A guide for tour and

activity companies

Extracts from a workshop with Olan O’Sullivan, CEO TrekkSoft

Designed by Barbra Silva
How to work with
Online Travel Agents
by Stephanie Kutschera,
Franziska Wernett &
Olan O’Sullivan
Copyright © 2019 by TrekkSoft AG

www.trekksoft.com/en/academy

Cover Design Copyright © 2019 by TrekkSoft

Book design by Barbra Silva

All rights reserved. No part of this book may be reproduced in any

form by any electronic or mechanical means - except in the case of
brief quotations embodied in articles or reviews - without written
permission from the publisher.
Content

Introduction

Online Travel Agents in the T&A Sector

Marketing your business

Your bottom line

Real distribution

3 steps to working with OTAs

Introduction
Love them or hate them, Online Travel Agents (OTAs) are an ever-growing
part of the Tours & Activities sector. When used well, they are an additional
source of advertising, a way to reach new markets and an avenue to build
your brand. Used without a distribution plan or with just one OTA, you could
find your business in trouble quite quickly.

In 2018, there was a big shakeup for the tours and activities industry as two
leading OTAs changed their sales technique by acquiring reservation
systems. Bokun, a small Icelandic system has now been advertised across the
TripAdvisor collective with operators around the world reviewing their
options due to low rates. FareHarbor, a reservation leader in the US seemed
like an even match for booking.com who had begun work launching their
own experiences sales platform complimenting their existing hotel and flight
listings.

Within a short time, we have seen incentivised rates and free listings used as
a tool to grow market share. These have been met with a mixed response
from the industry.

We decided to write this ebook to educate tour and activity operators on the
future of the T&A industry, and how to plan ahead to ensure sustainable
growth of your business, working with OTAs… but only when it works for
you.

Enjoy the read!

Stephanie Kutschera
Head of Marketing at TrekkSoft

4
Chapter 1
Online Travel
Agents in the
T&A Sector
OTAs in the Tours &
Activities sector
Who are the key players?
Market
Core
Specific
Region
Vertical
Specific

We've divided OTAs into 3 types

Core: The key OTAs to be connected to for a global reach.
Regional: The OTAs that target a specific nationality or region.
Vertical: The OTAs that align to particular verticals e.g. small tours,
multi-day or tour type.

6
 The T&A Sector Supply Value Chain

Reservation Channel
Suppliers Sellers
Systems Managers

TrekkSoft Experience TripAdvisor Experiences

Day Tours
Rezdy Bank/TrekkSoft GetYourGuide
Adventure
Rezgo Redeam Expedia
City Tours
Palisis TourCMS Hotelbeds
Attractions
Checkfront PrioHub Civitatis
Excursions
PrioTicket Booking Boss Musement
Multi-Day Tours
BookingKit Tiqets
Transfers
Regiondo Klook
Rental
Fareharbor Booking.com
Reseller
Bókun TourRadar

Source: TrekkSoft

There are 4 parts of the supply chain when it comes to our sector.
First, we have the suppliers (tour operators) providing the products to sell.
Suppliers come under many verticals defined by tour types.

Second, you have the reservation system that will allow you to take bookings
online/on-site, and manage your resources, equipment and promotions.

Next is your channel manager that will connect your reservation system to OTAs.
This is not an individual API connection to OTA via your reservation system. This is
a purpose built channel manager which offers one API to your system to connect
you to the leading OTAs.

Lastly, you have your OTAs or sellers. This is how you can increase demand by
distributing your supply.

How to work with Online Travel Agents 7

 The Evolution of OTA Relationships

OTA distribution costs for

airlines are at breaking
point .

Airlines 2010 Leading airline American

pulls its OTA inventory to
send an industry message.

OTAs assist hotels to fill

bookings during off-peak
season.
2012 Commission rates:
15%-25%
OTA market share: 31%
Hotels
Hotels now compete with
OTAs for direct bookings.
2017 Commission rates: 20-40%
OTA market: 66%

OTAs acquire booking

systems to build market
Tours & share .
2018
Activities Commission rates: 20-30%
OTA market: 6%

8
The Evolution of OTA Relationships

As you can see from the evolution timeline, OTAs have followed a
consistent pattern when building market share in the tourism industry.

By 2010, OTAs in the airline sector were pushing commission rates to the
limit. This caused American Airlines to take action as they pulled their
entire inventory from Orbitz (the leading OTA at the time) to send the
industry a message.

In 2012, OTAs became a 'support' function for the hotel sector. Their pitch
was designed to assist hotels to fill rooms in their low-season. OTAs would
provide a new audience who were more price and tech-savvy looking for
the latest offers. It was a welcome advertisement method for hoteliers.

