Drawing from my own research and discussions over several months, I have identified five key issues that define the current relationship between Tour & Activity Operators and Online Travel Agencies (OTAs).
The issues are summarised as follows: Commission rates, Competition on Google Ads, Customer Data Access, Visibility and Ranking on OTA Platforms, and Value Proposition. I’ll outline each of these issues in this article.
Background briefing — The Tours & Activities (T&A) segment of travel has historically trailed behind airlines and hotels in adopting online booking solutions and still remains one of the last great offline sectors in travel with only 29% of tours & activities bookings completed online in 2023 (source: Skift). Yet the landscape is rapidly evolving — driven by a surge in digital adoption among operators and a growing consumer demand for the convenience and flexibility of online bookings.
A GetYourGuide advert at Berlin Hauptbahnhof, which transits 300,000 passengers per day.
Online travel agencies (OTAs) such as Viator and GetYourGuide play a pivotal role, accounting for 81% of online T&A bookings, compared to just 19% made directly through operators’ websites. This dynamic has spurred much debate over the over-reliance on OTAs and the nuanced, often ambivalent relationship between them and tour operators.
Below are the key relationship issues between operators and OTAs, presenting perspectives from both sides:
1. Commission rates
Tour Operators:
-
The commission, typically 20-25%, charged by OTAs significantly erodes our margins. It is especially harmful for small operators.
Online Travel Agencies (OTAs):
-
Consider the commission as an alternative to the substantial expenses of direct marketing. You would otherwise spend significant time and money on paid ads (Google, Meta, etc.), marketing agencies, website management, marketing staff, etc.
-
We get paid only if a booking is made, which involves less risk than pay-per-click advertising
-
We increase your potential reach and bookings significantly. You get new customers that wouldn’t have otherwise considered you. As a result, any booking on our platform should be seen as 75% of a booking that would have otherwise not happened rather than simply 25% of every booking being taken from you.
2. Competition on Google Ads
Tour Operators:
-
You are directly competing against us on Google Ads and make it even harder to get direct bookings because you have significantly higher marketing budgets
Online Travel Agencies (OTAs):
-
We are bidding on broader terms such as “biking tour in London” because we sell a wide selection of similar products, rather than specific operator keywords
-
We can afford to bid a lot more for keywords because 1) we are more likely to convert into bookings (selling either your product or the one from a direct competitor) and 2) because we create brand awareness after a first booking, which means the customer is more likely to come back and make another purchase during a future trip in a different destination. That’s our advantage as we scale and how our business model works
3. Customer Data Access
Tour Operators:
-
The lack of access to customer data hinders pre-experience logistical coordination and the delivery of tailored offerings
-
It also makes it impossible to contact the customer post-experience
Online Travel Agencies (OTAs):
-
Maintaining control over customer communications is crucial for protecting our brand image and ensuring a consistent customer experience. We can’t hand off email addresses to operators as some of them might send spammy marketing e-mails and damage our brand
4. Visibility and Ranking on OTA Platforms
Tour Operators:
-
The challenge of standing out amid increasing competition on OTA platforms often triggers a downward spiral of pricing wars or necessitates higher commissions for enhanced visibility
-
Smaller operators often struggle to achieve high rankings on OTA listings for specific destinations due to escalating competition, not only from similar offerings but also from vastly different products that generate higher booking volumes and secure top page rankings. This situation complicates the visibility of differentiated products with lower sales volumes, making them harder to discover
Online Travel Agencies (OTAs):
-
One of the essential factors that determine a product’s ranking on an OTA is the revenue it generates for the platform. The more bookings a product gets, the higher its ranking will be. There are other factors that may influence a product’s ranking like the number and quality of reviews, pricing, availability, and relevance to the customer’s search criteria. However, revenue generated is the most significant one. Therefore, you should optimize for volume (# of travelers who land on your activity on our platform) and conversion rate (% of travelers who book your tour after viewing it on our platform)
5. Value Proposition
Tour Operators:
-
Beyond basic listing services, the perceived added value provided by OTAs is often questioned
Online Travel Agencies (OTAs):
-
We expand your visibility to a broader audience
-
Our booking system is designed for ease of use, ensuring a smooth experience that contrasts with the often less intuitive websites of many operators, which can result in a frustrating user experience and lower booking rates
-
Our centralized platform simplifies the management of all reservations, allowing for straightforward tracking of bookings, availability adjustments, and updates to information, thereby decreasing your administrative burden
-
We provide you with valuable insights from customer reviews and feedback, enabling you to enhance your service quality and offerings
A GetYourGuide advert at Berlin Hauptbahnhof, which transits 300,000 passengers per day.
+ 458 others joined this month
Comments
My questions to Travel Massive members who are running tours & activities:
1. Are you currently listing your offering(s) on an OTA?
2. If yes, can you relate with the issues mentioned? Did I miss any other major topic? What is your overall feedback?
Thanks for your feedback and comments!
OTAs as currently structured, for urban day tours, is an obsolete approach in this AI era. The question will be which of the OTAs gets this first.... Thats the major topic you missed, but it is a good set of issues and perspectives!
I'm curious to get more of your take on this Alex! What do you feel is obsolete and what would be a better approach in the AI era?
Pizzas. Think pizzas. I have presented on verticalised personalisation many times, this short video has a slide with how I think the OTAs will restructure
Firstly thank you for this interesting discussion I found it very insightful.
Oh, well, OTAs are different, but generally, while there are certainly some strengths in OTA models, there are some fundamental weaknesses.
1. They can't create tours. "Originals" is an interesting approach, but true originals are created by tour operators who don't really need OTAs.
