| For a long time now, prospective travelers have had | | | | fee systems are more difficult to find because, for |
| the ability to search, find and make their basic flight | | | | some reason, they are not the norm for the travel |
| and hotel reservations on-line. Only recently has it | | | | industry. Flat fee systems charge a regular monthly |
| been possible for these same travelers to book their | | | | fee and a flat booking fee, generally between |
| destination products, such as sightseeing tours and | | | | twenty-five cents and one dollar per booking. When |
| attraction tickets on line as well. Despite this trend, | | | | compared with a commission based system, one |
| however, there is still no primary distribution system; | | | | might see why the the flat fee system is so |
| which means that most travelers have to visit many | | | | attractive. A tour operator selling ten bookings a |
| different individual websites in order to purchase their | | | | week with a retail value of a $350 per booking using |
| destination products. | | | | a commission system which charges 10% would cost |
| For a tour operator, one of the most important goals | | | | the tour operator $1,400 per month, compared to a |
| is to sell seats. The challenge is how to sell more | | | | flat fee system charging forty dollars per month and |
| seats and what systems to use to manage those | | | | seventy-five cents per booking. |
| sales. There are several challenges facing individual | | | | The third and perhaps most important challenge is |
| tour operators providers when choosing to sell their | | | | how to distribute products through multiple on line |
| products through their website or through a booking | | | | and off line sales channels while managing inventory. |
| portal. The first challenge is deciding what kind of | | | | This challenge is surprisingly not that difficult to |
| solution to use. There are primarily two types of on | | | | overcome, primarily because there are so few |
| line booking systems available. One is stand-alone, | | | | choices for tour distribution systems. The major |
| which means that it is installed directly on a website, | | | | GDSs do not currently support destination products |
| the other is hosted, which means it is installed and | | | | and are focused almost exclusively on the distribution |
| managed by another company. Generally speaking, | | | | of major airlines, hotels, and cruises. There are other |
| stand-a-lone booking engines require an upfront | | | | consumer based tour product websites that will sell |
| license fee and require the tour operator to have | | | | products on behalf of tour operators, however in |
| access to a hosting facility, IT expertise, and the | | | | almost all cases, these tour booking websites are |
| ability to install and manage the software. | | | | simply travel agencies that charge a hefty |
| The key benefit to a stand-alone solution is that the | | | | commission or require exclusive net pricing. The best |
| tour operator has complete control of their system | | | | option for the tour operator is to find a system that |
| and can customize it to fit their specific needs. The | | | | allows them to manage their inventory, streamlines |
| biggest disadvantage of a stand-a-lone system is that | | | | their sales process, gives them the ability to sell |
| the tour operator's products are only available from | | | | through their own website, and provides an |
| their website and cannot be distributed openly. | | | | underlying distribution network that allows them to |
| Stand-alone systems can also be very costly, | | | | resell their products through both on line and off line |
| requiring both software and specialized hardware. | | | | sales channels. |
| Hosted solutions are sometimes referred to as | | | | In summary, there is an immense number of tour |
| "software as a service" solutions and are rented on a | | | | operators who have not yet taken the leap to |
| monthly basis. Because hosted solutions are shared | | | | software based solutions for inventory, sales, and |
| by many users, they are generally lower cost, | | | | customer management. Although the number of |
| although not always, and do not support | | | | solutions that provide some or all of these |
| customizations. Although some solutions support | | | | requirements is growing, they all present their own |
| distribution of products through a branded portal | | | | strengths and weaknesses. The best and most |
| website, very few actually allow for the open | | | | flexible solution would present itself as a hosted |
| distribution of destination products through some kind | | | | solution with an integrated distribution system. The |
| of global distribution system. | | | | solution would allow tour operators to manage their |
| The second major challenge for tour operators is | | | | inventory, bookings, customer information, and |
| deciding whether to use a system that charges a flat | | | | provide lots of reporting. Ideally it would be a flat fee |
| fee or a commission. This can be a tougher challenge | | | | system that charges a monthly fee based on the |
| to overcome because both hosted and stand-alone | | | | operator's volume of bookings rather than charging a |
| systems charge both flat fees and commissions. So | | | | commission. |
| once the tour operator has chosen a technology, | | | | The system would, however, still allow the operator |
| they must decide if the cost of the system is | | | | to set commissions on products that are sold through |
| appropriate. The benefit of a commission based | | | | third party resellers, so that they can compensate |
| system is that there is generally very little cost to | | | | their sales peoples appropriately. It would have an |
| the tour operator until a sale is made and then the | | | | integrated consumer booking engine that would give |
| tour operator pays on average about a five percent | | | | the tour operator options for customizing the look of |
| commission on the sale of their products through the | | | | their website. Lastly, the system would also have an |
| system. In some cases, the commission can be as | | | | open application interface that would allow more |
| low as one percent or as high as twenty-five | | | | technologically savvy operators to totally customize |
| percent. This may seem attractive because there are | | | | their consumer booking experience and integrate |
| no upfront or ongoing costs, but the costs of a | | | | products in unique and interesting ways. |
| commission based system can quickly add up. Flat | | | | |