One of the toughest decisions facing operators in the sightseeing and experiences sector is which reservation and distribution system to use. So the biggest software providers are competing aggressively on price to woo them.

Since early 2018, when TripAdvisor bought one system, Bokun, and Booking Holdings bought another system, FareHarbor, the two brands have ramped up marketing campaigns while also pushing discounts.

The systems providers believe that the sector will coalesce around a handful of players. They want to be among the winners who grab the most share.

The world has dozens and dozens of reservations systems, which fall into a few buckets. Maybe a hundred or so are essentially mom-and-pop software businesses, with basic functionality often targeted for a specific product, such as, say, heli-sking.

Another set of systems have taken venture capital money to grow faster. Peek has taken at least $39 million. BookingKit has raised tens of millions of undisclosed funding, including a Series C announced in May. Rezdy has taken about $6.5 million, while Xola has collected about $6 million, and Checkfront has received about $1 million.

Lastly, FareHarbor and Bokun represent companies tied to online travel agency groups, which provide capital and expertise but also, deservedly or not, have a reputation for greediness and shadiness. (FareHarbor had raised about $7.5 million from investors and millions more from friends and family before selling.)

Low-cost, niche, and profitable system players like Bookeo and Rezgo could hum along for years. But the venture-backed companies like Peek may have a clock ticking. They need fast growth to be able to justify an initial public offering or to sell at a high price to a potential acquirer.

“All the exit opportunities have pretty much dried up,” said Max Valverde, CEO at FareHarbor, during a panel talk on Wednesday at the Arival conference in Orlando, Florida.

“You can be a local, lean business, or you can go to be a big company,” Valverde said. “It makes me think of something Mark Cuban told me when we were talking about FareHarbor and he said, ‘When you run with the elephants, there’s the fast and there’s the dead.'”

Perhaps. But it isn’t entirely obvious that Airbnb, Expedia Group, Trip.com Group, or a less obvious player like a Hotelbeds or a Sabre might not be interested in acquiring a booking management service for sightseeing and experiences — or at least acquire one that’s on a path to profitably. The news Tuesday that Airbnb led an investment round in Tiqets, a ticketing and reservation system primarily for attractions like museums, hinted at some remaining opportunities.

In fact, online demand generators like Airbnb, Ctrip, and Expedia Local Expert have incentives to try to help reservation systems grow, especially in markets where they have gaps in supply, such as for Spanish-language operators, where Civitatis is a significant player.

“We bought Bokun last year because we were responding to the observation that most of the industry is not online,” said Dermot Halpin, president of attractions and vacation rentals at TripAdvisor. “We wanted to help catalyze this with a low-cost offer that lets operators manage their businesses and distribute their product.”

Klook, to cite another example, has built software to help operators handle online booking and digital payments with about 10,000 signed up so far. Perhaps it wants to get more business-to-buiness technology into its system.

“In any region of the world, there’s not enough supply available via professional reservation systems,” said Lukas C.C. Hempel, managing director of BookingKit, in an interview.

In other words, the majority of operators of sightseeing and experiences businesses still are working with paper and pencil and Excel spreadsheets.

Until more operators more quickly adopt state-of-the art reservation systems, demand generators like Booking.com, Traveloka, and all the other usual suspects will struggle to offer travelers a full array of the best-matched experiences.

Do FareHarbor and Bokun Play Fair?

Since Booking Holdings bought FareHarbor and TripAdvisor, with its sister brand Viator, bought Bokun, several industry players have said to operators that it’s risky in the long-run to work with a reservation system owned by a distributor.

“Operators are concerned about the pricing power that OTAs [online travel agency systems] have exerted in other sectors,” said Ruzwana Bashir, co-founder and CEO of Peek.

Independent reservation systems can decide to optimize based on what their operators need, said Jason Morehouse, co-founder and CEO of Checkfront, during a panel talk. “But the systems tied to OTAs are somewhat driven by OTA needs. We think there’s a conflict of interest.”

