PhoCusWright published an article recently with the premise that travel companies in the long tail are taking traffic away from the big OTAs.
Certainly that feels true, given all the movement in what I call the “emerging travel segments” – emerging referring to their recent adoption of electronic distribution as a viable sales channel – including golf, tours and activities, timeshares and vacation (villa/apartment) rentals.
Let me say at the start that my definition of electronic distribution is any information provided electronically (to trading partners, distributors, brand.com) about the product (the safari, the castle in France), not just the transaction.
Distribution covers everything from a photo of the product to richer media to an availability calendar (real-time or not) to pricing and terms to the actual booking transaction.
Often segments new to distribution assume it’s all about the transaction, but in these specialty segments, that’s just not true.
Emerging segments are interested in distribution, but companies in these segments, especially those that provide travel products with a lot of moving parts (niche or specialty tours, vacation rentals), find the established OTAs, while well-suited for distributing non-experiential travel like business and non-complex leisure travel, are definitely not set up to distribute more complicated products.
These products have generally been distributed in a manual, very high-touch way, which is good for the traveler (lots of personalized service) but not so good for keeping operator costs down (lots of manual processes and human overhead), and has definitely limited research to the times of day when someone would answer the phone.
But times are changing. Costs are high and travelers of all types are now used to researching and buying online, including their business travel and uncomplicated leisure travel, and they’re used to researching whenever it suits them, not just during tour operator office hours.
It was only a matter of time until the buyers of complicated travel started asking for some information about those travel products online – at the very least, rich media like images and videos, and some idea of availability.
However, the large OTAs are built for the transaction not the research. When planning a safari in Africa or a tour of castles in France, the process of researching is a part of the experience, and the large OTA brands don’t support that function and probably don’t want that kind of overhead.
So small tour operator technology providers that enable distribution are stepping into that gap in the States and Europe, like PEAK 15 Systems, Rezgo and TourCMS, and many specialized content aggregators are popping up as well, including well-known names like National Geographic Traveler and Travel + Leisure, but real-time availability is rare and most transactions in these segments take place off-line.
The obstacles to real-time distribution are several and familiar – outdated business processes, technology and money.
One tour operator software provider says his primary competition is Excel, not other technology companies.
In the adventure travel and vacation rental segments, standardization of the descriptors of product (define safari, define tent, define castle, define moat) is a huge business issue that these segments must address before electronic distribution can really be effective.
Other segments have done it (air, rental car, rail, hotel, even cruise) so standardization is a reachable goal with a known payoff in cost reduction, increased sales and brand reach.
The technology and distribution providers stepping into this market are generally start-ups, and the cost of entry is high.
Funding for technology start-ups is still very tight, but interest and demand for these travel products is rising, and they are higher ticket products with higher margins than business travel and uncomplicated leisure travel products.
There could be a role in these segments for the large OTAs.
Orbitz owns away.com, an aggregator of adventure travel content (but there’s no integrated search capability and no booking capability), and the large OTAs have the scalable infrastructure and technical knowledge to support the distribution of any type of inventory unit.
They would have to be willing to be more research oriented and less transaction-oriented, at least in the short term.
Orbitz’ example of away.com is a possible model for the other OTAs, provided it becomes more integrated with orbitz.com.
There’s a real financial prize to be had in these emerging segments but the winners will have to have patience to support lots of online looking without much initial online booking, and will have to drive standardization of product definition, product presentation and product distribution to realize those financial prizes.
PhoCusWright published an article recently with the premise that travel companies in the long tail are taking traffic away from the big online travel agencies.
Certainly that feels true, given all the movement in what I call the “emerging travel segments” – emerging referring to their recent adoption of electronic distribution as a viable sales channel – including golf, tours and activities, timeshares and vacation (villa/apartment) rentals.
Let me say at the start that my definition of electronic distribution is any information provided electronically (to trading partners, distributors, brand.com) about the product (the safari, the castle in France), not just the transaction.
Distribution covers everything from a photo of the product to richer media to an availability calendar (real-time or not) to pricing and terms to the actual booking transaction.
Often segments new to distribution assume it’s all about the transaction, but in these speciality segments, that’s just not true.
Emerging segments are interested in distribution, but companies in these segments, especially those that provide travel products with a lot of moving parts (niche or specialty tours, vacation rentals), find the established OTAs, while well-suited for distributing non-experiential travel like business and non-complex leisure travel, are definitely not set up to distribute more complicated products.
