If a rose by any other name still smells just as sweet, do
we sense that same aroma in the travel industry these days?
Those of us who have worked in the space for a while have
watched some obvious segmentation morph into something entirely different, but
we are still using many of the same names and terminologies from days gone by,
which doesn't make sense in today's world.
Not only does it not make sense, but an argument could be
made that it hinders our industry from being more innovative, adopting broader
uses of technology, and ultimately aligning with what consumers really want
from us.
When OTA's arrived on the scene, their very name defined
them. They were a digital version of a traditional brick-and-mortar option.
However, isn't it now the case that tour operators, independent travel agents,
and receptives all have websites, and all use those websites for not just
awareness but also transactions? Isn't almost everyone now an OTA?
Receptives used to be located in one strong market and work
in another source market; their appeal to visitors in the point of origin was
their familiarity with the destination and ability to provide fundamental
services, like transportation, seamlessly to visitors. However, hasn't the easy
availability of add-ons and services changed this model drastically? I do not
work currently and have not worked for years with anyone who fits the old
concept of a receptive tour operator.
Travel agents typically worked in a brick-and-mortar
location. Then, they became adept at converting to a remote or home-based model
when the market changed and physical locations became less relevant.
At one time, these agents purchased all of their offerings
at a lower commission because they were buying from a wholesaler or aggregator,
who skimmed a percentage of the commission before selling to the agent. They
were typically small businesses focused on one-on-one customer interaction and
relied on word-of-mouth advertising.
However, most providers now have several "travel
agents," as defined currently, who are selling well into the millions of
dollars. Is a $ 7MM or a 12MM travel agency still fitting the antiquated
profile? I say no. Many agents are frustrated that they have succeeded in
building their businesses with lower available margins than those offered to
OTAs, tour operators, and receptives, and they are still treated as less
significant.
The facts are that many of these travel agents are outpacing
the other options in CAGR and total revenue. Should they still be required to
buy through a wholesaler when outpacing the rest of the market or when they
have reached a certain production level?
So why does it matter? It is certainly not just about
offending over-performing travel agencies. It is crucial because we need to
understand the nuances and the changes to understand what is working and what
is not.
A case in point might be when we look at an OTA's
performance and assume good results are entirely because of its online
e-commerce strategies and effective marketing. However, most OTAs have a B2B
channel, sometimes branded differently but still contributing to the company's
financial success. What if the e-commerce business was flat and the B2B channel
drove over-performance? It would be nice to assume full transparency would
involve sharing that information.
However, the reality is that an OTA will hardly advertise
and promote those facts because the wins come from a part of their business
that differs from their core. The travel agents I see are often more adept and
more convincing with storytelling and social media, which we all know matter
more than ever these days. The big OTAs and wholesalers could improve at social
media, so their businesses benefit from the travel agent or B2B channel in
numerous ways; however, they seem bent on not recognizing this vital part of
the business.
Although those of us inside the industry might understand
these nuances, and we may be able to make decisions knowing that the
"truth" about how the business happens may not all be measured by OTA
attribution models, those on the outside do not. Often, when CVBs, Government
Tourism Entities, and Visitor Bureaus are being sold programs, they are fed
incorrect information. As a result, they usually invest in the distribution
model they recognize rather than the one that meets their current strategic
needs.
The investment could be wasted if buyers don't understand
the roles these different models fulfill or base decisions on historical
performance.
Is it time to remove the labels and acknowledge that all
channels are just travel providers? The old terminology no longer fits, and
rather than clarifying the fragmentation, it just confuses matters and often
results in investment being made in the least innovative and least deserving
channels.
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