Are OTAs Right for Your Business?
Online travel agencies, or OTAs, are third-party resellers such as Viator, Expedia, GetYourGuide, and others that sell local tours and activities. This might make it sound like OTAs are competition for your business, but the relationship between operators and suppliers is a bit more complex than that.
In fact, OTAs can help you bring in more revenue without doing a lot of extra work. They expose your business to new customers who are ready to book a tour or activity in your city. This guide will walk you through some basics of working with OTAs to help you decide whether they’re the right fit for your business.
How can OTAs help your business?
According to Phocuswright, OTAs are the fastest-growing sales channel in our industry, and they will continue to grow and make up a bigger part of the tours and activities market’s future (2019). If you find yourself with empty seats or half-filled tour groups, or if you’re looking to reach a wider audience, OTAs can help broaden the horizons of your company’s online presence by exposing you to customers who might not find you otherwise.
As a business owner, you might be working with a small staff and juggling all the different aspects of running your business. This means that you don’t always have the time to work on marketing efforts that can bring more customers to your business. If you’re not maximizing the full capacity of your availabilities, then you are leaving money on the table! Building partnerships with third-party resellers, big and small, is an easy way to create additional streams of revenue and reach a broader audience looking to book tours and activities.
Third-party resellers can help fill availabilities by providing your company with another platform where customers can discover your company and book with you. One of the benefits of the biggest OTAs is that they sell other services like plane tickets and hotel rooms, so they attract a wider audience. Sites like Expedia can put your activities in front of customers who have just booked a flight or hotel — the exact audience that might be looking for a tour in your area.
In their 2018 Affluent Traveler Survey, Skift found that 67% of high-income travelers would prefer to spend their money on activities than a nicer hotel. Having your activities available to book on OTAs can help you capture these clients while they’re booking their other travel arrangements and are ready to spend some money on their trip.
While the commissions can seem hefty (more on that in a moment), you could be saving money on the marketing efforts it would take to get in front of a comparable number of potential customers on your own. Companies like Expedia and Viator already have a large user base and plenty of experience in marketing to their customers, and your business could greatly benefit from their existing footprint. OTAs also tend to have mobile-optimized websites and convenient apps, which is a huge plus, considering more than 50% of bookings made by international travelers are made on mobile.
Where Should You Get Started?
Before deciding to start working with an OTA, spend some time evaluating your current business. Are you filling up enough availabilities, or do you need a substantial boost in customers? Considering the commissions involved — which average 20% or higher of your retail price (Arival) — how much would OTAs benefit your bottom line? How much business would they bring in? It’s all about striking the right balance to ensure that it is the right move for your company.
Do some research on the major OTAs as well as the local ones to understand their policies and ensure that their customers are the same audiences you’re looking to capture. Some things you want to understand about any OTA you’re considering working with:
- Their commission structure and whether you can afford it, taking into account the cost of each tour for your business (you want to make sure you’re still profiting, of course)
- The sign-up process and necessary contracts and agreements
- The terms and conditions and cancellation policies
- The number of visitors they get and the rate at which they’re booking activities
- How to get your tours and activities on their platform
It’s typically a bit of a process to start a relationship with an OTA, but as a FareHarbor client, we work to make this process easier for you. FareHarbor has an in-house Channel Development and API Team to assist you with connecting your FareHarbor Dashboard with third-party systems that allow customers to book into your live availability from another platform such as TripAdvisor, Expedia, or even local companies down the street.
The next step is to think about how your activities fit in with the other activities offered on OTAs. Are your prices competitive? Do you have great customer reviews? These are all factors that potential customers will consider when comparing your activities against others available on OTAs. While the goal of being on OTAs is to fill empty availabilities, you also want to make sure you’re offering your most attractive activities to give you a better chance of getting booked.
Striking a Balance
As we said before, it’s all about balance. OTAs should be an additional source of exposure and revenue for your business, but you should also continue to maintain and optimize your company’s website to ensure you continue to get direct online business. Ideally, OTAs should drive around 20 to 30% of your online revenue.
You don’t want to become dependent on OTAs (or any one source of revenue), so it’s important to ensure your business is always easily discoverable by tourists who are looking for what you have to offer. Here are some tips to follow to ensure you continue to get more than 70% of your business directly:
- Make sure your website is optimized for conversions and is easily accessible on mobile.
- Make your website easy to find by improving your SEO.
- Build a robust online presence through social media channels and digital marketing.
OTAs will only become more popular in the coming years as travelers look for more convenient ways to book their travel. According to WEX, 71% of tours and activities suppliers expect the online reseller channel to grow, and the current trends support this expectation. One-stop shops are becoming the name of the game in our industry, and it’s important for businesses to be present in the spaces where potential clients are looking to book their trips, from the flight to tours and restaurant reservations.
Travelers today care more about experiences than anything else, so it makes sense that is the fastest-growing sector of the tourism industry. If you want your business to continue to grow as the industry evolves, it’s worth considering whether OTAs are the right move for you. They might be just the thing you need to boost your bookings. If you’re interested in getting started with the OTAs that FareHarbor works with, get in touch with your AM to get the process rolling!
Check out more of our business management strategy guides for more tips on how to grow your business.