By 2017 however, OTA market share had doubled and commission rates
increased as a result. Due to huge campaigns on search engines,
remarketing on social media and TV advertisement, hotels now had to
compete for business against OTAs.

OTAs then introduced rate parity for hoteliers to be listed on their sites.
This meant the hotels must offer OTAs their best rate, and they could not
beat this rate via their own website. Hotels with discounts on their website
were checked and penalised.

In 2018, the OTA market share in the T&A sector was just 6%. Then in April
TripAdvisor and Booking.com acquired reservation booking systems that
would support their growth in the sector. Since then, the spotlight has now
firmly been placed on the T&A sector.

How to work with Online Travel Agents 9

What does all of this mean in the
digital travel sector?

1. OTAs fighting it out for CONSUMER EYEBALLS pushes up acquisition

costs, primarily in Google

2. Increases YOUR advertising costs & squeezes margins alongside the

OTAs

3. OTAs follow a “WINNER TAKES ALL” strategy by winning the advertising

war with scale, earning the right to charge higher commissions

10
 Could using one of these acquired booking
systems limit distribution in the future?

Owner 1000 Mile Journeys, Peter Syme:

This is a quote from a recent interview with Peter at Arival 2018.

You can watch the full interview here.

“Reservation systems have been (around for) longer than most OTAs… If the trend goes
the way we think it’s going to go, by the OTAs getting better and better at their job and
the distribution shifting from direct to OTAs, they gain more and more over the industry.
That’s not necessarily a bad thing depending on what the split is, but it does present the
supplier with multiple challenges.”

“If they also own the technology that runs your business, you’ve not just given your
distribution to an OTA that can make your business or break your business in the switch
of an algorithm. You’ve given the technology that is running your business to a company
that is global… and on the whole, we are tiny suppliers with no negotiating power.”

It’s early days, but choosing a booking system owned by a marketplace could
potentially put your business at risk. Terms could be set that you only use their
distribution channel which will remove other distribution opetions, higher
commission fees could be enforced or even rate parity which is currently
practiced in the hotels sector.

Our advice? It’s worth asking questions and having an agreement in writing.

How to work with Online Travel Agents 11

Chapter 2
Marketing
your business
 Marketing your
business
In this chapter, we will discuss the different advertising avenues to market your
business.

Online Travel Agents

Working with OTAs come with pros and cons. Our tip is never to allow your
business to be reliant on one OTA or distribution channel. If something was to
change such as their commission rate, terms or their cancellation policy, what
could that mean for your business?

The Pros
● Expand your audience to reach and be seen as a professional operator in
your region.
● Address a new market or sell your tours globally without having to invest
time and spend yourself.
● Get support to make your listing stand out and to be translated in various
languages.
● A lucrative source of bookings and income as part of a balanced distribution
strategy.

The Cons
● High commission rates 20%+ which will continue to increase as OTA market
share and volume of bookings grow.
● Limited information and connection with your customers based on each
OTA.
● Less brand exposure as some OTAs will remove your company name from
your listing.
● Reliance on OTAs can become a problem if they change rates or terms.
 Direct Bookings (Traditional)
We would say traditional to describe your team on the streets actively selling
your tours face to face, no channel included. This is a great booking method if a)
you have the stream of tourists arriving and you know where to reach them, b)
you aren't overrun with direct competitors or there isn’t a limited number of
tourists and c) travellers book in-destination and tend not to plan in advance.

If all of the above is not the case, then you could spend a lot of money having
staff promote your tours without a captive audience.

Direct Bookings (Technology)

Using Pay Per Click, Google AdWords, Facebook Paid Ads etc. is considered a
direct booking but it still comes with a big learning curve and an acquisition
costs. This is a great method if you have built your customer personas; you
know where they are located, age range, interests and platforms.

Paid campaigns aren't easy but direct bookings offer a high reward including
fewer costs, more control and most importantly a relationship from start to
finish with your customers.

Partners/Resellers/Trade
However you want to call it, we call them partners. This could be other
operators in the region, hotel concierges, DMOs or Tourist Offices,
restaurants... Anyone who is willing to sell your tour to their customers.

Building relationships take time and usually mean offering free experiences to
potential partners, but a personal recommendation of your tour is priceless.

How to work with Online Travel Agents 14

 Reviewing your marketing spend
on distribution

The Inverted U Curve by Gladwell 2015 bases on the principle that doing
more doesn’t consequently mean gaining more.

When you are consistently improving your product (e.g. enlarge the
marketing budget to promote a tour) there is a time when your changes stop
having a positive influence on the product’s promotion and market
positioning, or even worst, starting to have a negative impact on the overall
user experience.

