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Trends for Vacation and Travel Providers

Travel and hospitality trends - target 2020
The travel industry trends illustrate a shift in the market power from the providers (resorts, cruises, etc) to the acquisition and digital distribution channel operators (such as OTA, Agents).
This is especially concerning for the vacation providers because it erodes their margins significantly, with the digital channel costs growing faster than the revenue they can charge on their services to their guests. According to travel research studies (such as those commissioned by Hospitality Asset Managers Association), the growth rate of customer acquisition costs is double that of the hotel revenue, which is clearly not sustainable.
The Good News: the Volume of Business is Growing
According to BEA (Bureau of Economic Analysis), the growth was 3.4% in 2014 and 6.2% in 2013, while the economy (GDP) only grew at 2.4% in 2014 and 2.2% in 2013 respectively. Also, the population and demographics dynamics, with the wave of babyboomers going in to retirement, adds to the increase in volume for the travel industry. Plus, people pay more for transportation, accommodation, and food, with the biggest price jumps seen in entertainment and recreational services.

The Bad News: Higher Costs go to External Customer Acquisition Operators
Driven by historically attractive commissions (10% -20$, and even 30%), lots of new players entered the OTA market, from individual startups to big players such as Google and TripAdvisor, with notable newcomers such as Amazon, Apple, Facebook, etc lining up their offers as well. And while competition in this space pushes the prices down, the fragmentation of the market leads to increased costs for the stay providers, who have to cover more channels. And with consolidation of these digital channels, they grab even more of the market power, further cornering the destination providers.

The proposed strategies: providers should capture their audience
Given the growing power of the distribution channels, OTAs and other pre-booking players that influence greatly where vacation goers end up booking, the main strategy left for vacation providers is to fight them on the post-booking services field, to build up customer loyalty and to focus on having repeat guests. Once the guest is on their premises, there is a variety of things that can be done to secure a come-back: from great services, enterntainment, etc (which unfortunately lead to increased costs) to simpler, more effective "social goods" solutions such as what we do at VacationMingler: help people connect and have a memorable vacation so that they come back for the entourage and the enjoyable company to be found on the premises.

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