Destination marketers are skilled at helping travelers plan trips, but they're poor at encouraging transactions. Are they missing a trick by not driving more direct bookings and, thus, helping to level the playing field for the smallest travel suppliers?
Travel Tech Briefing
Editor’s Note: Exclusive reporting on technology’s impact on the travel industry, delivered every Thursday. The briefing will guide executives as they decide if their companies should “build, buy, or partner” to stay ahead.
This week, let’s do a thought experiment. What if cheap technology has improved so much that destinations could start driving bookings themselves — rather than leave the selling to the online giants?
That’s the idea floated by Vinicius Geraldo, a São Paulo-based travel tech executive.
Geraldo believes many destinations, especially in Latin America, are leaving money on the table and they need to become “more transactional.”
- The websites of destination marketing organizations are often sophisticated. But they have gaps. They’re generally ineffective at driving travelers to buy hotel stays.
- “Most destinations use white-label booking tech that looks dated from 1997,” Geraldo said.
- Consumers gravitate toward the global online travel resellers instead. But those brands tend to spotlight the biggest advertisers.
- That dynamic disadvantages the smallest suppliers. Think of an independent hotel, which lacks the buying power of a hotel chain. Or think about the proverbial the shrimp shack in a beach town, whose mom-and-pop owners know little about digital marketing.
- “A destination could charge a commission of only 3 or 4 percent for a booking — far, far less than what the Booking.com’s of the world charge,” Geraldo said. “That would mean a destination could have the best prices, attracting travelers to use it.”
“You would have more inclusion if destinations become transactional,” Geraldo said.
- More direct bookings might level the playing field for smaller suppliers, who tend to get little attention on the giant platforms. That could help destinations achieve some of their goals for equity and inclusion.
- “In emerging markets, there are still many small businesses that don’t have the resources to do digital marketing in the languages of the five biggest source markets for a destination,” Geraldo said.
- “Destinations could provide the online infrastructure to drive direct bookings at a lower cost,” Geraldo said.
To be clear, we’re not talking about replacing Booking.com, Trip.com, or Expedia.
We’re just saying that destinations might do a bit better. Most benefit from favorable Google search rankings. They could rank high in consumer search results for their destination names by using a bit of savvy.
- The online resellers have enormous advantages, and they will continue to dominate online selling for years to come.
- But! What if there’s more room today for destination marketers to grab a share of bookings?
- Even grabbing, say, a 5 or 10 percent share of online bookings would be a meaningful change.
Canada, for example, has tested this concept.
- In 2018, the Hotel Association of Canada created a national Check In Canada booking engine, using about $125,000 ($160,000 Canadian) in grant funding. The service is essentially a bare-bones metasearch, or price-comparison tool. It lets consumers research hotel availability for particular dates.
- Destination marketing sites in Canada, such as the Explore Edmonton site, can insert the tool like a widget — encouraging visitors to book hotels.
- Clicking to book sends consumers to hotels’ direct websites.
- The effective commission rate can be in the low single-digit percentages — cheaper than the 10-to-25-percent commissions tha online travel agencies typically collect.
- The vendor Meridien Reservations Systems powers the search on a white-label basis.
- Has Canada’s project driven a surge in bookings? No.
- But has Check In Canada been fully marketed, fully resourced, and as fully tech-savvy as it could be? No.
The ground has shifted in the past several years. Destination marketers faced headwinds for generating bookings, but those headwinds are weakening.
- Online reseller giants have seen one of their advantages fray. They used to pay for hundreds of market managers in regions. It was these managers’ jobs to build relations with local suppliers and suck up inventory. They also ensured that the properties were listed in extranets accurately and compellingly.
- But this process has become costlier over time, and Expedia and others appear to have shed many of these managers.
- Until recently, many suppliers didn’t have the tools to market themselves. So they relied on the giant platforms to be their online billboards.
- The rise of social media has blunted the edge of online giants, who excel at gaming Google search results with lavish ad spending. They appear to be not as good at marketing cost-effectively on social media.
- Social media usage provides cheaper channels for destinations to use to reach consumers.
- Customer acquisition costs may have come down for destinations thanks to the spread of best practices at retaining customers once gotten through social media, reducing churn.
- On the supply side, smaller travel operators have been recently armed with many of the essential tools of the big boys. Tools like Stripe have enabled any business of any size to accept a variety of payment types.
- Recent consumer adoption of QR codes gives destination marketers tools to encourage people already in a location to visit their site to learn about last-minute bookable experiences on a destination’s site.
- Destination marketers could spread their QR code stickers across their lands with the help of participating hotels and restaurants and experiences operators, the way Tripadvisor and Guide du Routard stickers are everywhere today. The QR codes could direct visitors to check out a destination’s website or progressive web app.
In Geraldo’s distinctive vision, the smartest destinations will invest in becoming pipes in the distribution chain.
- Destinations could launch application programming interfaces, or APIs — enabling other online companies to plug into their feeds and sell travel elsewhere. (For more on APIs, see this previous article I wrote.)
- Suppliers would see destinations as if they were essentially channel managers.
There are a few potential obstacles.
- Getting smaller travel operators to care about a new channel can be difficult.
- In Puerto Rico, a pre-pandemic effort attempted to create a mobile-first directory of the island’s best hotels, restaurants, and experiences.
- But the island struggled in its early days to educate owners of small businesses on why they should provide information on menus, amenities, and store hours. Some of the suppliers felt they had enough business as it was.
- But maybe the pandemic crisis has changed that dynamic. Maybe many small owners now value international tourism because they can no longer take it for granted and they want marketing parity with the giants in the recovery.
- One more issue is having up-to-date information about travel businesses available in multiple languages. Translating information accurately into multiple source languages can be tricky, though there are tech vendors that specialize in making content “localized.”
Geraldo is a self-interested party. But that doesn’t invalidate his idea.
- Geraldo is the founder and CEO of HS LatAm, a vendor of digital sales tools for the travel sector, mainly hotels. He’d like to sell digital tools to destinations, too.
- Geraldo has also led the creation of Travel Tech, a series of free online workshops for tourism trade professionals.
- So he’d like to sell destinations tech. But let’s face it. Destinations have a choice of vendors. Some of the first names that come to mind are Bandwango, Mtrip, CoPilot Travel, and Wend. Plenty of supplementary services providers, digital marketing agencies, and consultancies can help, including perhaps CrowdRiff, Adara, Arrivalist, Sojern, Dragon Trail, East West Marketing, and I&I Travel Media.
- For more context on the possibilities thanks to new tech, read about a related effort: Visit Mexico to Tout Digital Wallet as Unofficial Loyalty Program.
- The real, unresolved question is whether there’s merit to this concept.
I hesitate to mention blockchain technology because its hype has run ahead of its immediate practicality.
- But the potential of decentralized alternatives is relevant, Geraldo said.
- Organizations such as Dtravel — an attempt at a decentralized platform for travel selling beginning with short-term rental hosts — underscore today’s enthusiasm for the democratization of travel.
- Geraldo believes blockchain will eventually become an important tool for destinations.
Meanwhile, let’s set aside blockchain. Several factors may enable destination marketers to move mountains they have assumed were fixed forever. Which destinations will experiment?
I always read tips and feedback. Contact me at [email protected] (or, for greater privacy, ask for my Signal account).