Most
Benefits

Some

None
Some Most

Anything
How to work with Online Travel Agents 15
Source: The Inverted U Curve, Gladwell 2015
 Where is your advertisement on the curve?
The Inverted U-Curve covers three different areas with different logics.

The left side means doing more or having more makes things better.

There is the flat middle part where doing more doesn’t make a difference.

The right side when doing more makes things actually worst.

What does this mean for your tour & activity business?

With the Inverted U-Curve you can compare how well a tour or activity is
meeting your customers’ needs reflected by your input - mainly covering
marketing expenses to gain a bigger reach and visibility for that specific
tour.

As soon as this product positions in the middle flat there is nothing

additional you can do to boost the tour, or at least you shouldn’t as all
additional input would lead you more to the right side, meaning it’s useless.

How to work with Online Travel Agents 16

Chapter 3
Your bottom
line
 Understanding your
Gross Profit
At the end of the day, your business is all about the profit you will make.
Understanding your Gross Profit will allow to work out how much commission
you can afford to pay each OTA, and what amount could be detrimental to your
business.

Fixed Costs: Your office, staff, equipment, additional guides, photographer,

transport, storage etc. This will vary depending on your tour type and partners.
On average this is around 50% of your tour but can be as low as 30% for a
walking tour with one guide, or as high as 65% for a complex tour that involves
3rd parties.

Commissions: This is your paid commission to your OTA, sales team, channel
manager, payment gateway or reservation software.

Marketing Costs: Marketing agency, advertising budget, internal marketing

(writing listings, adding availability), booking engine and channel manager.

Gross Profit Margin: What percentage is this and how does it set you up for
growth? Does it give you flexibility or are you limited?

How to work with Online Travel Agents 18

 Direct Versus Indirect

Direct Booking Example: OTA Booking Example:

Revenue: €21,000 Revenue: €21,000
Commissions: - €1,150 Commissions: - €4,200
Net Revenue: €19,950 Net Revenue: €16,800
Marketing Costs: - €4,800 Marketing Costs: - €3,420
Marketing Agency Cost: €900 Channel Manager Cost: €420
Fixed Cost for booking engine: €200 Fixed cost for booking engine: €200
Internal Marketing Cost: €700 Internal marketing Cost: €2,800
Advertising Budget: €3,000

Gross Profit: €15,045 Gross Profit: €13,380

Gross Profit Margin: 71.64% Gross Profit Margin: 63.71%

Annualised Annualised
Direct Net Profit: €54,540 OTA Net Profit: €34,560

Direct offers 1.58x the profit of OTA sales

Turnover is VANITY
Profit is SANITY
RevPAT ProfitPAT
Chapter 4
Real
distribution
 Real distribution
strategies
In the this section, we want to show you real distribution cases from various
tour & activity operators.

This includes how these operators are working with different distribution
channels, what their challenges were and how they solved them.

The selected companies differentiate in terms of their location, their target

market and their distribution split.

Some of the cases we have discussed in detail in our presentation at Arival -

The in-destination event - in Berlin March 2019.

How to work with Online Travel Agents 21

 Best Case 1 (Best of Switzerland Tours)

Type of company: Day tour company, year-round, start from cities including
Zurich, Lucerne to the surrounding attractions

Target group: International 80%, Domestic 20%; FIT, solo traveler, group

Distribution split: 60% OTAs, 20% Direct, 20% Partners like hotels, local
resellers like tourism offices

Development of a distribution strategy:

In 2009, Best of Switzerland Tours distribution was very focused on local

resellers like tourism offices and hotel partners.

The market and their customers wee changing so they needed to adapt. Their
customers became more likely to book things directly in-destination 24-48
hours in advance. At the same time distribution channels including OTAs
became more popular and review sites such as TripAdvisor inspired travellers
what to book within their destination.

The main reason why they decided to work with OTAs is that their guests came
mainly from overseas. They lived in locations where they didn’t have marketing
knowledge or resources to reach them. Additionally, Best of Switzerland Tours
mostly had one time visitors. Working with OTAs became a very beneficial part
of their distribution strategy.

In the beginning, not all of their products were accepted by OTAs, as one of
their competitors was already listed with similar tours. Best of Switzerland
Tours had to look for opportunities to stand out in the market and to make
unique quality experiences. And it worked.

How to work with Online Travel Agents 22

 Best of Switzerland Tours now have a very “powerful product” demanded by
many OTAs. This puts them in the privileged position of being able to negotiate
with OTAs (e.g. commissions) and set target agreements that are reviewed on a
quarterly basis.

