With margins being squeezed at every point of the supply chain, the future for traditional outbound tour operators is apparently in destination management and to own Long Tail supply.

Hans Lerch, vice chairman of the Migros Group of Switzerland, which owns Hotelplan, who was recently appointed caretaker global CEO of Hotelplan, says this is a logical step.

“Just look at yourself when you buy something – you may not buy at the cheapest price, what you want is the best value for money. And when you go to a destination, it does not matter if you spend $20 or $30 for a meal – what you want is the experience. People, when they are in-destination, will not bargain as hard and tend to spend more.”

Lerch reckons disintermediation has taken out the margins in all parts of the value chain, adding:

“Tour operators give less margin to the travel agent, and you are earning less and less as you bring the product to the client.”

This was why tour operating groups like Hotelplan are looking at buying suppliers of in-destination products such as ski operators or dive companies.

Lerch says:

“These kind of services add to the experience of a destination and customers will pay on the ground for these services.”

Owning such Long Tail supply also means more control over destination services given stricter legislation makes tour operators like Hotelplan liable for accidents that happen to customers when using sub-contracted suppliers.

It’s a model that has been tried before, with tour operators starting up their own hotel operations. But Lerch says this is difficult, claiming that running a hotel “is a different business” from running a tour operator.

But niche, specialty products and services are different, he says, and these cannot be copied by online travel agencies, adding: “Virtuality stops somewhere.”

As caretaker CEO, Lerch aims to reposition Hotelplan. He says: “In 1965, it [Hotelplan] was substantially bigger than Kuoni, but Kuoni is now two-and-half times bigger.”

Indeed, it was Lerch who was responsible for building up Kuoni’s global operations.

Asked if he intends to do with Hotelplan what he did with Kuoni, Lerch says: “That took over 40 years to build. That train has left the station.”

Instead, Lerch sees four ways traditional tour operator can grow in the new marketplace:

1. Continuing to grow the legacy model “which still pays the salaries”.
2. Invest in the online channel. Every tour operator has to take part in this. “The good news is that Expedia did not knock out the legacy tour operators within two years like they said they would and was feared. Many legacy tour operators have made good investments in the online channel and have built good businesses.”
3. Through companies that cannot be copied in their content and brand or the way it is packaged. For example, Abercrombie & Kent in UK or Intrepid Travel in Australia. “These continue to enjoy good organic growth.”
4. Expansion by geographic markets. “Where is business going to grow quicker and how can you attack these markets?”

Apple changed the music industry with iTunes. Might smartphone manufacturers like Samsung, Nokia, Motorola and RIM or mobile operating-system providers like Apple, Google or Microsoft disrupt the travel industry by weaving themselves into the fabric of travel distribution?

Mobile trip-management company WorldMate is “deeply involved” with multiple parties “in the mobile landscape” which are seeking to embed travel services from mobile check-in to last-minute travel purchases into their core operating systems, says Chief Commercial Officer Nadav Gur.

Gur says the players include smartphone manufacturers which are looking to travel — and talking with online travel agencies and other distribution parties — as a substantial revenue stream to offset margin pressure on smartphone manufacturing and services.

Gur, who was the founding CEO of Worldmate, says he expects one smartphone manufacturer to launch a deeply integrated travel product this year.

WorldMate, which offers trip-management services and competes against TripIt, TripCase, Kayak Trips and others, claims to have the largest user base in the crowd, although the company is relatively short on brand recognition in North America.

The smartphone players seeking to get involved in travel are not talking about building apps and linking to third parties for trip-planning, but seek to embed travel services and booking off-the shelf into their devices.

With the cash that some of these giant device manufacturers have available, it isn’t inconceivable that they could be looking at acquiring an OTA, with their smaller market caps  – even an Expedia or Priceline — as they seek to shake up the market and move their plans forward.

WorldMate’s role with the smartphone manufacturers or mobile operating-system providers is to provide them with technology expertise and the business acumen necessary to break into the travel industry.

Privately held WorldMate has investments from Motorola Ventures and the Blackberry Partners Fund, but Gur says don’t necessarily use those relationships to read the tea leaves about which mobile partners WorldMate is involved with.

So why would a major smartphone manufacturer, like Apple or Motorola or Nokia, need WorldMate as an entrée into the travel industry?

Gur says having a first-mover advantage might be critical, and perhaps WorldMate might trim six to nine months off the delivery process for its partners.

The last-minute travel arena might be a key focus of some of these mobile players because of the nature of their devices. They can push hotel or car-rental offers to travelers at airports, for instance, especially if there are flight delays or cancellations.

With many people saying that mobile devices may eventually replace the PC as the primary means for browsing the Web and booking travel, perhaps smartphone manufacturers and mobile-operating system providers will play a huge role in changing travel distribution as we know it.

Gur, citing confidentiality agreements, declined to identify WorldMate’s partners in the new mobile-travel push.