“
When you change the way you look at things,
the things you look at change”
-
Max Planck
.
This statement is shockingly apparent when one examines the good, the bad and the ugly relationship between in-destination suppliers and resellers, especially OTAs (online travel agencies).
OTAs, simply put, sell suppliers’ products online to customers, extract their commission, and remit the balance to suppliers some days later. The OTA’s purpose is to simplify the somewhat overwhelming process of booking travel due to the plethora of options. Reseller sites allow a customer to compare like products from different companies. These sites conveniently connect customers to businesses with user friendly booking forms & a consolidated secured checkout. They have everything a traveler is looking for in one place: air, room, car and within the last decade in-destination experiences.
In-destination experiences include activities (air, land, and water,) attractions (museums, parks, centers, aquariums, etc..) guided tours and events - all the fun things to do! These experiences fuel the visitor industry as they are what people take and post pictures of. They’re what vacationers tell stories about; they make memories, often once-in-a-lifetime memories. With the exception of the larger attractions, these businesses are owner operated by people passionate about sharing the experience. These businesses are also vested stakeholders in the community. They are not part of a large corporation; their profits remain in the local economy.
|
|
All this would appear to be a great partnership if not for greed. The sales are in the $10s of billions annually. The two largest OTAs are Booking Holdings and Expedia Group. In the past 10+ years, “acquisition” has been the name of the game. In addition to acquiring their travel competitors, this past April both companies absorbed the two most prevalent in-destination reservation systems, thereby purchasing suppliers’ inventories & business marketing knowledge. These multi-billion dollar corporations dominate the top of the funnel with automated technology harnessed with AI (artificial intelligence) and real-time inventory access. Their sites are major travel distribution channels on a global scale.
When making travel plans, customers often don’t realize that many tools they use to book are owned by the same corporation. They also don’t realize that the algorithms used to display recommended products may not be based on what’s best for the customer, rather it is what’s “best” for the OTA -in other words, which supplier is paying the highest commission. These are for-profit corporations with shareholder responsibilities. Their focus is on the bottom line. A recently shared algorithm change will rank suppliers higher if they are using the OTA owned reservation system. An example is TripAdvisor, which presents itself to consumers as an unbiased review site, yet the listings are based on their self-interests. (
Interview with Dermit Halprin/CEO of TripAdvisor candidly sharing company policy at 2018 Arival show in Las Vegas
)
|
|
OTA sites are removing branding of in-destination supplier products. So instead of featuring XYZ’s famous biking adventure, it is truncated to a “famous biking adventure,” with links and phone numbers to suppliers’ websites removed. Some sites are posting "tour not available" if contract terms are not met. OTA contracts claim sole rights to the customer’s information. Others required the ability to use marketing materials in perpetuity. Suppliers are alienated from the customer and pitted against one another. Commissions have increased from 10% to over 35%. As a result consumers are paying higher prices while receiving less value for their money and an increasing portion of the profit exits the local economy.
Who is dependent upon whom? If all resellers went out of business tomorrow, suppliers would still survive. If all suppliers went out of business tomorrow, resellers would be out of business. They would have nothing to sell. The dependency is clear, greed is allowing the tail to wag the dog. So, what’s the solution?
Now more than ever suppliers need to recognize they are in the driver’s seat. The solution is for suppliers to unite and stop the dysfunction before it gets any worse. Say no and follow Best Business Practices like:
- Read and Sign Sales Agreements, removing unacceptable terms
- Agree to Commission levels which are reasonable
- Retain Price Integrity, Discount in ways that instill positive customer behavior which will increase direct sales, decrease consumer prices, increase lead times and ensure customer retention.
- Use a Central Reservation System not affiliated with an OTA
- Pay Flat Fees for services
- Be selective about who you allow to sell your well-branded products
Grab the wheel & be in control of your company's destiny! Establish & retain healthy boundaries.
OTAs provide a needed service, but their demands are out of balance. To retain the farm-to-table beauty of in-destination experiences, Hawai’i suppliers need to unite, stand up for themselves and recognize their strength. In the long run, the industry will thrive, benefiting OTAs, suppliers, consumers, and the destination.
|
|
Toni Marie Davis -
Nov 9, 2018
|
As Executive Director of
Activities & Attractions Association of Hawaii, Inc
. for over 20 years, Toni Marie's role at A3H is to unite Hawai'i's In-Destination Experiences by promoting and protecting suppliers thru collective Marketing and Lobbying. Two of her most notable accomplishments are Hawaii Revised Statute 468M which protects consumers and suppliers with regards to the sale of in-destination experience tickets and creating
PonoRez
.
|
|
|
Activities & Attractions Association of Hawaii
P.O. Box 598, Makawao, HI 96768
|
|
See what's happening on our social sites
|
|
|
|
|
|
|
