In February, Travel Market Report ran an article that discussed some fundamental shifts in the way that travel suppliers are doing business. While I still firmly believe that most suppliers are making a decided shift to net rates and direct bookings, a new tactic was brought to light in this article.
Some travel suppliers are essentially operating as travel agents representing other suppliers’ products. Imagine the nerve! I suppose the blame can be placed on the big three OTAs (Online Travel Agency), Orbitz, Travelocity and Expedia. What started out as an online means to distribute airline tickets, quickly morphed into a full blown online travel agency complete with cruises, tours, hotels, car rentals, insurance and fees! It was only a matter of time until the actual suppliers caught on and decided that they too can be travel agents.
As virtually every cruise line executive has said, until the agency community steps up to the plate and can fulfill 100% of their capacity, they will seek alternate means of distribution to fill in the difference. While we may not like to hear it, we have not done a great job. The first time I witnessed it was when Frontier Airlines was trying to get market share from America West. When America West eliminated commissions, Frontier stood firmly behind the agency community and held the line on commissions. They were not shy telling us what they expected in return. After 6 months, the market share for Frontier actually dropped. And this is how the industry rewarded Frontier for sticking up for us! So, on one hand, I really can’t blame the suppliers for looking out for their own bottom line—we do it for our own respective businesses.
So, now it appears that we will have more competitors fighting after the same disposable income from the consumers. Are you prepared to fight for the business? Do you have a plan to set yourself apart?
We can all talk about the personal service we offer that a website does not until the cows come. But the fact remains is that many consumers are comfortable completing major transactions completely online. I just read an article about a Canadian funeral home that has launched an online business model! Yes, we can give personal service. So what? You need to take a hard look at your business and see what it is that truly differentiates you from your immediate local competition and these big players who are better funded and more aggressive.
Like City Hall, fighting the suppliers will be next to impossible. They quite likely are receiving equal or better compensation from their “partner suppliers”. They certainly have larger budgets for marketing. And perhaps the largest asset they have is their brand. When coupled with the marketing reach their budgets can buy and a well known; usually trustworthy brand name, our suppliers could very well become one of our largest competitors.
Imagine a world where a customer is looking for a Caribbean cruise. They spend a few hours researching the itinerary and cruise line and have committed to a particular sailing. The next logical step is to check the pricing. Of course they go to the cruise line’s website. They probably go to one of the big three OTAs. They do a Google Shopper search and all of a sudden YourFavoriteSupplier.com pops up with the lowest price. That supplier has a great name and great brand recognition. So with the client that knows what they want, where are they going to buy?
Once again, the industry is throwing up a sign for you that must specialize to differentiate yourself from the crowd. Are you reading them?