3. Routes to market

One of the biggest decisions you will have to make as a business is to decide your route to market, or the sales channels you will use to sell your product.

Typically, businesses as they grow and develop will use a variety of channels, and deciding on your optimum sales strategy is a delicate balance between cost of sales, exposure to the market and booking potential and ultimately profitability. It should be reviewed regularly as part of your ongoing monitoring and evaluation as your business develops and new opportunities emerge.

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If you missed it watch our webinar which looked at routes to market, focusing mainly on the Domestic market. There is also a supporting slide presentation and a worksheet.

The main sales channels in the early stages of development to consider are:

Direct to Customer – the customer pays you the full retail rate. The main way to do this will be via your own website (see Online marketing). It is important that the retail rate should be the same as that provided to other sales channels.

Inbound Tour Operators (ITO) – these are the link between NI’s tourism products and the overseas travel distributors that buy them, including wholesalers, direct sellers, travel agents, meeting planners and event planners. Typically, a net rate providing a 30% margin is agreed with an ITO and is paid to you once a sale is made.

Online Travel Agent (OTA) – these specialise in online distribution and have no intermediaries. They deal directly with the consumer and the tourism product. Typically, a net rate providing a 20% margin is agreed with an OTA and is paid to you once a sale is made.

Meta Sites - such as Trivago, Hotel Tonight, Secret Escapes, Wego, TripAdvisor and Google Hotel Finder, basically are price comparison sites and they will crawl other OTA websites and present your properties price on 5 or 6 channels to a customer so they can see which OTA is displaying the best price. As you can see, having Rate Parity on all OTA channels is important. If you want your own brand website to be presented to the customer, you need to pay. This payment is on a Pay Per Click basis and you pay that Meta Site whether a booking is actually made or not.

The advantage is that you have less of a risk of being booked on an OTA which the Meta Site has displayed if your brand site is shown, but you also risk being charged a fee for a click that doesn’t actually convert to a booking.

The world of the OTA’s, Meta-Sites and the impact of other booking sources such as AirBnB is changing almost daily. However, what we as an industry need to realise is that they are here to stay and the impact of these channels is something we can’t afford to ignore.

Working with other Businesses

Working with other businesses could increase your visibility and give you access to other sales channels. You may be part of a cluster group and want to create an experience bundle.

The solution for many smaller businesses is product ‘bundling’ This involves combining complementary products to provide an enhanced offer and a more complete and compelling experience for your customers. This approach differs from packaging in that the products are promoted together but sold separately. One business will take on the booking and payment process on behalf of you all i.e. a local hotel or larger attraction.

Other options include working with your local Council Visitor Information Centres (VIC). A VIC travel agent retains the commission (typically 10%) once the booking is confirmed and pays you the balance.

If you are considering being part of a more formalised experience package, there are a number of ways to go about this. Consider creating a package with another operator to sell at an inclusive price e.g. overnight accommodation with a tour or activity.

The packages can be sold direct to the customer or indirectly through inbound tour operators or other bonded operators such as coach operators. There are a number of costs and complex legislative issues to be aware of. Packages of this nature are regulated by the Package Travel Directive.