Expected Growth of Online Bookings: Traffic vs. Profits
According to a report by tourism research agency Phocuswright, travel experiences have emerged as the third largest category in the travel industry following transportations and accommodations, with global revenue increasing year over year. As Covid accelerated digital transformations, the conveniences of online bookings such as instant reservations, online payments, and free cancellations, are being highlighted, further driving the trend in growth of online reservations.
The rise of OTAs has been one of the key drivers for the growth of online reservations. These platforms provide a variety of products and have put together flight tickets, accommodations and travel experiences in one place. Travelers are able to access more transparent product information with OTAs; and for businesses, although the commission required for OTAs has reduced profitability, they may achieve more sales through the online traffic from these platforms.
From our research, we discover that only 30% of travel experience sales takes place on OTAs, which indicates around 70% of transactions occur through other channels, such as direct bookings on businesses’ websites, or through distributors or influencers.
As bookings for travel experiences are often made at the last minute, the lead time is rather short. According to <rezio 2023 Travel Trends and Consumer Insights Report>, travel experiences are generally booked only 5 days in advance, and sometimes even after arriving at the destination. Generally, travelers prefer to book on OTAs that are trustworthy and equipped with convenient payment methods, such as KKday. However, a majority of travelers still prefer to book via local tour agencies or at accommodation.
Phocuswright's study on the US travel market indicates that approximately 40% of overall sales in 2022 came from supplier direct channels. To achieve profitability, travel experience providers need to be able to close large amounts of sales effectively, and the best approach is to adopt a multi-channel strategy.
Common Sales Channels for Travel Businesses
For travel experiences and activities, sales channels include: OTAs, distributors, and booking websites, each with its own unique advantages.
OTAs (online travel agencies) are online marketplaces where consumers can directly purchase travel services and products, including accommodations, flight tickets, car rentals, and tours. As these platforms provide an extensive amount of products, they attract large traffics and bring consistent sales for businesses. However, users on these platforms often search only for products they are interested in, and individual brands are not highlighted. Therefore, competitive pricing and compelling product combinations are essential to stand out in OTAs.
For distributions, travel experience providers will supply their products to other collaborators such as travel agencies, tour guides, travel influencers, who will then resell to their specific customer base. Collaborating as a supplier to distribution partners allows businesses to reach new customer segments and adapt to changes flexibly. Travel businesses can also adjust pricings and inventory according to market circumstances, and have a better chance at generating a large number of sales.
Businesses with an established brand and existing customer bases may opt to have their own booking websites, in hope to collect more customer data and build stronger connections, as they have become less reliant on traffic from OTAs. Bookings from operator owned channels also remove the additional commissions needed in other sales channels, significantly improving profitability for businesses.
Analyze Profit Model to Formulate the Most Effective Distribution Strategy
After understanding the unique strength of each channel, travel businesses should consider the following questions:
Where do your customers spend their time?
Which channels have the least operational costs?
Which channels are your current competitors active on?
For example, a travel agency offering one-day tours in Japan primarily handles its bookings through their own website while also collaborating with overseas distributors such as travel agencies in Korea and Taiwan. Occasionally, they partner with influencers on marketing campaigns to sell vouchers under limited-time promotion. Utilizing various combinations of sales channels, they are able to attract diverse consumer groups.
Simultaneously managing online, offline, and social media sales through multiple channels can certainly increase revenue, but it also complicates operational management. Recording transactions from various sales channels, tracking payment statuses for each order, and maintaining communication with distributors, which are all handled manually, can lead to errors and potentially impact customer satisfaction.
Thus, it would simplify daily business operations if orders from different channels are consolidated into a single interface for tracking and processing. This is why we strongly recommend travel businesses to adopt the use of an ‘all-in-one backend’ system.
Effectively Manage Complicated Orders Sources
Travel experience providers using rezio can manage all orders in a single backend, including orders from OTAs or distributors. With our ‘Channel Manager’, you may connect and sell your products on major platforms including KKday, GetYourGuide and Viator. In addition to order management, you can also set up payment methods, selling price and inventory in the same system.
With our ‘Distribution’ features, managing distributors is made much easier! Travel businesses can assign different products and discounts (by fixed amounts or percentage discounts) to individual distributors, who will then receive a storefront URL to easily place orders and purchase directly through the page, effortlessly creating an exclusive distribution network!
Be a part of the Tourism Ecosystem, Sharing Resources and Profit Together!
In summary, rezio’s key features of ‘Channel Manager’ and ‘Distribution’ in a centralized backend have helped many travel experience providers in maximizing sales and reducing operational cost, which in turn enabled them to focus on delivering higher quality services. According to rezio’s internal data, we observed a 20% growth in performance from Q2 to Q3 since the rise in cross-border travel activities in 2023, indicating increased utilization of channel and distribution functionalities among users.
The sales channels in the travel industry are undergoing a trend of fragmentation, as new customer segments are emerging due to influences of social media.As any medium capable of delivering content may become a potential point of sales, having an all-in-one booking management system becomes increasingly essential. In addition to improved efficiency of managing bookings, having real-time data provides insights for businesses to understand market needs and make flexible adjustments to their strategy.
Has your business started using a reservation management system? Be a part of our tourism ecosystem, and let rezio be your best partner for global expansion!