The symbiotic and tenuous relationship that OTAs have with airlines and hotels is now shaping up in the hot emerging sector of in-destination experiences. What does the future hold in this newfound alliance between tour operators and OTAs? By Xinyi Liang-Pholsena
It’s a booming time for the travel experiences market. Not only have the tours, activities and attractions sector attracted global leaders in online bookings like Expedia, Booking.com and TripAdvisor Experiences into the fray, recent entrants such as Klook, Traveloka and Airbnb Experiences are also bringing rapidly changing distribution dynamics to tour operators and suppliers in the region.
As the fourth largest tourism sector in the region after airlines, hotels and rail, gross bookings for tours and activities in Asia-Pacific is expected to reach US$45 billion in 2019.
In Asia-Pacific, the tours and activities sector has been “significantly growing faster” than other regions, and is expected to post an average of seven per cent in the 2017-2022 period, versus four per cent in the US and three per cent in Europe for the same five-year period, according to Douglas Quinby, co-founder and CEO of Arival at its inaugural Asia conference in Bangkok in June.
Even the very staging of the Arival conference in Bangkok was itself testimonial to the coming of age of the tours and activities sector, a common refrain expressed by trade players at the event.
Unlocking new opportunities, revenue stream
As the tours, activities and attractions sector heats up, OTAs are fast emerging as key sales channel for many tour operators, particularly in Asia where a vast majority of traditional sellers and resellers are just beginning to distribute online.
BeMyGuest’s co-founder and CEO Blanca Menchaca said: “We are just seeing the tip of the iceberg when it comes to online distribution. In Asia, a majority of tour operators are just starting to sell online, so a lot of activities are not even online yet.”
This growing influence of OTAs is readily acknowledged by many tours, activity and attractions operators.
For Aquaria KLCC, executive director Daryl Foong sees a natural partnership for the oceanarium with OTAs, whose extensive marketing reach help to bring in bookings.
“We’re a walk-through experience, therefore we want an OTA. I give them margins and they do marketing for us… OTAs bring a wide range of consumers to my aquarium,” he said.
Meanwhile, a partnership with OTA often translates to better and effective outreach to targeted markets than an SEO campaign on Google, particularly for smaller tour outfits with limited funds for digital marketing investment.
Hidden Secret Tours’ owner and co-founder Fiona Sweetman sees value in OTAs as a marketing platform. While the Melbourne-based boutique tour operator still relies on traditional agents to market its tours through their brochures, she said it’s a “conscious decision” to pick TripAdvisor Experiences as an online distribution channel.
It’s a similar sentiment shared by CityWonders’ business development director Eduard Marti. He said: “With shorter booking window for activities and more travellers even booking in destination, it’s important to work with OTAs as they have the funds to be listed among the top few listings on Google.”
With last-minute bookings becoming popular, OTAs actually provide “a way to maximise group sizes” and help fill up last few seats of a tour, said Grasshopper Adventures, CEO Adam Platt-Hepworth.
DMCs, many of which are making a push to become tech driven, are starting to explore OTAs as a new distribution channel too.
Nicola Scaramuzzino, Thailand country manager for Panorama Destination, views activities OTAs as “an extra distribution platform” and “new potential area”, coming critical at a time when DMCs recognise the need to evolve with changing times and get a better handle on digital distribution.
Likewise, Go Vacation Thailand’s director of business development Tobias Fischer also expressed an interest in online activities marketplaces.
He said: “Online tours platforms are definitely an interesting channel we’re exploring. We see it as a B2B2C channel where we can control our selling rates, although hotels may not like it if we out contract rates online.”
With wider access comes hefty commissions
As much as OTAs are driving new opportunities in the in-destination industry, challenges and issues like rampant discounting and hefty commissions (typically 20 per cent or higher) are among key concerns voiced out by sectoral players.
At present, Wahyu Mandiri Tour Bali’s director of sales Romida Marbun views the typical 20-25 per cent commission rates charged by OTAs as a “fair” treatment, in return for the “good volume” of bookings received through such online marketplaces than through the DMC’s own website. “If you want the European market, you go to Expedia; for Asian markets you go to Klook, Kkday and Ctrip,” she added.
On the other hand, Stephane Planchais, CEO and founder of Original Food Tours, has set a maximum commission fee he’s willing to pay activities OTAs, and thinks the 30 per cent rate applied by some as “ridiculous”.
With commission rates unlikely to go south anytime soon, Planchais foresees activities OTAs likely to gain more clout and push for increased rates in return for higher placements for tour operators.
But as OTAs scale up and become more competitive marketplaces, a challenge then is also finding the right products to sell on such platforms, shared Asian Trails’ group director marketing and ecommerce Niels Steeman.
“A challenge lies in whether products and experiences are not already loaded and selling (on these sites). The products a DMC wants to sell are often already displayed on these OTA channels, sometimes in abundance,” he remarked.
“It goes back then to finding niche products and novelty items that are not featured on these OTAs. This too depends heavily on the targeted market, as some products may not (yet) trigger booking tendencies because of the unfamiliarity of these new products.”
CityWonder.com’s Marti thinks it’s possible that suppliers would soon have to work their listings just like on Google. “We used to be in the top few listings but that could change as more products and operators get listed, although for the moment I need OTAs and I’m happy with our partnership,” he expressed.
Striking the right balance
As Asia’s distribution landscape becomes more dynamic and complex, it’s inevitable that travel operators have to develop strategies to manage their partnerships with OTAs, whose market share is still small. But it’s changing fast as OTAs look to increase their share of the pie.
Ultimately, the relationship with OTAs is about “finding a balance”, said Grasshopper Adventures’ Platt-Hepworth, emphasising on the need for tour operators to ensure a healthy portion of direct bookings.
Backing this view is Original Food Tours’ Planchais, who stressed the need to diversify distribution channels, as well as geographic and demographic markets to safeguard his business.
In the longer run, however, Planchais does not see OTAs a viable platform to build up a brand presence. Some OTAs have approached him to white-label tours from his boutique outfit, but he has turned down such requests. “We don’t offer white-label as well, as customers have to sign liability. We’re here to build the brand,” he remarked.
Also, Planchais thinks it’s necessary and prudent for tour operators to develop their own reservations technology systems and APIs to drive direct bookings – “which still make the most money” – in order to own their own data than relying on business insights from OTAs or external channel management sites.
Perhaps tours, activities and attractions players don’t have to look too far on how to handle their relationships with OTAs. The symbiotic yet tenuous relationship that hotels have with OTAs are reminders of how in-destination players should approach and manage their relationship with OTAs.
Meanwhile, Steeman firmly believes that the DMC remains and can become a strong player in the OTA segment, simply because of its “vertical integration of services to run and operate tours and activities”.
He remarked: “We’re still tailoring most of our requests to the specific wishes of our customers. We haven’t seen any major disruptor yet that offers the dynamics online to do this in Asia. The B2B customer demands a partner that can handle multi-day itineraries, cross-country travel options, rate negotiations where needed and so forth,” he said.
Travel consumers are currently buying day trips or experiences lasting a few hours on OTAs. Bringing multi-day tours online could very well be the “next phrase but we’re still a few years out”, Menchaca remarked.
What is clear is that Asia’s tours and activities marketplace is now heating up, and disruption is not far off. Watch this space.