Online Travel Agents 101

Transcription

1 Topic Online Distribution Tutorial 39A Online Travel Agents 101 This tutorial outlines the role of Online Travel Agents and how to work with them. Reading time: 15 minutes Prerequisite: none

2 Tutorials 38 and 39 (Online Distribution 101 and Online Distribution: Advanced) reviewed online distributors and how to work with them. This tutorial goes one step further, covering a particular group of online distributors known as Online Travel Agents (OTAs). 1. What are Online Travel Agents (OTAs)? There are countless online travel distribution sites available with more popping up all the time so it can be confusing to know how each one works. However they generally fall into one of three categories: Online Travel Agent Site (e.g. expedia.com) Consumer (RESEARCH & BOOK) Distribution Site that redirects to a 3rd party site for bookings (e.g. metasearch engine such as About- Australia.com) (RESEARCH) Distribution site that facilitates 3rd party bookings on its site (e.g. tourstogo.com) (RESEARCH AND BOOK) Tourism Operator's Site (BOOKING) Online Travel Agent (BOOKING) Online Travel Agent sites OTA sites allow consumers to check live availability and pricing then book travel products in real time through the OTA site. Examples include Travelocity and Expedia. The financial transaction on such sites is generally between the customer and the OTA. The OTA is acting as the merchant who takes the money and forwards the net amount (i.e. payment less commission) to the tourism operator/supplier (usually after travel). There could be plenty of variations so it is important businesses review all the terms and conditions of the OTA in relation to commission payable and the process involved. Some OTAs forward the funds to the operator/supplier prior to travel In some cases the customer s credit card is used to secure the booking and the guest pays directly upon checking out of the hotel (with commission invoiced after departure) The terms and conditions agreed to by the customer are those of the OTA Tutorial 39A, Page 1

3 If customers need to amend or cancel the booking they need to contact the OTA. They basically act as a traditional travel agent does, but with the booking taken online. Sites that redirect to a third party site for bookings Such sites allow the customer to search for travel products and then redirect them to a third party site where the booking is made between the customer and a third party (this could be the operator/supplier or an OTA). Examples include In some cases the website includes indicative pricing only and customers are directed to a third party site to check availability/pricing and make the booking. E.g. Total Travel (Yahoo!7) In other cases customers can check availability and pricing but are still redirected to a third party site to make the booking. For example, About- Australia.com allows customers to search more than 20 other booking sites through their site and once the customer has decided what they want to book they are redirected to a third party site to make the transaction (could be the operator s own site or an OTA site). Sites that aggregate (collate) search results from lots of other sites are known as aggregators or metasearch engines and generally receive payment (commission) if a booking is made as a result of the redirection from their site (i.e. for the referral). Sites that facilitate bookings but do not act as the merchant (i.e. process payment) Such sites allow the customer to stay on the original website to make the booking so it appears seamless (i.e. they do not redirect to another site). However, the booking is still actually between the customer and a third party (the operator/supplier or OTA) so the site does not act as the merchant. Examples include tourstogo.com, check- in.com.au and jasons.com. Their terms and conditions clearly state they are a booking facility or intermediary only, even though they process the payment on their site. Often with these online reservation services the financial transaction is between the customer and the tourism operator. The tourism operator generally receives payment at the time of booking (less commission payable to the online distributor) directly into their nominated bank account. This would mean the merchant listed on the customer s credit card statement would be the name of the tourism operator Tutorial 39A, Page 2

