Rezdy’s main focus is on helping tour and activity providers with three areas of their business: marketing, operations and distribution. Marketing deals with attracting customers and dealing with bookings, operations is about running your business and making your staff happy, and your distribution strategy is about growing your business and getting it out there in front of people.
It seems like a slightly less obvious example of a distribution strategy, but we suggest this because it makes sense that when people are at a hotel, they are usually in an unfamiliar location and a concierge desk is a good place to put your products to reach people who are looking for things to do.
You may wonder what motivation a hotel concierge has to resell tours and activities. Believe it or not, it is more than simply the commission payments! The concierge is there to look after the guests – which includes answering their questions as well.
If you want to implement this distribution strategy, it is a good idea to make it as easy as possible for them. This is the case with any distributor, but this is important for a concierge because their role is so diverse. If the concierge has a queue of 20 people in front of them, they want to be able to address questions as quickly as possible to get through everyone’s questions. What this means for you is that you need to provide them with a concise, accessible and comprehensive information package about your product. This way, they can answer questions about it quickly and easily and move onto the other problems they need to solve. This makes them look professional as well, so they could potentially earn tips from it too.
If you are based in the city, these centres are often a hub for information about activities in the local area. Visitors looking for things to do will often think to come to these centres as their first port of call for ideas.
Similarly to the hotel concierges, when working with these centres you need to consider what they want to get out of it. In some places, these centres are publicly owned and funded by local governments, but in other places they are privately owned and need to be run as a business. The implications of this difference would most likely be to do with the commission rates you would negotiate with them – privately owned centres would rely on commissions to make their money.
Unlike many of the other channels, visitor information centres are focused almost entirely on tours and activities and rely heavily on them for their revenue. As such, they depend on you as much as you depend on them. This means that they will be quite concerned with being able to give assurances to their customers that they will have a good experience. This puts the pressure on you to prove that you run a professional operation that delivers good results, but at the same time it might give you some more room to move when negotiating commission rates.
These are websites such as Groupon and LivingSocial that rely on getting sufficient traffic that they can bargain for discounts with suppliers. It’s not as bad as it sounds for you – some of these websites receive massive traffic every month. Groupon, for example, receives an average of 108 million visitors per month. These websites can be an extremely powerful distribution strategy to increase your exposure and brand awareness.
The other thing about daily deal sites is that, while they are global businesses, they have quite a local reach. Groupon, for example, has a very big database of consumers that are segmented based on their location, so they offer deals that are geographically targeted quite specifically.
OTAs could be regional, national or even global. The global ones are the huge ones everyone has heard of – think of Expedia, Viator and GetYourGuide. They tend to be known most for selling flights and hotels, but they also resell tours and activities, usually on a commission. There are industry standard commission rates that you should be aware of depending on what sort of agent they are. Similarly to daily deal sites, OTAs attract massive website traffic, so partnering with them to distribute your products can be a very valuable investment.
When looking to partner with an OTA, one of the buzzwords in the industry at the moment is ‘curation.’ What this means is that everything needs to be unique – both photos and descriptions of your products. They want this because it is good for Search Engine Optimization (SEO) – it appears higher up the list of results when someone searches on Google. If several OTAs have the same stock photos on their pages, they have to compete with each other for search rankings, whereas if the content is unique, it is easier to rank based on particular search terms.
Curation also happens on the basis of reviews. The activities that receive better reviews on the respective OTA – Expedia, Viator, GetYourGuide, etc.- are ranked higher in the list of responses. This is an incentive for you to provide a good activity and get good reviews. If you don’t, you’ll be ranked lower and less people will see your listing.
The other benefit of OTAs is that they are well-oiled marketing machines. They know everything there is to know about marketing – they can get more customers than you can, and they can do it quicker and more cheaply because that’s what they do.
Inbound Tour Operators are agents that operate within a particular country selling activities from that market. For example, an Inbound Tour Operator in Australia would put together a 5-day package including activities, accommodation and transport, which they would then sell to a wholesaler in, for example, France, who would sell it to travel agents who focus on the French-speaking market. These are an especially good investment if you want to expand into a particular national or regional market.
Travel bloggers are a potential source of valuable reviews and word-of-mouth recommendations. If you can incite them to book your activity and you give them a good experience, they will write about it to their followers. Bloggers do not quite reach the same scale of audience as OTAs or daily deal sites, but the people they do reach are people looking for very specific information that the bloggers provide.
These are a small but emerging distribution channel. Railway companies particularly in Europe are starting to sell tours and activities in package deals with tickets. If your products are suitable for this sort of package deal, then this is definitely a distribution channel you might want to look into.
The chief consideration with regard to your distribution strategy focuses on reach. You need to think about what is your reach, and what is your agent’s reach. If you are going to invest in working with an agent, you want there to be as little overlap as possible between the reach you already have and the additional reach they can get you. For example, if you own a store front next door to a hotel, there is probably no point paying the hotel concierge commissions to send people next door to you because if they have been in the hotel, chances are they have already seen your store front since it is right next door. It would make more sense to pay commissions to the concierge at a hotel on the other side of town because that captures people who would not have otherwise seen your store.
Another consideration for your distribution strategy is the time frame of the bookings you want to receive. Local agents are better for getting bookings on a shorter time frame – a few days in advance or even the day of. This is because people who visit these agents are already in the destination and looking for things to do while they are there.