These products have generally been distributed in a manual, very high-touch way, which is good for the traveler (lots of personalized service) but not so good for keeping operator costs down (lots of manual processes and human overhead), and has definitely limited research to the times of day when someone would answer the phone.
But times are changing. Costs are high and travelers of all types are now used to researching and buying online, including their business travel and uncomplicated leisure travel, and they’re used to researching whenever it suits them, not just during tour operator office hours.
It was only a matter of time until the buyers of complicated travel started asking for some information about those travel products online – at the very least, rich media like images and videos, and some idea of availability.
However, the large OTAs are built for the transaction not the research. When planning a safari in Africa or a tour of castles in France, the process of researching is a part of the experience, and the large OTA brands don’t support that function and probably don’t want that kind of overhead.
So small tour operator technology providers that enable distribution are stepping into that gap in the States and Europe, like PEAK 15 Systems, Rezgo and TourCMS, and many specialized content aggregators are popping up as well, including well-known names like National Geographic Traveler and Travel + Leisure, but real-time availability is rare and most transactions in these segments take place off-line.
The obstacles to real-time distribution are several and familiar – outdated business processes, technology and money.
One tour operator software provider says his primary competition is Excel, not other technology companies.
In the adventure travel and vacation rental segments, standardization of the descriptors of product (define safari, define tent, define castle, define moat) is a huge business issue that these segments must address before electronic distribution can really be effective.
Other segments have done it (air, rental car, rail, hotel, even cruise) so standardization is a reachable goal with a known payoff in cost reduction, increased sales and brand reach.
The technology and distribution providers stepping into this market are generally start-ups, and the cost of entry is high.
Funding for technology start-ups is still very tight, but interest and demand for these travel products is rising, and they are higher ticket products with higher margins than business travel and uncomplicated leisure travel products.
There could be a role in these segments for the large OTAs.
Orbitz owns away.com, an aggregator of adventure travel content (but there’s no integrated search capability and no booking capability), and the large OTAs have the scalable infrastructure and technical knowledge to support the distribution of any type of inventory unit.
They would have to be willing to be more research oriented and less transaction-oriented, at least in the short term.
Orbitz’ example of away.com is a possible model for the other OTAs, provided it becomes more integrated with orbitz.com.
There’s a real financial prize to be had in these emerging segments but the winners will have to have patience to support lots of online looking without much initial online booking, and will have to drive standardization of product definition, product presentation and product distribution to realize those financial prizes.
Related posts:
Long Tail Travel innovations at PhoCusWright 2009One-on-one with Rob Torres, head of Google TravelTen factors to define a Global Distribution System [GDS]
on 04 November 2009 
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PhoCusWright published an article recently with the premise that travel companies in the long tail are taking traffic away from the big online travel agencies.
Hi Valyn
Great post!
Its a very interesting sector and one that is under reported over the trade press.
Personally I don’t believe distributed transactions will be the end point in this sector – but distributed marketing (to support product research) with centralised transactions will be the norm (e.g. sending traffic onto individual tour operator websites or sales leads into a CRM system)
You mention this but mention it as a point on the path. I think we will get there and no further.
Traffic will go from Google -> Vertical search (could be part of Google) -> Individual tour operator website / system
[Incidentally, when I use the term tour operator I mean mainly companies that supply guides / tour leaders - not those who package hotels / flights]
Alex
TourCMS
I couldn’t have written that any better Valyn. After spending a week with Adventure operators at the recent Adventure Travel World Summit, I found that many operators are interested in distribution and want to expand but fear that their products will become commoditized. What I had to explain is that an electronic distribution standard is like a can and what differentiates one can from the next is not the can itself but rather the contents of the can. The can could hold beans, pasta, soup, or tuna. All of these things are fundamentally different products but packaged in a way that makes them easy to ship to retail stores for sale to consumers. It will take time, but once we have operators using electronic systems it will become easier for them to distribute, because they won’t have to think about it.
Excellent description of the present situation. Reading this, I am not surprised that research shows increasing travel consumer disappointment with the travel research, shop, buy process. They are not aware of all the technical issues we insiders in the industry know are hindering progress. They just realize that the experience is not what they expect and can best be described a “click-o-rama” as I’ve called in a recent post.
The challenge to the industry – and it’s key players – is clear, tackle the issue of complex trip to drive future growth and increase customer satisfaction that will result in profits.