“It’s fear-mongering at this point,” responded Valverde of FareHarbor. “We have data privacy lawyers surrounding us.”

As Skift has previously reported, Johannes Reck, co-founder and CEO of Berlin-based GetYourGuide, has disagreed.

“We’re not fear-mongering, we’re stating the obvious,” said Reck in August. “TripAdvisor and Booking.com are running these systems at a loss in order to capture and monopolize data from tour operators. This is not in suppliers’ best interest.”

When asked on-stage if FareHarbor shares operator data with other Booking Holdings companies, Valverde said, “Absolutely not. We’re built on a completely different tech stack. We have a Chinese wall. We have competition lawyers surrounding us and watching our every move.”

When asked if TripAdvisor gives sort-order preference in the listings consumers see to operators who use Bokun, Halpin said, “No.” Operators using Bokun were for a while able to get preference for prominent placements for sponsored ads in the search listing, but the company has stopped doing that.

Valverde said that the fear that Booking Holdings would use FareHarbor to do something “sketchy” has proven to be unfounded and that it’s “playing fair.”

Some operators still feel ill-will toward FareHarbor. Lisa Lavelle of Catalina Food Tours claimed that FareHarbor had “held its reservations hostage” when her company tried to switch away from FareHarbor to another system. When Catalina Food Tours told FareHarbor it was leaving, FareHarbor locked it out of the system and told it that reservations would be refunded, disrupting its business, Lavelle said.

The claim drew scattered but significant applause from the crowd, suggesting the situation resonated in some way with other operators.

Valverde said that FareHarbor didn’t want to be on the hook for reservations in case the operator was going out of business.

“We solved the situation to your satisfaction,” Valverde said.

“No, you didn’t,” Lavelle said.

“Well, we resolved it,” Valverde said. “There may be ill will, but we resolved it.”

Tough Choices

Today, many operators are heavily swayed by price in picking a reservation system. While understandable, that’s not the common practice in other, more-established sectors, where shopping for systems on the value provided and its relevance to an operator’s business is more standard.

In response to an operator focus on price, several companies have been pricing aggressively to gain share.

Exhibit A: After TripAdvisor acquired Bokun, it offered a 0.1 percent fee per booking. It later changed to a 2.9 percent per transaction fee on bookings an operator takes directly and that pass through the system. Bookings through TripAdvisor and Viator are free to manage in the system. Bokun has a separate credit card processing fee.

The focus on system price has led to a confusing set of pricing structures. Some systems charge a percentage fee per transaction, but pass along another fee for, say, credit card processing. Others charge monthly subscription fees. Others offer a hybrid of subscriptions and per-transaction fees.

Each model has pros and cons. Systems dependent on the monthly subscription models, for example, may be perversely incentivized to limit, say, operator customer service interactions because each additional interaction is a cost.

But some operators dislike booking fees because they already have slim profit margins on each transaction. A subscription model might let them grow their customers without growing their system costs, at least up to a point. For example, if an operator runs a seasonal business, they will dislike paying fixed monthly costs off-season when they’re having few customers.

Given these tensions, the market seems to be shifting now to hybrid models of subscription plus transaction-based fees. But not for all players. FareHarbor has stuck with its per transaction model.

Yet operators arguably need to get beyond the fixation on fees, which can start low but ramp up later. Finding a system that closely meets their priorities and can handle their type of product is probably more important, as is choosing a system that will likely stay in business for a long time, given that migrating between systems can be a headache.

As operators start looking to value rather than price, systems will likely change their marketing, too.

“In three years, booking systems will stop saying they can do it all and will instead have clear pitches, like ‘We’re the best for observation desks,’ or ‘We’re the best for food tours,’ or ‘We’re the best for handling local regulations and taxes in your particular geographic market,'” said Hempel of BookingKit.

Photo Credit: A view of a sightseeing tour to see the aurora borealis. Tour operators are in the market for reservation booking systems, which is undergoing a price war. Visualhunt