Tour operators: It's time to stop fighting online travel agencies

In the last couple of months, there's been a rising sentiment against online travel agencies (OTAs) within the tours and activities industry. Companies like Tripadvisor/Viator, GetYourGuide, Klook and Expedia have been at the front and center of discussion, controversy and - let's say it - criticism, among the in-destination community.

This debate is, without a doubt, positive. Suppliers should raise their voices and question some of these companies' practices and policies, especially now as OTAs dominate the online distribution of their products. Suppliers are the backbone of these businesses and without them, OTAs cannot exist.

That being said, I think this community is taking things a bit too far too fast in that discussion. I see a few people loudly advocating against working with OTAs completely to other tour operators, and that's not in the industry's best interest. 

And while it is true that I am the CEO of an OTA called TourOpp, we are only a young and small startup. Therefore, I speak of OTAs in the third person as I don't think we "qualify" in that heavily-invested bunch, yet. Furthermore, my partners and I at TourOpp are also shareholders of a tour operator in Ecuador and Colombia, so I most definitely empathize with the struggles and concerns of tour operators.

Here are a few things that we should give OTAs credit for and recommendations on how to change the direction of this debate to be a more productive one for the industry.

Without OTAs, there would be no online distribution and technology today

The main driving factor behind the growth in revenue and investment in this sector can be attributed to OTAs. Around 2014, a few tech-startups started to grow significantly by digitalizing the booking process of the in-destination piece of travel (until then, most travelers were not able to book a tour or a ticket to a museum online).

To fulfill this vision, the need to have live inventory became apparent, so a second wave of investment went into reservation technology to serve as a middle layer between the tour operator and the OTA.

Today, these reservation technology companies are allowing tour operators to streamline their whole operations, reduce costs and automate their businesses, allowing them to focus more on the experience itself and less on the admin work behind it.

Furthermore, these reservation systems have also allowed many businesses in this industry to sell tours and activities on their own websites, something that was very difficult or prohibitively expensive for most business owners before. If it weren't for the res-tech companies, which came as a need to provide inventory for OTAs, and the investment behind it, who knows how long it would have been until something like this was available.

Investment money will always go to big ambitious global companies and not to small businesses, unfortunately. So if we want this industry to keep developing and growing, and if we expect new technology to come, we have to allow some of these companies to be part of our ecosystem.

You're not going to win the online advertising game

If you think you can beat Tripadvisor, GetYourGuide or Expedia on SEO or SEM, you're just missing the big picture. OTAs have big pockets, and the investors behind these companies are bidding on growth more than profitability. So once you start looking at the numbers, you will find that some of these companies are actually losing money on paid advertising solely to acquire that customer. The hope behind this strategy is that such customers will go back to them in the future. Do you really want to play that game?

And by the way, if you think a 20% commission is too high, try making a business out of that. I usually see tour operators who don't consider all the costs associated with running a Google Ads campaign, like paying someone to set up and manage that campaign, absorbing the cost of the credit card commission and all the customer-service time associated with that. If you find yourself spending 13% of your average booking in Google Ads, and you think that means you're saving 7% in costs compared to an OTA commission, think twice.

OTAs are, at the end of the day, nothing else more than digital marketing agencies that run on a commission basis. Their strategy is to use economies of scale in their favor to bring down the costs of campaign management, credit card fees and customer service.

Hilton and Marriott, have been trying to play against OTAs in the digital segment for years without success in the hotel sector. If anything, those who have the biggest advantage in the online game are really unique or specialized businesses that can bid on queries like "Berlin Bunkers Tour,” as it is usually not worth the time of the OTA's team to focus on niche markets, which means a lower CPC.

That being said, I believe it is impossible for everyone to have a unique product. Therefore, if you have a more "traditional" tour operator your business will be much better off focusing your efforts on things like optimizing your costs, automating your operation and cross-selling, rather than trying to beat OTAs on Google.