By using a Channel Manager, they can deliver real-time availability to all OTAs
including a direct booking option.

Now with the newer OTAs that focus on the Eastern target group arising, there
are new opportunities to collaborate and address their main target markets
from overseas.

Key takeaways:
● Product quality: Even if an OTA refuses your product now, it doesn’t
mean they will in future. Focus on the quality of your product and make
it stand out. Invest in your tour guides as they make people refer and
come back.

● Select your high transaction products for high volume OTAs, and niche
products at vertical or regional specific OTAs.

● Know who your customer is so you can choose the right distribution
channels to reach them.

How to work with Online Travel Agents 23

 Best Case 2 (Splash White Water Rafting)

Type of company: Rafting tour company in Scotland, near Perth

Target group: Domestic travellers from the UK, small amount overseas

Distribution split: 80% direct, 20% indirect (including OTAs)

Development of a distribution strategy

To set up a suitable distribution strategy, Splash White Water Rafting first
created their customer personas. From this, it turned out that their customers
were mainly domestic travellers coming from within the United Kingdom. They
could create an in-house marketing strategy to target these customers
themselves using pay per click and social media paid advertising. They also
focused on building up and benefitting from a local ecosystem sourcing hotels
and local activity companies to partner with.

Splash White Water Rafting decided to use OTAs as an advertising opportunity

to target international visitors as they were unable to reach these alone. First,
they tested some OTAs to see if they would provide quality bookings from their
preferred target group. If these bookings would have come from UK based
visitors it would not make sense for them to pay a OTA.

They find that communication via OTA bookings is difficult due to the limited
contact information offered. Their tour location is remote with reduced phone
signal, so they aim to contact guests prior to their tour booking date with all the
information they could need. This is not possible with bookings through
selected OTAs.

How to work with Online Travel Agents 24

To create a balanced distribution, Splash White Water Rafting aim to fill their
tours with 80% direct bookings and just one or two guests from OTAs.

For them, building a strong customer relationship is key, and this is only
possible when bookings come direct.

“Your customer relationship is the most valuable thing you have.”

Peter Syme, MD

Key takeaways:
● Understand your customer and how you can reach them with or
without OTA support.

● Understand that direct business is mostly not direct - it comes from

platforms like google, facebook, where you still pay, but you have full
control.

● Focus on building a customer relationship that can develop into repeat

business and referrals.

● Build a strong local ecosystem with partners. This could include hotels
and local operators in your destination, or other destination operators
where travellers are likely to visit both locations.

How to work with Online Travel Agents 25

 Best Case 3 (SANDEMANs NEW Europe)

Type of company: Europe’s largest walking tour operator with over 100 tours
daily in 20 European cities and 12 countries

Target group: Solo traveler, FITs, couples, families, groups

Distribution split: 67% OTAs, 33% direct bookings

Development of a distribution strategy:

SANDEMANs NEW Europe choose which OTAs to work with based on a select
criteria. This includes brand outreach, available languages, communication,
support, API connectivity, user management, available currencies, competition
and PPC promotion.

As SANDEMANs NEW Europe run tours in different cities, on most OTAs they
decided to set up accounts for each city. This makes it easier for them to
manage everything and view the results by location. This does however come
with a lot of organisation in terms of updating tour availability and schedules
correctly. However for GetYourGuide, one overall account is beneficial in
terms of number of listed tours, reviews and the overall ranking. This gives
their tours better placement and offers customers a real view of the company
as a whole.

With so many distribution channels and accounts, connectivity plays a major

role to reduce administration cost and human error. They use TrekkSoft to
connect their live availabilities to each OTA, avoiding manual emails and phone
calls expected from a high volume of bookings.

How to work with Online Travel Agents 26

 Due to increased competition, SANDEMANs NEW Europe focus on quality to
stand out. They hold stellar reviews which have given them strong brand
loyalty from travellers who have visited them over the past 10+ years.

Reporting helps SANDEMANs NEW Europe to find out which tours and
locations are in demand or where they should focus on improving their
product. Reviewing each OTAs performance gives the foundation to discuss
renewal and commission rates.

Working with OTAs comes at a cost. SANDEMANs NEW Europe work on a

‘free tour’ model followed by in depth paid tours. With this model, they need to
carefully manage their distribution strategy to protect their profit margin.

Key takeaways:
● Aim for a “direct first” strategy always. Even if a customer originally
comes through a OTA, figure out how can you ensure they come back or
refer to your website direct.

● Consider a loyalty scheme as an incentive for travellers to visit more of

your tours in different locations.

● Select the OTAs that are a fit for your company. Focus on quality over
quantity.

● Try new OTAs and listing styles to see what works for your business.