2. They create price competition between THEIR operators. Quit it, and it will be way easier to position yourself not just against other operators, but against the whole OTA.
3. The commission is insane, which makes it even harder to create great experiences. Also, the customer portrait is not always a great match.
4. The lack of power balance between OTAs and operators attracts weaker operators. Once your business is strong, you detach from the OTA for the reasons above.
5. They seem to be weak in marketing. I don't have access to numbers, but I'm sure they burn their ad budgets. It's not very hard to compete against OTAs, especially if tour operators unite and update their own business models.
It's been quite a few years since OTAs showed up, but I'm still not sure if this model, generally speaking, is long-term viable. I think travel has to develop in a slightly different way.
"if tour operators unite" - also complicated.............
I know! So many people think they are competitors, while they are not.
On the other side, all my best friends in the industry do exactly the same what I've been doing, and we have no secrets. It's better to grow our pie together rather than compete for our pieces of the pie.
It just takes time, but the journey is awesome. That's what makes it better long-term, imho.
I like the term co-petitors ...
You make it feel like it is easy to compete with OTAs on marketing! From what I hear, it seems to be a struggle for many operators who do not have the required budget to effectively compete. Do you have an example of tour operators uniting and updating their business models as you mentioned?
I have been following the T&A space for a while now (although not directly working on it) and the way you've presented both sides of the relationship is very clarifying.
Seems like a love & hate relationship for operators, while OTAs don't have anything to sell without the local businesses....
Thank you!
These are all very valid points and increasingly the large OTA's are making life challenging for small operators. Very customer friendly cancellation policies have lured more people to book through them as well. The pivot towards commission based visibility has been for me the most damaging trend as it is purely revenue driven and does not serve the end customer as they simply get presented with whoever offers the highest commission. The key for operators is to make the system work for you and ideally do not rely too heavily on them for revenue. For me the majority of my bookings are direct and my pricing on OTA's allows for the commissions they charge.
Hey Scott,
Thank you for commenting on your experience! I'm intrigued, you mentioned that "your pricing on OTAs allows for the commission they charge". Are the OTAs not requiring you to provide the same price on their platform as the direct price you are displaying on your own website?
From the Tour Operators perspective, you've nailed it. And if you do your math correctly, you will conclude that you are better to put some of your marketing dollars elsewhere. When you look at the major Tour Operators who also flood their products on the OTAs, you cannot compete. A small Tour Operator may have 10 tours on an OTA. The major players have over 100 tours on these sites. A small tour operator is simply not in the picture so why hand money to them.
There is also the issue of self-guided tours. From our market research, we found that more and more people are leaning towards self-guided tours (which is what Narrated Guide is all about). However, it doesn't marry well with OTAs in terms of both the listing and booking systems.
But it's where our target audience is and we have limited marketing budget so we put up with it. For the amount of exposure we get on these platforms, we are okay with the commission rate.
I agree, Viator does a terrible job of categorising "self guided" / gamified tours.
Hello Benoit
Great article. I am building an OTA for Afrocentric things to do around the world. While my OTA is still a baby, I have asked this question many times: Why do big brands such Louis Vuitton has a shop at a mall? in addition to their store.
I see my OTA as a mall. The one stop centre for tour operators to gain more visibility and reach a variety of travellers. Let's face it some consumers don't know what they want.
My experience running my travel platform so far indicates that there many small operators with authentic and local experiences that we are bringing to travellers. Otherwise, it would been challenging to find. SEO takes time!
Hi Charles,
Thank you for your comment! I totally agree that OTAs serve as a great discovery tool. I usually don't know what I want to do when planning to visit a destination and I'm looking for inspiration and recommendations on the more unique experiences that are specific to that destination. However, as large OTAs scale (shifting from curated to open market place), it becomes increasingly difficult for smaller and differentiated operators to stand out if the main ranking factor in the OTA listings is revenue generated to the platform (favouring large scale operators or operators willing to pay higher commissions).
Hi Benoit, a pretty accurate wrap of the situation. In answer to your questions;
1.Yes
2. A. The inability for an operator to respond to customer reviews on GYG. This leaves operators very vulnerable to false or inaccurate reviews
B. OTAs wanting higher commission to pay you more than once a month, or more commission to prevent them running ads across your page promoting your competitors (because they pay more).
C. ITOs facilitating the entry of OTAS in to the wholesale distribution space, because ITOs have been laggards to adopting API technology
Many thanks for your insights Brett!
A. You just made me realised responding to customer reviews was not a possibility. As far as I understand, customers can only leave a review if they've actually booked the tour or activity, which helps prevent fake reviews. But I agree with you that it would be beneficial for operators to have the opportunity to reply and provide additional context when needed.
B. It was news to me that operators have to increase their commission rates to get paid more frequently. Could you share an estimate of how much the commission typically goes up in such situations?
I've always thought the practice of placing ads across operators' pages was damaging the OTA / Operator relationship. From the OTA's point of view, it makes economic sense because they aim to secure a booking, whether it's with you or a competitor. So they are increasing their chances of conversion while intensifying competition to make extra money from operators willing to pay more for more exposure. But, as Scott mentioned above, it does not serve the end customer as they simply get presented with whoever offers the highest commission and not the best product.
I would prefer to improve the search and comparison process for customers from the start, and remove on-page ads to give operators the best possible chance to secure a booking when a customer visits their page.
Good points. Most tour providers, at least in the beginning, will always need some kind of help in pushing their product. Perhaps the way OTAs do it will change, but the principle will stay.