Finally, it is also important to remember that OTAs are responsible for a big portion (if not all) of your website sales. Referred sometimes as "window marketing,” hotels and airlines have long used OTAs to get their products promoted in front of a large audience because a lot of people will end up booking directly on their website once they have made their decision.

OTAs have "democratized" the industry

Not so long ago, the tours and activities industry was pretty much a monopoly in every destination you looked. Big tour companies used to dominate the sector as they would have exclusive business relationships with traditional travel agencies.

Then, OTAs came along and opened their marketplaces to all tour operators allowing them to compete in a - usually - leveled playing field. As a result, smaller tour operators have seen their businesses grow tremendously and hundreds of thousands of new tour businesses have appeared.

Believe me, without OTAs, we wouldn't be seeing so many "food tours" or "walking tours" in every city. But remember this, there's only so much space on that first page of Google. Therefore, telling or promising all these small tour operators that they have a chance to be there is literally impossible.

And, whether you like it or not, travelers will always prefer to book in an OTA rather than booking directly with the tour operator. Why?

• Convenience & Ease: From a user experience perspective, it's a lot easier to search and compare your options in one site with one unified format, rather than having to open and look at multiple websites. 
• Security & Trust: No matter how much people talk about "buying local,” most travelers will always trust more those brands they recognize and larger companies that have a "reputation" to maintain. And then, there's an added benefit of having an "intermediary" to neutrally solve potential conflicts or situations that may arise. 
• Loyalty Programs: For the past five years I've never booked a hotel room outside of Hotels.com, as they give me one free night for every 10 nights I book on their site, no matter where I book that room. That's just a benefit that a hotel alone will never be able to give me. While I don't see any OTA in our industry offering a solid loyalty program, I expect this should follow soon.

What you should be asking OTAs

Now, I'm not saying here that everything's perfect and that tour operators and activity providers should mute their voices. There's definitely a few things that I think most OTAs need to address. In the list below I provide some suggestions for the tours and activity community to agree on and demand to OTAs as a collective:

• No advertising on your "brand's" name: If people look for your brand, the only one advertising for it should be you.
• Your brand should be visible: If they are going to sell and promote your products, they have to promote your brand too.
• Cancellation terms should be respected ALWAYS: It should be common sense, but I was surprised to see an OTA suddenly changing and disregarding previously agreed on cancellation terms after the COVID-19 crisis. Many multi-day operators were affected by this sudden change as they don't control 100% of the costs associated with a booking (such as the hotel and meals perhaps).
• Commission rates should be respected ALWAYS: The commission is probably the most delicate part of the relationship between a supplier and a reseller, so it should be transparent and agreed on from the get-go. Again, unfortunately, we saw an OTA earlier this year unilaterally asking suppliers to "match" regional commission rates.
• Position on listings should be determined by popularity and traveler reviews and not by commissions: This is something that has been heavily debated in the hotel sector for the past two years, and the tours and activities community should learn from it. If we all agree that OTAs are going to be a middle layer between you and your customer, they should at least guarantee that they will provide a leveled-playing field. To do this, product listings should not be ranked based on commission, but on factors like popularity, flexibility and traveler reviews, instead.
• You should be able to communicate with your customer: Some OTAs still believe they have the right to "own" a customer even though YOU are the one offering the service. As a consequence, they make it extremely difficult and time-consuming to communicate with your customers. I believe that, as long as you comply with GDPR regulations, you should be able to communicate with your client directly. 

Conclusion 

These are difficult times and I don't think it's in your business' best interest to resist partnering with OTAs. Yes, you should definitely use some of this down-time right now to work on your website, your social media and your marketing strategy, but also take some time to talk to your OTA clients.

Listen and understand their needs and make sure they hear yours too, so that you can discover new opportunities between your companies. Remember that success in business is usually through diversification, so try not to put all your eggs in the "direct marketing" strategy, as you may find that doing so will have its risks too.