4 The customer agrees to the terms and conditions of the tourism operator / supplier (as well as the booking site) Amendments and cancellations usually need to be made directly with the tourism operator / supplier These sites are known by many names including online reservation or booking service, travel portal and online distributor. It is important to keep in mind that there are no hard and fast rules here and the dot points are indicative only. Always read the terms and conditions of a distributor to check payment process and policies. Summary Contracted parties Cancellations / Amendments Payment Online Travel Agent Site Consumer is entering into a contract with the agent and agrees to their terms and conditions. Cancellations and amendments are made through the agent. The OTA is the merchant (i.e. the website name appears on the customer s credit card statement). Payment is generally on account meaning funds are held by the agent and forwarded to supplier/operator just prior to or after travel (as stipulated in the contract) just as an operator would normally deal with a traditional travel agent. Other Distributor Site (Online Reservation Service, Travel Portal, Travel Metasearch Engine etc.) Consumer is often entering into a contract with the supplier (operator) and agrees to their terms and conditions. Cancellations and amendments must generally be made directly with the supplier/operator. The supplier/operator is often the merchant (i.e. their accommodation or tour company name appears on the customer s credit card statement). Payment (less commission) is often paid upon booking to the supplier/operator (i.e. up- front). To act as an online merchant (i.e. process payments for online bookings) the operator needs to have an online merchant service facility (OMSF) established with their bank. An OMSF enables consumers who book product to pay securely online, with the booking revenue deposited directly into the operator s nominated bank account. The bank takes a fee of around 1%. 2. How do OTAs source their product? OTAs can source their product offering using different methods such as channel managers and direct contracting: Tutorial 39A, Page 3

5 Channel managers Channel managers (such as SiteMinder, Resonline and Levart) allow tourism operators to manage inventory which is distributed across multiple sites and only have to update the information in one place (refer to Online Distribution 101 tutorial). Through these sites operators can choose to opt in to various distributors, many of which are OTAs. Opting in involves agreeing to the terms and conditions (including commission) of the distributor. Direct contracting This is a more traditional approach where either the OTA or the operator initiates a relationship (many OTAs have online forms on their website operators can use to register their interest) and a contract is agreed to. Some OTAs provide an extranet service that allows operators to set room rates, manage inventory, upload content, create promotions and view performance reports. Extranet means a computer network to which outsiders have controlled access (i.e. through a site requiring a password). 3. Do all OTAs sell exclusively to consumers? Not all OTAs sell exclusively to consumers; some OTAs concentrate on making their online travel product available through other distributors such as travel agents (traditional and online) and wholesalers. Instead of a Business- to- Consumer (B2C) business model, they have a Business- to- Business- to Customer (B2B2C) model. This means the product they have contracted does get sold to individual consumers but only after it has passed through another link in the distribution chain. Other OTAs prefer to focus on corporate travel so this would be a Business- to- Business (B2B) model. GTA (Gullivers Travel Associates) is a good example of a company that focuses on distributing to the travel trade. Gulliver s website travel.com/aboutus/distributionmodel.html used a good diagram (below) which explains their model. Just like the traditional distribution system (i.e. Inbound Tour Operators, wholesalers and actual shop- front travel agents), the commission payable to an online distributor will be higher if they in turn need to pay commission to a travel wholesaler or agent. In return they can generally offer you a huge distribution network. Tutorial 39A, Page 4

6 Screen capture: travel.com/aboutus/distributionmodel.html 4. Why do I get bookings from a site I have never even heard of? Operators often comment that they are receiving bookings from online distributors they have never heard of, let alone signed an agreement with. One reason for this is because many companies have multiple brands (websites with different names) and automatically make the product available across these brands. This should however be stipulated in the contact between the operator and the distributor. Also, there are a lot of relationships between OTAs and other distribution points. Some OTAs have thousands of affiliate resellers which means their content (all or just some, for example a particular region) is available on thousands of sites anything from a dedicated travel site through to a completely unrelated site. An example might be a sporting group or school undertaking a tour. On their web page about the upcoming trip they might include a link to an OTA search engine (for the cities they are going to) so parents and friends can book their trip. Any bookings made as a result of clicking the link will earn the affiliate (in this case the sporting group or school) a commission. Tutorial 39A, Page 5

7 Let s look at another example: An accommodation provider using SiteMinder as its channel manager opts in to booking.com as a distributor (i.e. agrees to their terms and conditions including commission level). This means that they would not only be available to be booked through the booking.com site (in more than 40 languages) but also on other sites that draw on the site for their content (such as About- Australia.com.au). The company profiles listed in the advanced tutorial will further clarify the key brands and websites of the key players. This will help demystify the relationships. Product flow (distribution) from operator/supplier to consumer The diagram below illustrates the location of the contractual relationship (in red) between the operator/supplier and the consumer. Tutorial 39A, Page 6