On the other hand, global agents such as OTAs are better for getting bookings further in advance – months ahead. This is because people use these services to plan holidays before they leave and look for activities that are available in particular locations before they leave home.
This is important because, if your website already generates enough bookings ahead of time for you, then you may not need to spend the money partnering with global agents and you might want to focus more on local agents to fill those last-minute places. Likewise if it is the other way around – if most of your bookings are last-minute, you might want to shore up your longer-term bookings and remove a bit of the uncertainty by partnering with a more global agent to try and increase your longer-term bookings.
As important as knowing your agent’s reach is knowing your market and how they behave. We surveyed booking behaviour trends based on the large network of users we have at Rezdy and identified some trends. Flights and hotels, with the exception of corporate travellers, are booked well in advance because it is generally cheaper that way. On the other hand, tours and activities are mostly booked short-term. 36% of them are booked within 24 hours of the commencement of the activity. Another 26% are booked within 7 days of the start. All up, that makes 62% of all tours and activities booked within 7 days of the activity taking place, and more than 1 in 3 booked the day of. This is data that we obtained from analysing trends among 1.6 million bookings (totalling a value of $600 million) from all over the world and from all sorts of activities.
These numbers should inform your choice of agents. The short-term nature of bookings for these activities means that, while global agents might seem like the ‘sexier’ option, you cannot underestimate the impact of your local agents and their importance in a distribution strategy.
Another factor that has an influence on the behaviour of your market is the value of what they are booking. The price of the activity has a direct influence on how far ahead people book. If you are selling, for example, a $15 hop-on-hop-off bus tour, people will be more likely to book on very short notice because of the low price point. If you offer a $10,000, 10-day African photo safari, people are going to book that well in advance because that’s not the sort of money people spend on impulse. From our analysis, we identified that 62% of the number of bookings were made within 7 days of the activity, but that 62% only accounted for 46% of the total value of all those bookings, which shows that the shorter-term bookings were for the lower-price activities. This also means that you should factor in the price you charge for your activities when evaluating the sort of agent you want to work with in your distribution strategy.
We have already named a couple of the big brands you should consider working with – Expedia, Viator, Groupon and LivingSocial. You can find them and others in the Rezdy Marketplace where you can get into contact with them. If there are others you want to work with who are not yet integrated with Rezdy, let us know and we will talk to them and make it happen.
The next ‘brand’ you absolutely cannot afford not to include in your distribution strategy is not in fact a brand, but an entire country: China. You simply cannot afford to ignore the country with one fifth of the entire world’s population. The thing about the Chinese market is that it is not only huge, but it is changing very rapidly as well. Up until now, Chinese tourists were travelling with all-inclusive packages in which they often were not even allowed to get off the bus. They had pre-selected packaged tours, pre-selected accommodation and pre-selected shopping outings all organized for them from within China.
This, however, is changing. There is a very quickly-emerging middle class in China – people in their 20s and 30s with a good income and no kids who really want to travel. We call them the Free Independent Traveller – the FIT. They like safe destinations, they have good buying power, and most importantly there are lots of them. They are also looking to travel to destinations all over the world. They have already been to all the big places like Paris, and now they are looking to experience the rest of what the world has to offer.
A small story that highlights this is one about the town of Queenstown in New Zealand. Queenstown is New Zealand’s tourism and adventure capital – the economy there is all about tourism. Earlier in the year, around the time of Chinese New Year, they were completely overwhelmed. They simply did not have enough beds in the town for everyone who wanted to stay. There were just that many Chinese tourists who wanted to visit Queenstown. That was because it is a safe and convenient destination for them – it is only one flight from China and New Zealand is known for being a very safe place to travel. This clearly shows that you need to include China in your distribution strategy. There are just that many of them and they want to travel, so it’s really a no-brainer if you want to get more bookings.
We have already talked about what different types of agents there are, but you need to attract them to the prospect of working with you as well. The most important things to know when trying to attract agents is what agents want from a relationship with a supplier and how to give that to them.
(Hint: it’s more than just commission payments)
The first thing that agents want from you is professionalism. The way to give them this feeling is to project a professional image. Technology can help you to achieve this through things like real-time availability. Agents don’t want to have to waste their time and their customer’s time calling you to confirm availability. They might be in a different time zone to you or you might be busy out leading one of your activities. They want to be able to have a look, find the information they need, and confirm for their customer then and there.
Next up is commission. We said that commission isn’t everything, but it is certainly still important. Agents want the right level of commission – it’s not an unreasonable expectation that they receive fair pay for the work they do on your behalf. They also want the partnership to work for them as well. This means transparency. Transparency in the activities you offer, so they know what they are selling and how they can best sell it, as well as transparency in the commission you are paying them. Are you paying them commissions for each person they refer to you? Or are you paying them commissions just for the actual bookings they can get for you? They are running a business just as much as you are and they need the clarity and the assurance that the relationship will benefit them as well. Additionally, you need to guarantee to them that they will actually get their payment. No one likes that person that they always have to chase for money, and if they have to chase you too much they’re likely to just decide they don’t want to work with you at all.
In Part 2 of our distribution strategy webinar, we will go through some of the other top concerns, such as how much commission you should pay and some of the cost considerations of distribution compared to direct marketing.