Best Host Travel Agency For Beginners 2020 – Online travel agencies are among the youngest players in the travel market. Since their emergence in the ’90s, they have revolutionized travel distribution, becoming hotels’ greatest enemies and transforming the way people research, plan and buy their travel. And they don’t plan to stop, with new startups popping up every year and giant companies growing even more.
Having worked with a number of travel companies we can pride ourselves on knowing a thing or two about building and growing a successful online travel agency. Here we’ll talk about the ins and outs of the industry, from increasing your inventory to getting the right technology to getting ahead of the competition. But let’s start with the basics.
Best Host Travel Agency For Beginners 2020
An online travel agency, or OTA, is a website (or app) that specializes in selling travel services to customers. There are OTAs that offer hotel rooms, flights, car rentals, vacation homes, tours, or all at the same time. They are basically distributors for hotels, airlines and tour operators who profit by charging a fee for every sale.
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Airline and hotel distribution network. White lines show user interaction and blue lines show movement of data
OTAs are intermediaries between customers and service providers. Travelers can go directly to the hotel or airline website, but around 44 percent of people visit OTAs to compare prices and see the full range of options. OTAs assemble their rich inventory by connecting to various partners through APIs — bits of code that facilitate communication between different software systems. Who are these partners?
Hotels. Hotels and OTAs have a variety of ways to connect: via extranets, a channel manager software, or an API that connects to hotels’ central reservation systems.
Bed banks or wholesalers. These industry players buy hotel rooms in bulk and sell them to OTAs, travel agencies, or even airlines. Here is more information about the largest bed banks and how OTAs can work with them.
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Global Distribution Systems (GDS). These computer networks dominate travel distribution, storing inventories, timetables and prices for all types of services: from hotels to ferries. Sabre, Amadeus and Travelport are the largest and almost a necessity if you want to sell airline tickets. You can login to GDS terminals manually or set up an API connection.
Airlines via NDC connection. This fairly new distribution method allows airlines to sell their inventory outside of GDSs. We’ve already explained how NDC works in detail, but in short, you need a separate software solution.
Another partner allows OTAs to promote their offers – meta search engines. Websites like Google Flights or Skyscanner collect different flight options. For many OTAs, this is the main source of traffic.
Finding the best mix of suppliers and merchants to keep prices low and markups high is the main job of any OTA and how they essentially make money. To support this task, an OTA should work like a well-oiled machine. Let’s turn our attention to the main elements that help this machine run.
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OTAs are technology-oriented companies. And that’s exactly why they appeal to today’s travelers more than traditional travel agencies. Most operations in OTA are automatic and there are many systems responsible for it. We will cover three mechanisms that run behind the scenes of an OTA: the booking and commission engines and the back office.
If you’re a visual learner, watch a series by Travel Technology Competence Manager Andrey Chebotarov on YouTube where he covers all of this.
First, let’s talk about booking engines from the customer’s perspective – the heart of an OTA, interacting with users on the frontend and performing all the main tasks of the OTA on the backend.
A travel booking engine is a software component that automatically processes bookings. However, that’s just the tip of the iceberg. In fact, a booking engine is responsible for all of the following functions of an OTA.
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Integration with suppliers. One booking engine connects to all your suppliers via the above travel APIs. An API allows you to query suppliers for availability information and pricing, place orders, get tickets, and more. A booking engine receives this information and processes it so that it appears on the search results page exactly how you want it.
Search rules. A booking engine can be programmed to display search results in the way that suits you best, using search rules. Search rules dictate which products from which vendors, at what price, should be displayed to which users. That and pricing rules are critical elements in creating travel customizations.
Pricing Rules. Many OTAs practice dynamic pricing, which means prices change based on current demand, competition, season, vendors, customer acquisition sources, and more. Price rules allow you to always choose the most profitable price, taking into account all these factors.
Order and ticket flow. An order flow is a series of steps that take customers from search to checkout. Each provider has its own booking flow and your OTA has to adapt to all of them, which is a difficult technical and UX task to be managed by a booking engine.
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That must have given you a good idea of how the most important OTA process – booking – works. Now let’s talk about the system that helps OTAs generate profits – a commission machine.
A commission rules engine is a software component that automatically calculates the commission and therefore the final price of the order.
There are two types of commissions applied to OTAs – fixed fees and adjustable commissions. Fixed prices are common but not helpful for winning the contest. So, OTAs write commission rules depending on different factors, namely:
Suppliers. If you got a particularly good price from a supplier, you can set a lower commission and thus make a sale and keep the margin high.
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Dates and destinations. You can set a larger commission ahead of peak season or a popular event when you know demand will increase.
The size of a deal. Customers with complex itineraries that generate more income than a normal traveler can get a discount. This is often a small price to pay for a person’s happiness and loyalty.
Traffic source. A common practice is to cut the commission for users on the metasearch site, where you compete with competitors for the lowest price, and vice versa – increase it for people who come directly to your page.
There are countless factors and their combinations that need to be included in the commission rules. To learn the most winning combinations, OTAs can use analytics and adjust rules accordingly, or even automate the engine to always bring you the best deals.
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These were two main systems in an OTA, but let’s also briefly review some of the administrative processes that go on behind the scenes in an OTA’s back office.
The back office of an OTA is an infrastructure that connects various systems in the company, including those described above. We have an article that explains how each process works in the back office of an OTA, so look there for details. But we will cover some basic functions here.
Order counter. No OTA is fully automated. Many medium and small users still rely on phone or offline orders, even if the customers come from the website. A booking desk is a tool for travel agents to view all bookings on one central platform, create customized travel packages, and book in more sophisticated ways, e.g. B. by manual access to GDS terminals.
Customer Relationships and Support. As with any e-commerce business, it is typical for an OTA to have a CRM system to store information about customers. It is mainly used for marketing, which accounts for the lion’s share of an OTA’s budget. Customer data makes it possible to better understand your customer segments, to target them with interesting offers and to build trust and loyalty.
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Invoicing and payment processing. The topic of cash accounting is often confusing, especially when you consider that the process is different for hotels and airlines and there are many additional players involved. When working with airlines, OTAs use software from industry regulators IATA or ARC. Hotels are often less complicated, but since you source most of your inventory from third parties, the process requires smart management and technical finesse.
Ideally, all of these functions should be automated to allocate time and human resources to the growth of the business, rather than supporting it. But realistically, you want to automate at least one system to solve the most repetitive tasks.
There are tons of OTAs in the world and around 70 percent of the market is shared between the two biggest players: Expedia Group and Booking Holdings. Expedia Group owns brands like Expedia, Orbitz, Travelocity, Trivago and more. And Booking Holdings includes Booking.com, Priceline, Agoda and Rentalcars. You can see the market breakdown in detail in this handy infographic.
Despite a near oligopoly in the market, travel distribution is still a profitable business that needs to be started and run. Today, medium and small businesses have all the resources to be successful if they know what OTA success consists of. It is one or a combination of these three things:
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We have a guide to building a marketing and pricing strategy for an OTA, but here are some key points.
Even if you have the most advanced booking engine and a group of experienced agents to close the deals, customers will leave you
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