Dynamic packages boost tour operators and OTAs

Travel technology tools that allow clients to create more flexible package holidays in terms of dates and destinations are boosting dynamic-package sales, according to data gathered by Spanish tour operators and online distribution giants. The investment made in technological developments, a couple of years ago, by several companies that sought to allow agencies to create tailor-made packages, has rewarded them by considerably increasing their income. In some cases, this resource allocation has become a business weapon in terms of growth projection at tour operation level. A proof of this is that, after heavy investment in tools for online distribution, the sales figures of these companies continue to grow. One of the pillars for the important leap observed in great tourism intermediation companies in the last few years has been this online platform, which makes it easier for OTA’s and travel agencies to customize the design of multi-destination travel.

Dynamic packages have enabled mid-size tour operators, as well as macro online companies, such as Expedia, to benefit from an increase in the sales of this type of customized travel.

Thanks to its Expedia Lodging Partners tool, this U.S. OTA has managed to jumpstart important agreements with its suppliers in order to provide ‘flight+hotel” products on their webs thus generating, also for hotel owners and tour operators, a new source of income.

Lately, Expedia has signed outstanding alliances with giant wholesalers as well as with large hotel groups such as Meliá, Barceló or Bahía Príncipe, geared to distribution in the United States.

Booking, however, has focused on providing hotels to the webs of airlines and has not jumped on the bandwagon of offering dynamic packages as supplier for intermediary companies, a sector where its top competitor, Expedia, has managed to take over the largest portion of market share.

 

BACKGROUND

Circuit tour wholesalers have benefited from the emergence of low-cost companies to lower the potential risks of buying seats in charter flights and also to expand the array of destinations and flight times that they offer. In addition, they can do this at more competitive rates than traditional airlines, whose fixed costs are higher.

Another factor is the boom of Asian tourism: while faced with the prospect of a growing and uncontrollable volume of Asian tourists, which may end up collapsing some areas, museums or historical monuments, circuit tour wholesalers are able to purchase large stocks of tickets. This grants them great market value in a context in which some large world capitals are on the verge of saturation.

The business expectations of large tour operators rely on the sale of circuit tour products, in a context in which tourism intermediation – when it comes to beach tourism, escapades or cruises – is weakening; the trend shows that final clients are booking without intermediation. Companies know it, and they have placed their hopes in circuit tours and large trips to keep expanding their business.

These large vertical groups believe that circuit tour distribution through retailers can generate added value, increasing their growth and profit margins.

Their perspective is that, when faced with the challenge of direct sales, a tour operator selling circuit tours will be, in most cases, in a position to offer better rates for hotels, excursions and multi-destination travel. Furthermore, they can also generate a feeling of trust that clients usually expect from this type of tourism product.

On top of economic and safety reasons, there is the possibility of offering better service. In Spain, for instance, these wholesalers are the only ones offering departures to European capitals from different cities throughout the country that, without these tour operators of circuit tours would not have this type of flight connection.

 

PROSPECTS

The willingness to provide a better service, combined with the additional advantages previously described, are some of the keys to which tour operators are resorting in order to fight the growing volume of Internet direct sales. They study client preferences and needs in order to bring them to their territory.

Tourism keeps growing; the progressive popularization of tourism-related prices, and the fact that a growing number of countries have a middle class with enough purchasing power to buy these products have turned tourism into an activity with an increasing number of adepts. Traditional destinations of great conventional circuits tours are losing momentum as more and more visitors have traveled to these areas and, therefore, end up being attracted by new emerging areas.

According to travel industry sources, demand for long-haul circuit tours and for destinations that until recently were considered to be secondary, is on the rise. Thanks to this trend, more proactive intermediaries are increasing their market share.

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