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10 Ways How OTAs, Tour Operators and Travel Agencies can Optimize Profitability in 2020

The travel industry is one of the most competitive industries that exist. Due to online globalization, a company from The Netherlands can compete with a company in the UK over the same customers. With so much competition, optimizing profitability is key for companies in the industry. This post will share 10 ways how OTAs, tour operators and travel agencies can optimize profitability in 2020.





Profitability Problems


In the previous paragraph, we mentioned competition. While increased competition many times drive prices down, they also impact the customer acquisition cost - many bidders for customers´ attention increase pay per click advertisement costs and any other advertising "real estate" costs.


Not only that, but depending on the type of travel business you own and/or what regions you are focused on, you are subject to seasonality.


Add to that the occasional "force majeure" impact like that of Covid-19, it´s safe to say you are swimming upstream in the travel industry. Due to these reasons, it´s crucial to learn how OTAs, tour operators and travel agencies can optimize profitability in 2020 by focusing on tweaking certain areas of their business.


How to Optimize Profitability in 2020


1. Maximize your profitability during peak seasons


Introducing different pricing tiers is key to maximizing your profitability during peak seasons. This way you will be able to price based on demand, bundle extra products, modify prices for weekdays versus weekends, charge more for peak hours of tours (certain activities that are more popular during the day rather than at night) and promote last minute deals for your spontaneous customers


2. Maximize profit margins by re-shopping your flights and hotels


Flight and hotel prices change frequently, even AFTER you already sold them. Therefore it´s important to implement repricing services such as Trappit for flights an Pruvo Revenue Maker for hotels. Re-shopping flights can reduce your flight purchase costs by 4.5% on average, while re-shopping your hotels with Pruvo can increase your hotel booking profitability by 36% on average. These services only charge a success fee, so if you don´t save you don´t pay!



3. Data Driven inventory

In an era when everything around us is driven by data and artificial intelligence, it is not surprising that companies who utilize their own data generate significantly more profits. Thus, it is important to better understand your customers and adjust your product and inventory based on your existing customer base. The most important part is to understand what type of product your customers are buying. 

For example:

  • What are the top destinations you are selling?

  • Are you selling more city hotels or maybe most of your bookings are for all-inclusive resorts?

  • Are you selling more boutique hotels or mainly hotel chains?

  • What is the average length of stay and what is the ADR?

These data points will give you a better understanding on what type of inventory you should focus on improving. Though most of you might think that it is better to add as many providers as possible, I believe that the key is to add the right providers that fit your business needs.


4. Inventory Aggregation


After analyzing your data and pinpointing your strengths and weaknesses as mentioned above, it´s important to add as many suppliers as possible who fit your needs. This is how you, the travel buyer, can use the industry competition to your advantage. Certain providers have better negotiated agreements in certain regions. While some suppliers specialize in all-inclusive resorts, others have better agreements with boutique hotels. A study done by Tourwriter shows that the majority of tour operator companies manage a significant amount of suppliers; 68% have between 50 and 400 on their books, while a further 9% work with up to 900.



5. Analyze checkout process and remove extra steps


With e-commerce, many times less is more. Every additional step from the moment a customer engaged with your business until they completed their reservation is "churn-prone". What's great is that you don't have to invent the wheel. You can piggy back on industry leaders' marketing analysis. Analyze the top companies within your niche and see how many steps are needed from the moment the customer engages till they have a reservation in their email and do the same.


6. Focus on a niche


Another conclusion you might be able to reach after analyzing your data is that it might be more profitable for you to focus your efforts on a certain travel niche, rather than just the broader market. Though your total potential market might decrease, you will have less competition and lower customer acquisition costs.


7. Travel packages


What can you bundle together? Explore selling the typical flight and hotel package along with a less common package such as hotel and baggage tracking.


8. Reduce digital ad campaign waste


While it´s common practice to increase digital ad spending prior and during peak season, it´s possible that you are investing a lot of remarketing money in less engaged audiences. Take advantage of artificial intelligence tools like Fixel in order to reduce "ad waste" and assure that your remarketing budget is focused only on the prospects most likely to convert into customers.


9. Strategic partnerships


It´s impossible for you to be great at everything. However, you can team up with companies that have unique complimentary services you don´t offer and that your customers will love. An example of this is a series of recent partnerships the IT platforms DCS Plus, TravelgateX, Parsec and IT4T Solutions made with Pruvo. Thanks to these partnerships, these companies´ customers will be able to use Pruvo´s hotel repricing service directly from the IT platform, without any needed integration.





10. More payment methods


For certain regions, Visa and Mastercard might not be enough. Innovation in payment methods is speeding up, and you need to consider accepting payments Google Pay, Apple Pay and possibly Bitcoin.


Conclusion


While certain aspects are out of your control, it's crucial you focus on simple, low cost tweaking of your business in order to optimize your profitability.

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