The picture of travel and tourism industry doesn’t seem to be as glossy as it looks. If we intend to go deeper we find that every day many agents are either incurring huge losses or are threatened by the online offers or are shutting down their shutters. In this scenario, the question is, are the online portals eating up the business of the agents who are doing business the conventional way? Is it an ethical way of doing a business where one section of the travel and tourism i.e. the online portals is doing pretty well despite making profits, whereas the tour operators are not able to compete with them, as per few tour operators. Let’s have a look.
‘Ethical’ is a big word in itself, the meaning of it doesn’t stand as simple as its pronunciation. Today, ethical is really losing its meaning, not only in regards to travel and tourism industry, but also in other verticals. The online portals are taking away the business of the tour operators which is being claimed by many of the tour operators these days, and Ethical Tourism Policy has become a buzz. Let’s first understand what ETP is and why this initiative has been started by a group of tour operators. Online travel portals which are armed with large foreign funding are squeezing hoteliers for lowest possible rate and have brought almost a monopolistic situation. They are in a way abetting unethical practices in the travel and tourism industry. Many Tour operators have to shut shop and many are on the verge of closure because Tour operators are not able to compete with the heavy discounting by portals.
But, is anybody making money in the process? The answer is, none! The whole beneficiary in this game of price war by travel portals is direct customer. The ARRs of hotels have gone down drastically, and the offline agents have literally swept out of business because OTAs sell inventory lower than their purchase price to kill the competition. Most of the tour operators want a permanent solution, else they will be forced to shift their business options, says the member of ETP group.
The group firmly believes that hotels should play the role of a principal and product supplier and frame rational sales policies for the tourism industry. The group basically wants to stop hotels to offer attractive special rates to offline or online tour operators producing results for them. All what they demand to hotels is to have strict ethical tourism policy. Firstly hotels should allow portals to discount the rates only on B2B portals and B2C portals should display selling price set by hotels.
The ETP under this model aims at benefitting the hoteliers as well. It says, hotel’s ARR will increase as discounted rates are not displayed and dot coms will be making better profits and will not squeeze hotels for lower rates. As the price war will be resolved, it will be create better profits for the hotels. It also states that hotel’s direct customer will not have any complaints from the hotels as display rates on portals will be higher than nett rates quoted to portals. This will result in gaining the confidence and enhancing hotels credibility amongst direct clients. Since discounted rates are going to be only b2b portals and display rates on b2c portals, travel agents, tour operators will be more loyal to hotels. Hotels will get their bulk sales from Dot Coms as tour operators will be routing their business through their B2B portals.
When it comes to portals, the ETP promises that they will also be benefitted. Since on b2c portals clients will see only selling price and will either book directly or will come through a tour operator. In both the options portals will be benefitted. If clients book on display rates, portals will make more profits, if client comes through an agent which again route his business through portals because of the heavy discounted price on the portals. So portals are getting benefit either ways. Portals will get a loyal team of professionals (i.e tour operators) with no cost which will further enhance their business as tour operators will provide personalised services to all clients. As of now they have to hire team and have that liability of paying them on monthly basis. One customer probably comes to portals may once or twice a year for his booking. But if agents start making profits through portals then probably each agent might be able to give two to 10 bookings a day resulting in maintaining or enhancing the high turnover model of the portals with better service standards. Portals can create their own team of loyal professionals (agents) at no cost and still be able to maintain their turnovers. This will probably convert into a model where agent’s offices can be claimed claim their own offices by portals and can provide all service of offline as well, such as payment collection, personalised services, etc, through the local agents of the specific locations.
The movement obviously intends to provide benefits to tour operators, affordability and easy access of technology at no cost using the portals for bookings. Else agents will have to spend crores of rupees which hardly anyone of the tour operators can afford. An ease of business will be created as portals will do all spade work of contracting and will upload on b2b where tour operators have just to login and conclude the booking procedure. Tour operators are running from pillar to post to get wide range of hotels and keep negotiating the rates will be reduced as portals will do all the contracting that too on a special discounted rates and with incentive schemes by portals. Agents will get their customers and profitability back as clients do not have excess to b2b portals and can see the common display rates on b2c portals only set by hotels.
ETP, a war between offline and online, better to be termed as a movement, is a step to bring in the industry i.e. hoteliers, portals and tour operators together and work as a team. The tour operators are on a verge of losing their business and concerned with the rising demand of online. It is important for all verticals of the industry to follow certain ethical practices so that interests of the industry as well as the clients are safeguarded.
What is (ETP) Ethical Tourism Policy?
ETP is not against any portals or technology it’s not about online vs offline, many are confused, rightly so as industry is going through transit. The aim of the policy is to use technology for the benefits of all industry partners in fact ETP welcome technology and suggest all members to adopt the technology for its better use. Under ethical tourism policy, hoteliers to stop only these few portals which are using their dominant position of having excess funds to under sell (selling even below their purchased cost) b2c portals to have common display rates (selling price) set by hotels. As many hotels could sense brand diluting by not getting the same profile of guests due to this under cutting of price by using different means of under cutting, discounted coupons, advertisement budgets etc.
ETP is against ‘Predatory Pricing’ which is illegal under CCI, (Competition Commission of India) Predatory pricing the act of setting prices low in an attempt to eliminate the competition. Predatory pricing is illegal under anti-trust laws, as it makes markets more vulnerable to a monopoly. Therefore Govt., allow 100 per cent FDI for market place with riders of predatory pricing, these OTAs must regulate else purpose of ETP is to approach govt and force regulation of such practices.
As of now it is a price war in our Industry, whereas the service standards have gone down drastically in the absence of respectable margins due to price war created by few OTAs. Market has become so vulnerable that news of defaulters and cheating has become very common which is not a good sign for any industry.
Ethical Tourism Policy is the new buzz in the tourism industry, where the online travel booking is taking over the conventional system. Well, we all will agree that today is an era of technology which has made everything easy and convenient. Online booking can be trouble-free, but often booking holidays through it cannot give a pleasant experience. Whether, it is tour operators, hoteliers or portals, all are the elements of the same industry and they should welcome the change as well as it is a high time to work as a team, and not step over each other shoulder to climb up the success ladder. We feel, all three should come together in order to offer better service to the consumer which in future will definitely lead to expansion and economic growth. The ‘price war’ should be resolved and better understanding amongst the hotels, tour operators and portals should be developed.
ETP is a great initiative, in order to save the dying business of the offline agents, but is a bunch of people enough to drive the mission. The answer is ‘NO’, if the entire industry is facing crisis, then it’s time to be united, come together and convert the movement into mass movement.