How to work with Online Travel Agents 27

 Best Case 4 (Outdoor Interlaken)

Type of company: Adventure company offering outdoor activities including

rafting and canyoning

Target group: Young, adventure seekers, American and Asian

Distribution split: 67% OTAs, 33% direct bookings

Development of a distribution strategy:

Outdoor Interlaken began working with OTAs 2 years ago, and at the beginning
this only included Viator and Expedia. Prior to this point, the company solely
worked with direct bookings and partners in the local area. They had stalls
around Interlaken for walking trade and strong connections with local
suppliers and hotels.

They chose to begin working with OTAs to increase their bookings and reach.
Viator and Expedia were both strong in the US market which was an ideal fit. As
Viator and Expedia were looking for suppliers in Switzerland, they made the
onboarding process very simple by uploading all of their listings and schedules
on Outdoor Interlaken’s behalf.

Outdoor Interlaken also wanted to reach travellers from Asia before they
arrived in-destination. They began looking for OTAs leading this market to
begin offering their products.

OTAs work well for Outdoor Interlaken to increase their reach and achieve
bookings in advance. The only issue encountered was from OTAs requesting
last minute availability. Outdoor Interlaken want to keep last minute
availability as they can sell this themselves in-destination.

How to work with Online Travel Agents 28

 Last minute bookings for Outdoor Interlaken also don’t work for some tour
categories as they have minimum attendees, resources or 3rd party
involvement.

Again as per case study 2, communication with their customers is vital,

especially for what to know in advance where to meet and what to bring.
Working with OTAs can sometimes limit this communication and cause delays
on the day.

Key takeaways:
● Choose to work with OTAs when it works for you. If you can reach a
certain customer type or have strong in-destination bookings then use
OTAs to reach the customers you can’t.

● If your competitors are on OTAs then you should consider it too. It’s
important to have a strong presence.

● Create a distribution plan based on your customer personas and the

booking volume you would like to achieve. A balanced strategy will take
time to achieve, but will be worth it.

How to work with Online Travel Agents 29

Chapter 5
3 steps to
working with
OTAs
 3 Steps to working
with OTAs
1. Choose the right OTAs for your business
● Does this OTA offer a segment you couldn’t reach direct?
● Decide what customer connection you want or need.
● Does this OTA work with direct competitors or big players that could
impact your application or bookings?

Use the quality over quantity when choosing how many OTAs you will work
with.

2. Know what you are signing up for

● Are their Terms & Conditions right for your business?
● Does their cancellation policy/timeframe work?
● What is their refund policy under different circumstances?
● What payout currencies do they offer?

Keep in mind that the application from the OTAs side can take a while to be
processed.

How to work with Online Travel Agents 31

 3. Decide how much this business worth to you

● What is your commission cap?

● Do you have leverage you can use to negotiate?
● How much availability will you offer?
● Can you afford a best price guarantee or seasonal offer?

Working with an OTA shouldn’t change the quality of tour you offer, but support
advertising to reach new markets.

Key takeaways
You are in this for the long-term

1. Plan for your business and customer type

2. Don't undercut or undervalue your business

3. Utilise OTAs to reach new audiences

4. Retain every customer to book again - Direct

5. Be prepared to try different things.

The market will continue to change!

How to work with Online Travel Agents 32

Comparison
Guide

DOWNLOAD
YOUR COPY
 Frequently
Asked Questions
What is a channel manager?

A channel manager allows you to connect with OTAs via an API connection.
Previously this was just via your booking system and required an API
connection to each OTA.

Now, there is a range of standalone channel manager systems which offer

additional benefits to tour operators that will reduce time and administration.

Will OTAs increase their commission rates?

This is guaranteed. We've already heard from tour operators who were
approached by one of the leading OTAs requesting 35% commission. That is a
huge chunk of your revenue.

Is there leading OTAs for each region?

Yes, Skift actually did a report in March 2018 which compared 6 OTAs to show
their market share in each region. Other leading OTAs also have a USP such as
Civitatis who is the largest marketplace for the Spanish speaking market.
Musement was founded in Italy so has a strong presence there.

Why did you write this ebook?

TrekkSoft is an independent reservation system with no ties to any OTA. We've

been around for over 10 years and want to see our operators succeed. We
wrote this to educate operators on what the future could mean for OTAs in the
sector and how now you can reduce the impact.

A guide to choosing the right booking solution 34

Are you ready to speak to our team?
TrekkSoft is the leading booking system
for day tour operators around the world

Connect with 15+ different marketplaces

and business partners worldwide with
TrekkSoft’s unique API integrations.

Learn about our Channel Manager in a demo call