
So what is our recommendation?
Include your booking fee in your total price. If partnered with a supporting booking software, tour operators can choose to absorb a low booking cost in the back-end and present it to the customer as a whole. By doing so, both your offering and direct channel will become more competitively positioned and the outlook for a balanced distribution strategy will look a whole lot brighter.