A side benefit of offering an improved overall experience will also be less of a focus on the absolute lowest component price a value will be added. As we know from other industries, only value add can prevent a product or service from becoming a commodity where only price is the differentiator.
Very interesting post. The challenge, as Valyn rightly points out, is alot of research/looking, and not alot of booking – at least not at the initial point of contact. I think Alex is right – what will develop will be marketing platforms, hosting travel companies that understand the long lead times and research-heavy aspect of these types of complex travel products.
@James
I *hope* we are right as we have a new distribution system about to launch that works on the principle of distributed marketing, centralised transactions. [Although doesn't technically/commercially exclude companies from using it for distributed transaction scenarios]
More about this when we launch it
Alex
TourCMS
Great first post Valyn. First, I would like to echo the comments of those above.
Most importantly, you highlight the importance of embracing an expanded definition of electronic distribution to encompass all forms of content. This is essential for travel sellers to communicate value.
Gone are the days when a traveler admits that they might not know much about a product, but the price was so cheap, they perceived value. The travel industry has been commoditizing itself for years by focusing only on the price and transaction.
As the planning of more complete and complex end-to-end travel arrangements begin to migrate onto the web, traveler-seller relationships become more engaged and personal, the efficient and accurate syndication of content will be expected – just like real-time rate & inventory access.
Web 2.0 technologies have helped democratize the travel space and have enabled the The Long Tail of travel.
You are absolutely right. Those organizations that truly understand their customer – and WHY they travel (not just their mode of transport and where they stay) – will deploy technologies that will cleverly align the best product to address traveler needs.
Establishing & leveraging industry standards is the fastest way to achieve that goal.
I think we’re all in violent agreement here. Electronic distribution is a continuum – from filling out a web form to request a catalog via the post to buying the product online – and products hit that continuum at whatever spot is right for the product, the product’s audience and the distribution channel.
OTAs (and GDS’ for that matter) have historically hit on the transaction end of the continuum, while complicated products have historically not event been on the continuum. That’s what is starting to change and will continue to change. Whether or not the OTAs and GDS’ move back along the continuum remains to be seen, along with where start-up companies hit that continuum. Interesting times!
Excellent post.
Your definition and analysis as well as the comments here give me a sense of Deja Vu as they go to many of the core concepts we’ve been addressing with an innovation we’ll demo onstage at PhoCusWright.
By contextually engaging travellers with experience and insight operators / DMO’s can add to the research, validate and plan stages which helps these providers demonstrate expertise and build social equity.
A recent study (I found via Jeb thoughts posterous -http://jebthoughts.posterous.com/under-the-influencers-the-relationship-betwee-0) indicate this influences behaviour lower in the funnel and I would add also helps reduce the effect of commoditisation.
As you say Valyn very interesting times.
I think we are currently at the tipping point with complex travel products moving to online distribution. Many specialist operators are starting to tackle online sales and some are beginning to see success.
The requirements are however, fundamentally different to hotels and flights. For instance, the depth and breadth of content required for any particular adventure travel product (for online sale) is vastly greater than for a hotel / flight. And whilst many customers do want to transact these products online (contrary to a lot of perceived wisdom) there is a big servicing requirement too, so as an OTA you need to have some very skilled & knowledgeable telephone servicing capabilities.
The next piece in the jigsaw for OTAs is the requirement for merchandising. There is so much product overlap, with small local operators, DMCs and outbound operators all touting the same product. For example on some adventure travel consolidator web sights you could be offered essentially the same cycling tour in Vietnam from a UK outbound operator, a US outbound operator, the Vietnamese DMC and the actual local Vietnamese operator who runs the thing.
The final piece in the jigsaw is the tailormade issue. Much of the large adventure operators are moving increasingly towards tailormade itineraries. I suspect the ability for an OTA to package individual tours, accommodation, flights and transfers together succesfully is still a long way off.
I personally am delighted by the emergence of technology companies such as TourCMS, rezgo et al. as they will do a lot to facilitate the change. I’m particularly excited about TourCMS’s forthcoming distribution system, and hope others follow suit.
Final thought: Valyn’s comment about being more “research oriented and less transaction-oriented, at least in the short term.” is spot on. It is something we have found out the hard way at Tourdust (http://www.tourdust.com), we’re trying to tackle all the above issues and have solutions in the pipeline, but it is going to be a long hard slog.