Open Travel Alliance and the Future of Travel Distribution
For many in travel, distribution would be considered the lifeblood of the industry. The triumverate of travel, or the BIG THREE of distribution, would tend to agree. These companies, born from the days when the only products you could distribute were airline tickets, have now expanded into other products like hotel rooms, cruise, and car rentals. But we are now at the point where many of the systems required to distribute the basics of travel are quite mature, so what is the next frontier for distribution?
In a recent PhoCusWright Roundtable discussion, the big discussion was around vacation rentals and the value of this disparate and fragmented market estimated to be around $24 Billion annually. This vertical in addition to the destination product (tour & activities) market, also estimated to be worth $24-27 Billion dollars are, in my opinion, the emerging markets for distribution. Both these markets share many commonalities that make them ripe for distribution:
- Little to no representation in the supply chain – In both the vacation rental market and the tour & activity market, there is very little distribution in the current supply chain. Except for a few larger players like Viator, Isango, and Homeaway, these products are not distributed at all and there are certainly very few vacation rental or tour operator software solutions out there for small tourism businesses or individual property owners to use that allow for distribution.
- Lots of non-traditional marketing opportunities – A lot of tour & activity products can be sold on a freesale basis (unlike hotels and air), and as such, they are a great candidate for non-traditional marketing opportunities more commonly associated with traditional tangible products. These may include Ebay, Craigslist, Vast.com, or other on-line marketplaces.
- Ripe for consolidation – There are many smaller software solutions out there that provide small tourism businesses and individual property owners with reservation capabilities but there are only a few leaders that have embraced distribution and, it is these products that will set the stage for the next step in distribution.
No distribution standards – This is where organizations like OpenTravel Alliance can play a significant role in determining the standards for this sector. Unlike air, hotel, and car, there are no widespread standards for this sector of the travel market. Tour and activity products, adventure products, and attractions can (at their core) be supported by a common set of xml messages. Additional messages can be appended to support new media and content distribution requirements.- Destinations & Travel Resellers are looking for products – Destinations around the World are not generally in the booking business and as such offer only limited capabilities to stakeholders. By providing standardized methods of connectivity, destinations can get access to a wider range of products and simplify their technology requirements. This is always a good thing when working with shrinking technical budgets.
Over the next few years I am convinced that we will see standards developed that will shape the future of distribution for a wider array of travel products. Our role as travel technologists and industry insiders will be to encourage the development of these standards and to educate suppliers and vendors alike to embrace these standards. Unlike air, hotel, and car, we have the opportunity to shape the systems that develop around the standards rather than trying to build standards around systems that already exist. What a great opportunity this will be to shape the largest untapped segment of the travel marketplace.
Steven -
Interesting post. I’d never thought of the comparison between adventure tours and vacation rentals. I too agree that this is a new frontier in travel distribution.
I would argue that tours are even more complicated than vacation rentals for a few reasons:
-The guided tours industry occupies many different spheres. Tours can be anything from high adventure to wine tasting to volunteer travel. A 1-day tour is different than a 5-day tour which is different than a 10-day tour. A vacation rental is simply a property and destination.
-The vacation rental industry is relatively new and *relatively* well organized. Tour operators have been around for a long time and are resistant to new distribution models.
-Consumers habits are unpredictable when it comes to searching for adventure tours.
The adventure travel market is appealing for the same reasons it is so difficult: it’s a massive market ripe for disruption with no easy solutions.
I believe it’s relevant to explore a broader use of the term “vacation rentals”.
Barges & Villa Rentals are just a few of these types of vacations that have been booked as a unit by small groups and families for years throughout Europe and beyond. Only in recent years have these types of “Vacation Rentals” along with traditional home rentals become popular in the US.
Similar to tours, consistently representing these properties across distribution platforms has proved challenging. Frequently these “properties” are represented and/or distributed by a portfolio company (Dude Ranch Association, Doorways etc) while still maintaining their own websites sporadically.
Distribution focused on tour providers and complex/unique properties needs, taking into consideration their financial, time and technical retraints, will be a welcome solution.
Kathy Dragon
Traveler
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Can someone comment on what role they feel the travel agent community will play in facilitating the transactions within this “new frontier” in the future?
@tthomas I think that agents have a real opportunity to guide the purchase for the consumer when it comes to these products. The big shift for the agent community will be the one from selling commodities like airfares, hotel beds, and cars to selling experiences that are made up of all these components plus the destination or adventure products. I presume from your question that you are an agent. So based on that presumption I would guess that you are looking for ways to generate revenue for your business and provide a value add service for your customers. What better way to do this then to be the expert in creating experiences and providing access to high margin products. The services offered by small operators (especially those in the tour & activities market) have traditionally been offered through local concierges and activity desks, so the commissions available for these types of products can be quite high. That said, some are very low as well, so it does vary based on destination. But that said, the products are much more lucrative then the traditional commodity products.
So, I will recommend to you what I recommend to any travel agent, focus on what you love, find your niche, and become an expert. The days of selling airfares and hotels for commission are long gone. Once you’ve found your niche and developed your specialty, take a look at http://www.tripology.com.
Very interesting post. What's your source for the market size estimate of the tour & activities market?
Very interesting post. What's your source for the market size estimate of the tour & activities market?