Online Travel Agencies and Aggregation Theory

In his article on Aggregation Theory, Ben Thompson remarks on the rise of the internet giving way to a new type of company supply chain:

"First, the Internet has made distribution (of digital goods) free, neutralizing the advantage that pre-Internet distributors leveraged to integrate with suppliers. Secondly, the Internet has made transaction costs zero, making it viable for a distributor to integrate forward with end users/consumers at scale."

This created the rise of Aggregator businesses, which possess the following characteristics:

Direct Relationship with Users

The Aggregator business is the one that the customer ultimately interacts with. You may read an article written by a reporter, but you find it through searching a topic on Google. You may eat food from a restaurant, but you ordered it through the "local deals" tab on Doordash. The curation the platform provides adds enough value to you that you prefer to interact with it, rather than directly with the supplier of your product.  

Zero Marginal Costs For Serving Users

The platform does not incur the incremental costs of increasing customers, so it is able to serve many more than  a traditional business. Google does not hire writers, and Doordash does not order ingredients and set up a kitchen. They have no incentive to vertically integrate to production, but rather capture demand in enormous volumes and distribute it accordingly.

Demand-driven Multi-sided Networks with Decreasing Acquisition Costs

Stay with me here. The more people searching on Google, the more content will be written, the better Google will get, leading more people to search on Google. There is a reinforcing loop that benefits consumers and producers that the Aggregator moderates.

In the Tours and Attractions industry, the Aggregator businesses are Online Travel Agencies (or OTAs). They wield a large influence over bookings across several categories of activities. While very similar by nature, each major OTA has certain strengths and weaknesses. Identifying a good fit can help you make the most of your OTA relationships and focus on one suited to your business and marketing style.

Top OTAs in Tours and Attractions

Expedia Local Expert 

Expedia is one of the largest OTAs in the world for a variety of bookings including flights, hotels and, more recently, the Local Expert division - focusing on activities.  As a trusted brand, Expedia is a tremendous vehicle to get in front of a large base of customers - but does charge accordingly with a heavy commission price tag on each booking of 20%-40%.  

When marketing travel, tourism and experiences, targeting the right customers at the right time is of paramount importance - and companies with a wealth of customer data rule this game. Expedia boasts 112 million unique monthly site visits and over 68 million email subscribers across all ad products. Based on the breadth of the platform, you can be confident that any ad spend that goes to Expedia will go to a robust and targeted advertising platform with support for audience insights, social media and reporting.  

Get Your Guide 

Expedia Group is the large conglomerate that covers many different booking functions. By contrast, Get Your Guide is the specialized company operating specifically in Tours and Attractions as the main competitor to Viator. While it does not have quite the same reach as its larger competitor it boasts an impressive year-over-year growth rate and a tremendous mobile experience - making it an attractive alternative. 

Being a newer company with a mobile-first design orientation has allowed Get Your Guide to build a large presence on photo heavy mobile apps like Instagram. Advertising direct-to-consumer on Instagram via Facebook ads can become prohibitively expensive for an individual tour operator. Get Your Guide is a great way to build a presence with younger travelers on the platform at a 20%-30% commission rate.  

Viator 

In software, it pays to be early. Viator was one of the earliest OTAs on the internet (launching in 1995) and was rewarded with an acquisition offer from the juggernaut TripAdvisor to the tune of $200 million. As such, Viator benefits immensely from the data and network associated with the TripAdvisor name.  

Search Engine Optimization is highly competitive in all travel and tourism and, when combined, Viator and TripAdvisor have some unique advantages. First, they are two of the longest running websites in the space and as such have a compounding advantage of seniority to rank highly in Google’s search ranking preferences. Secondly, the sheer volume of user generated content from TripAdvisor’s long history of reviews creates a large online footprint, so listings are more easily found. In SEO, the group seems to have a durable competitive advantage in organic search.  

Klook 

When entering a crowded software space, it helps to have tremendous financial backing to splash out into a large addressable market. Hong Kong based Klook has done just that, raising several massive venture capital financing rounds that allowed them to achieve red-hot growth in Asia and set the stage for a growing expansion into North America.  

Like Get Your Guide, Klook came about in the age of mobile apps and has a uniquely strong Partner App for all things Activity Bookings Management. This has a great application in Reputation Management, where consistent monitoring and speedy replies can make a world of difference. Partners can get SMS push notifications when a customer makes a booking or leaves a review and allows you to publish an instant reply. 

Understanding the nuances of each platform and using an effective Channel Management software can make sure you make the most of your OTA integrations.