Extraordinary amount of intense debate recently regarding issues around person-2-person (P2P) business models for tours and accommodation.
As I wrote recently, these new business models are certainlyÂ disrupting the conventional travel industry.Â But just because something is new, does it make it better? Was anything actually broken with the previous way of working?
So, lets compare a P2P approach versus how the conventional travel industry would approach the same problem:
1. Can you list a property that you don’t actually own?
With P2P it seems this is quite possible (See this story on Hacker News).
In the conventional travel industry the company that is principal would visit the supplier (yearly), even if overseas, and check that the property actually still exists.
At the same time, a basic heath and safety audit would be carried out as well as a check that the supplier is operating to best industry practice.
The traditional approach wins this one.
2. Who ensures that the product descriptions / images are correct?
With P2P the central website hasn’t any idea regarding the accuracy of the descriptions – well, not until a first customer reports back and comments via a review that all was not as described, by which time they will have had a poor customer experience.
In the traditional travel industry, descriptions/images are challenging to get right, too – however hotels/guest houses know they have to get this right and there are industry systems in place to distribute this content. It’s a fixed problem.
3. Will conventional travel websites wish to partner with P2P players?
Metasearch probably will want to work with P2P (as consumers tend to end up booking direct with suppliers anyway), but online travel agencies are probably less likely to integrate with P2P, primarily due to not wishing to mix an individual-provided service with a business-provided one.
This puts P2P at a disadvantage when working with the existing travel industry. At the moment the P2P players like to be seen as outside of the travel industry, so integration probably isn’t really a problem they are bothered about today.
However at the scale that some of these companies will need to work at in order to break even/attain scale suggested by their funding rounds, they will likely need to work with the conventional travel industry at some point because the industry has the necessary flow of travellers.
4. What are the protections against third party money laundering?
If anyone can list a property, does this introduce a money laundering risk?
The first defence against money laundering is “know your customer”. As a P2P marketplace you can have a situation where you neither know your customer nor your supplier.
In the conventional travel industry if you are transferring the money to a supplier that tends to be a business not an individual. Also tends to be a business you have regular contact with.
You might be money laundering (!) but at least you are not being used by a third party for money laundering without your knowledge…
5. Will P2P tour marketplaces lose their best performing suppliers?
There are 20+ tour guide P2P marketplaces. An individual selling via one of these marketplaces tends only to be bookable once on a particular day.
This approach is fine, but if that individual is in a popular destination they may be able to organise themselves to handle more than one booking a day.
Effectively they then become a tour operator rather than a tour guide. Tour operators (businesses) will have a different set of requirements both from a marketing and anÂ operationalÂ perspective.
It actually could actually end up with a situation where a P2P tour marketplace loses their best performing suppliers as these suppliers “outgrow” the P2P platform.
Or perhaps an individual just doesn’t want to be running a tour every weekend but are happy to run a tour every couple of months.
Oddly, this builds a situation where the more successful the P2P tour marketplace is, the harder it will be to retain the individual nature of the suppliers (rather than working with specialist tour operators).
6. Do customers understand that they are buying from a person?
Some of these marketplaces take 100% of the booking revenue up front. In the customers mind this payment to the marketplace makes them believe they are booking with the marketplace.
When something goes wrong (eg. a customer turns up for a tour or accommodation and it isn’t ready, organised etc) the customer may as a result contact the marketplace for immediate resolution.
There will be little the marketplace can do as they don’t have any more knowledge or staff on the ground to fix the problem.
This can only end in a PR debacle as the customer will blame the marketplace yet the marketplace won’t have any capability to resolve it.
Interestingly, at least on eBay if a customer has a bad experience with an individual supplier, people are “trained” to know that it is an individual supplier they should be agitated with rather than eBay.
Also eBay does not have people turning up in the middle of the night at a distant destination and finding they don’t have any accommodation booked, so customer service does not need to handled in real time, 24 hours a day.
7. Are individuals permitted to rent their home/sell a tour?
In most countries the travel industry is a highly regulated industry. The regulation does tend to lock in existing industry structures and leave little room for business model innovation.
However, the rules are there and, until changed, they are the rules we all have to abide by.
For example, with accommodation rental, does the supplier have the right to rent their home? Does their home insurance cover sub-rental?
8. Will people providing accommodation/tours need to be insured?
If paying insurance becomes “necessary”, will that remove the fun, individualistic, accommodation? Will it remove all properties that are not permitted to be listed due to regulations/law, as they will beÂ uninsurableÂ etc?
Will individuals think twice about listing their property if they are prompted with a question about insurance (perhaps built into the listing side of the marketplace), as that will make them think about the downside?
9. Are the P2P marketplaces taking enough revenue share?
Take Airbnb – it takes about 10% or so. Is that sufficient to handle all theÂ customerÂ service questions that will be incoming? Is that sufficient for big customer facing marketing campaigns?
I expect there was a working assumption built into the business model that customer service would be handled directly by the individual property supplier, rather than the central marketplace. Not quite sure that that assumption will turn out to be correct.
Businesses on the other hand don’t mind paying a good % of revenue share, but only if it is a booking they would not otherwise have received.
10. What proportion of “bad” customer experiences are acceptable?
P2P is a high risk, high reward booking for a traveller. The products are mainly great – indeed much more attractive than those provided by the traditional travel industry. However with the great comes theÂ occasionalÂ experience failure.
In the traditional travel industry products and services are carefully tuned. This means they are neither brilliant but equally they are never terrible either.
Will P2P marketplaces be able to handle the negative PR from a few poor customer experiences or will a few bad stories kill the concept?
P2P looks a really fun area to be innovating in within the travel industry.Â But will we still be talking about P2P in two years time?