Tripadvisor global commission change – why now? why at all?
February 10th, 2020
Last week Tripadvisor announced, with immediate effect, that supplier commission would be standardised on a regional and product basis rather than current practice to support individually negotiated distribution deals.
This was well covered by Skift, including the full contents of the supplier notification email itself. If you are only just hearing about the news, go and read the coverage on Skift first then come back here for analysis 😉
Initial reaction – is this about dynamic retail prices or about resources?
My immediate reaction from hearing about the change is that they want standard commission because that means they can slim down their supplier facing commercial team as minimises the amount of human negotiation required or possible.
Initial supplier onboarding and ongoing management can now be undertaken by more junior staff than previously as commercials become “The computer says XXX %”.
However its not wholly about saving resources.
From the Tripadvisor email:
We will adjust the retail price of your product(s) to align with our new commission rates in your destination
I see what the problem was – if they had standardised commission and not adjusted consumer retail prices, suppliers would not be paid the same amount for bookings as they are currently. Depending upon how their supply contracts are worded, this could be an issue. Perhaps their hand was forced and this adjustment is a once only exercise to ensure no supplier immediately loses out for an overnight change that could not be pre-announced.
Most online commentators are however expecting this statement to mean that Tripadvisor has introduced dynamic retail pricing. On balance, if Tripadvisor was adjusting retail prices as a once only exercise I expect the email would have stated that, so although my gut is saying this change is about saving resources, the pricing strategy adjustment seems to be equally important.
Two key questions
1 – Do they really want to create a price difference for the same experience based on how the customer booked?
Is training customers to check multiple retailers before booking a good idea? Will that create the need for a metasearch layer between consumers and retailers?
They must judge that this is reasonable and they are going to win (or at least be neutral) should that happen…..
However the competition is now GetYourGuide Originals and that has wiped 5% tech tax off the consumer price at the very least…… plus other efficiencies….. before you even get to considering that its likely a more attractive, better optimised, product. (Or will be over time)
That Tripadvisor/Viator have chosen price as their battleground is surprising, given the inherent weakness they have on that aspect vs their nearest rivals. If you are going to choose a fight, choose a fight on an area that you have a good chance of winning. This is the advantage of having the ability to set the battleground, but its an advantage easily squandered.
GetYourGuide and Klook are trying to move the battleground to customer experience and curation. Tripadvisor is still fighting the last war using an accommodation distribution based playbook.
2 – Can we have price differential without removing free cancellation?
Won’t customers just cancel and rebook at a lower price if they learn that another retailer has the same product at a lower price?
Right now we have fully refundable bookings. Hotels & flights do not, so they can adjust prices and customers who have already booked are locked in.
My view is that as an industry we should retain free cancellation over evolving towards dynamic pricing and non-refundable bookings.
If this continues, suppliers will either:
- Change their product for Tripadvisor customers – meaning they can price their product separately, breaking direct comparison. Not massively consumer friendly
- Introduce yield management tech – as suppliers can suggest prices to Tripadvisor they can adjust what they supply Tripadvisor to make Tripadvisor more expensive than other channels, or return Tripadvisor’s sales price back to their regular pricing.
There is just not enough margin in our sector (vs e.g. hotels) to introduce this kind of tech or overhead. Perhaps in attractions there is, but attractions are much more like hotels than tours are.
What would I do?
- Introduce a commission marketplace – still enabling reduction of sales team overhead (sorry!) – just like buying Google Adwords – but puts the commission control back in the hands of the supplier and lets the market set the level
- Choose discovery & personalisation as the battle ground, not price
- Embrace suppliers – GetYourGuide has effectively said they are going to replace their current product set with GetYourGuide Originals (in tours). Right now, with suppliers uncomfortable about how the market may turn, suppliers are looking for friends. Now is the time to do projects that are pro-supplier and win those friends for the foreseeable future
- Create a supplier movement, tens of thousands of suppliers all aligned against whatever GetYourGuide and Klook are upto is a powerful concept. Tripadvisor will find this easier to do this while it still has sector leadership
- Reverse the execution of this change – ultimately its minor strategically but high on the noise and optics scale
Future of this blog
One of these days, soon, I am going to have to stop writing blog posts about what others are doing in this sector as my own (new) biz grows and becomes a player again and it becomes unethical to continue without a gazillion disclosures.
In the meantime my stats show that the market likes insider views about what the retailers are upto….
Image: Flickr: Paul Mison
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