Putting the supplier cart before the distributor horse in travel
Imagine yourself walking into a grocery store. The shelves are stocked full of brightly labelled cans and boxes of goods. You gaze in awe at the vast selection of product.
Excited to purchase something for dinner, you reach out and pick up a can. To your surprise the can is empty. You take a closer look at the label and it states that the can is merely a representation of the food you are buying created exclusively by the grocery store.
In fact, once purchased, the grocery store will call the manufacturer to make sure the food you purchased is still available. If it is, then you are instructed to take the can to the food manufacturer who will then happily fill the can with the food that you purchased.
Oh, and by the way, there is no guarantee that the food that you purchased will actually still be available when you arrive, so you may have to settle for an equivalent substitute.
Now, imagine that all the cans and boxes on the shelves are the same; empty representations of products that must be redeemed at their point of manufacture. I think you would agree that consumerism as we know it would come to a grinding halt.
Although you are probably saying to yourself what a ridiculous way to distribute goods, many segments of the travel industry do, in fact, distribute this way.
I realize this is an oversimplification of the problem, but it’s not that far off the mark. Heck, both the wunderkinds of the travel space like Airbnb and incumbents alike work on the premise I have described.
A customer looks at a vast catalogue of amazingly beautiful photos and descriptions of places they can stay or things they can do.
They select one, pay for (or pre-authorize) their selection, and then wait for a message to go to the property owner or tour operator to confirm that they can accept the booking. If the booking is confirmed then the customer’s card is charged and they receive their proof of purchase or voucher.
If the operator rejects the booking, for whatever reason, the customer is out of luck and has to pick something else thereby repeating the cycle. Sometimes this process can take up to 48 hours or more.
Into tours and activities
As an outspoken evangelist for the segment for many years, it is certainly nice to see that the segment is getting some much needed love.
But what worries me is the number of start-ups and innovations that are popping up that are not dealing with, what I consider to be, the number one problem plaguing this segment; the empty can.
Let’s be clear, I’m not talking about a lack of supply, I am referring to a lack of access to real-time supply. There are, as PhoCusWright confirmed in its study, tens of thousands of small tour and activity operators in the North America alone.
There is no lack of supply in the tours and activities marketplace. The issue still remains however that, as of 2011, only 14% of these businesses have electronic reservation systems, and of those, I would estimate that less than 10% have systems capable of supporting electronic distribution with real-time availability.
I doubt highly that the number has changed much since that time.
So what can be done to make sure that the cart is placed firmly behind the horse?
Those who are interested in distribution need to open up instead of creating walled gardens of supply.
Look under the hood of any OTA specializing in a niche market, whether it’s vacation rentals, tours and activities, or people’s couches, and what you will find is a proprietary extranet designed to allow suppliers to load their content into the OTA’s database.
Some are fancier than others, some have nice features, and some might even pass as a basic management system, but they are all proprietary and by virtue closed systems.
Ask yourself these questions:
- So why wouldn’t an OTA just open up it’s extranet and allow suppliers to use their extranet as a tour operator software or property management system?
Because managing product for the purposes of distribution is very different than managing the supply of products.
- Is an OTA really going to allow a supplier to use their technology to sell direct to a consumer?
- Is an operator going to allow an OTA to be the sole repository of their content, both marketing and availability?
The answer to both those questions is most likely to be no.
One answer to the real-time supply problem is to build inbound APIs. The APIs that are currently available (from a distribution standpoint) are outbound APIs.
This means that they are designed to push content out to marketing partners rather than pull content from suppliers. In order to access real-time supply, the onus is on the large OTAs to connect to third party systems for the purposes of accessing availability or to process real-time bookings.
Fig.1 – Current OTA connectivity model
For anyone other than the largest of suppliers, getting the attention of an OTA is simply an impossibility. For most OTAs, creating a custom integration is generally not a priority because the revenue levels don’t justify the cost of a direct connect to a single supplier.
But, if the OTA had an inbound API that was standardized and properly documented, the OTA could stipulate the methods for sending and requesting content, availability, and booking transactions.
Fig. 2 – OTA with an inbound API
By opening up such an API, the OTA could connect with an unlimited number of third parties with only a single API build. If the API were built using Open Travel Alliance Schema, the potential to reduce build time and improve the likelihood of connectivity would also increase.
The burden to connect and maintain compliance would shift from the OTA and land firmly in the lap of the supplier or the supplier’s reservation system provider.
But how does this help get more small suppliers to adopt electronic systems?
Opening up channels for distribution can act as a strong motivator for suppliers to adopt systems that will allow them to distribute. Small system providers would jump at the opportunity to build to a distributor if it meant more suppliers adopting their systems.
Just look at the increased adoption of systems in Australia as a result of Tourism Exchange Australia. An OTA, or any large distributor for that matter, advertising that they have an API that is accessible for real-time availability push, means that thousands of operators who offer availability restricted tours and activities could distribute without the fear of overbooking and without the headache of back and forth emails.
Even if those suppliers are not ready to distribute yet, taking that step towards distribution by adopting a reservation system will increase their ability to book directly with consumers, which is still the primary booking channel for the in-destination tour and activity segment.
From a purely technical perspective, I am a bit surprised that this hasn’t happened already. My guess is that it is not a technical issue but a commercial one.
Maybe now that it has been brought to light, we’ll see some innovators or forward thinking OTAs actually build distribution platforms without the requisite half-hearted but still necessary extranets that tend to go along with them.
Maybe, just maybe, these organizations will have an API first approach, with a big banner that says “want to distribute through us, connect to our API and feed us your content”.
Maybe – just maybe – then we’ll see the vision of last minute real-time mobile bookings become a reality for the tour and activity and other niche segments.
Hey, I can dream can’t I?
NB: Grocery store shelves image via Shutterstock.
Stephen Joyce has been a contributing Node to Tnooz since 2009 and has been working in travel and tourism technology since 1995. Stephen is the CEO of Rezgo.com, a cloud based software as a service reservation and booking platform for tour and activity providers.
Stephen is a graduate of Capilano University, a certified commercial pilot, and holds a certificate in IT Management.