8 Online Travel Agent with consumer site (B2C site) Customer Channel Manager (if not direct contract) Online Travel Agent selling to other distributors (B2B site) Online Travel Agent Traditional Travel Agent Wholesaler (TRADE PARTNERS) Customer Tourism Operator Channel Manager (if not direct contract) Online Travel Agent feeding travel distribution or media sites Online Reservation Service, Travel Portal, Metasearch Engine Customer Online Reservation Service, Travel Portal, Metasearch Engine Customer Customer (via operator's own website) Tutorial 39A, Page 7

9 OTA overview diagram The below diagram provides an overview of the key players and their brands and affiliations. Agoda (Priceline) Australian Online Travel (AOT Group) Booking.com (Priceline) Ctrip International Ltd. agoda.com needitnow.com.au gostay.com.au travelmate.com.au needtoescape.com.au New South Wales Holidays and Great Aussie Holidays sites booking.com ctrip.com Discover Australia Expedia GTA (Gullivers Travel Associates) (Kuoni Group) Odigeo Online Travel Group discoveraustralia.com.au expedia.com hotels.com venere.com hotwire.com egencia.com tripadvisor.com elong.com Main activities are business- to- business (B2B) Agent site: agents.octopustravel.com.au opodo.com (incl Travellink brand in Scaninavia) Go Voyages / Govolo edreams Orbitz (Travelport) Quickbeds (Flight Centre) Readyrooms.com (Qantas Holidays/Jetset Travelworld) Roamfree orbitz.com hotelclub.com (powers Virgin Australia's accommodation booking engine) ratestogo.com asiahotels.com ebookers.com cheaptickets.com quickbeds.com readyrooms.com.au roamfree.com.au Travelocity (Sabre) Viator Webjet Wotif Group travelocity.com zuji.com.au (incl. Blue Holidays) lastminute.com (not lastminute.com.au which is owned by Wotif Group) viator.com webjet.com.au and other associated local domains (e.g. webjet.co.nz) wotif.com lastminute.com.au (not lastminute.com which owned by Travelocity) travel.com.au 5. Will OTAs bring me domestic or international business? The answer is potentially both, depending on which OTA tourism operators select. Some focus just on the Australian domestic market but there are many OTAs with a global audience that have a huge range of Australian product. Where available, this information is included in the company profiles contained in the advanced tutorial. 6. Do all OTAs focus on distressed inventory? Not all OTAs focus on distressed inventory. Distressed inventory refers to excess capacity (generally accommodation) that operators are prepared to sell at a reduced rate rather than have it empty. There are certainly OTAs that target travellers who are prepared to book at the last minute to get a cheaper rate (obviously at the risk of missing out on their choice of accommodation). Typically these sites have a short booking window (only showing availability for the coming weeks) resulting in a short lead time (i.e. the time between when the booking is made and when travel will be undertaken). However many OTAs have booking windows of 365 Tutorial 39A, Page 8

10 days (i.e. bookings can be made up to a year in advance), some of which also offer last minute deals. Where available, this information is included in the company profiles contained in the advanced tutorial. 7. Can Inbound Tour Operators (ITOs) or wholesalers that also have a consumer- facing travel site charge me their inbound or wholesale commission rates for sales made through their consumer site? Inbound Tour Operators (ITOs) work in the international marketplace and generally charge suppliers/operators around 30% commission, much of which is then passed along the distribution chain to international wholesalers and travel agents. Likewise, operators/suppliers are used to paying around 20% commission to wholesalers, who then have to pass about half of that to a travel agent. Some ITOs and wholesalers have a consumer- facing website (i.e. customers can book directly with them, cutting out the middle- man) and operators have asked whether they would be paying the higher commission rate for products sold in this way. It would certainly pay to clarify this with the distributor upon signing a contract with them, but generally their online content is contracted separately and tourism operators would expect to pay 10-15% commission for product sold through this method. 8. Key learning outcomes Online Travel Agents are online distributors that allow travellers to research and book their travel on the same website and they also act as the merchant (i.e. process payment) OTAs can source their product offering using different methods such as channel managers and direct contracting OTAs can deliver both domestic and international business to tourism operators OTAs don t always sell distressed inventory with short lead times. 9. Related material Related tutorials Online Distribution 101 Online Distribution: Advanced Tutorial 39A, Page 9