Should day tour operators compete on price?

June 29th, 2022

by Alex Bainbridge

Consumers love a cheap price and entire sectors of the travel industry are focussed on helping consumers save money. Much of the sector’s advertising is proclaiming how one platform’s prices are better than others.

This works where a product is a commodity (like hotels, flights or attractions), but experiences are not commodities, experiences are moving towards personalised offers based on who is asking becoming more important than what was asked for, e.g. including other information we know about the guest.

Every consumer will be offered a unique product, so by definition they can’t be compared on price, except in the round

Then when I listen to OTAs and Rez tech talk about their future plans, many are talking about introducing dynamic pricing. If I was a tour operator supplier, and I wanted to introduce yield management, I would choose class based yield management rather than dynamic pricing. But OTAs want dynamic pricing because Google does…. and rez tech wants dynamic pricing because it is more complex so they can sell you more stuff and make themselves more important to your business.

I would prefer that we as a tour operating sector compete on innovation around the customer experience rather than price

BUT seems that the industry is wanting to compete on price.

Model wars

However, if that is the collective decision of the industry, remember that a few weeks ago I introduced the concept of a Digital Experience Platform. [Read the white paper]. This proposed industry structure competes head on with the OTA > rez tech > tour operator model.

The main reason this is more efficient as an industry structure is that we reduce from 3 layers to 2, an immediate saving on tech integration costs while also reducing the number of entities that need to earn revenue share.

But what does this actually mean for the end product i.e. the consumer experience? Now we are rolling out, you can compare this robotaxi enabled craft beer tour in Las Vegas vs a similar vehicle experience offered by GetYourGuide.

Limo beer tour

 

Buy your own beers, pay for your own (robo)taxis

Admittedly the GetYourGuide retailed experience uses a limo rather than a robotaxi, but the Digital Experience Platform approach comes in at maybe 25% of the consumer retail price (to be confirmed!)

The three layer OTA > rez tech > tour operator model just can’t win vs the two layer Digital Experience Platform model for a wide range of tour experiences in the market today, on a price comparison basis.

Question

If you are one of those companies in the incumbent OTA > rez tech > tour operator model, within tours, why exactly do you want to push the market in the direction of price competition when you know your long term threat is an alternative industry model that is naturally at a lower price point?

Instead, accept that all human operated tours are a luxury product in tomorrows AI powered tour market and prepare to compete accordingly. For me that means compete on customer experience rather than price.

Image: Pexels

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