Tourism today – big power – minimal responsibility

Billion opportunities says UNWTO – but for who?

10 megacompanies in three travel sectors making money out of local communities’ tourism assets in 2016

There are three powerful forces in the travel industry nowadays- the OTAs (sometimes called ironically "The Sharing Economy") the cruise companies and the big tour operators. Ironically in this era of ‘free competition’ and ‘market forces’ there are a just 10 powerful megacompanies who drive the conversation and make the money.

The OTAs – these burgeoning behemoths of the travel and tourism industry have no allegiance to anything other than the marketplace and to their bottom lines. They are asset-light and the price/earnings ratios of their shares imply big future profits. They have taken the business by storm in the last 10 years. As a result of rapid consolidation just 8 megacompanies dominate this business.

$60bnPriceline, $25bnAirBNB, $15bnExpedia, $12bn Tripadvisor, $51bn Uber, even $516bn Google are moving into whole-tourist-package solutions and will soon have a stranglehold over the whole of the global travel and tourism industry.

The OTAs hold destination suppliers to ransom – it is no wonder that they are less interested in destination sustainability than the destinations are. The OTAs priority is how they can preserve their massive share Price/Earning ratio (and hence the value of their companies) and that means inexorable growth before they are swallowed up by the next innovation.

The only way that sustainable/green/local holidays can take centre stage is if consumers demand it and/or destination organizations and/or destination communities take the lead.

The cruise companies – the cruise industry shows no signs of slowing down, with nearly 24 million passengers expected to sail in 2016, a dramatic increase from 15 million just 10 years prior (2006) and even 1.4 million in 1980.

The Cruise Lines International Association (CLIA) member cruise lines are scheduled to debut 27 new ocean, river and specialty ships in 2016 for a total investment of more than $6.5 billion in new ocean vessels alone. Just two big, powerful organisations dominate the business – $29bn Carnival and $20bn Royal Caribbean.

So – 24 million passengers bodies (and their wallets) are sealed in the ship for the duration of their holiday and the cruise company gets first take at any expenditure. So, no hotel or restaurant spend and no (except intermediated) excursions.

Naturally cruise companies go for top destinations – so the Caribbean, Venice, Dubrovnik, Barcelona, Amsterdam, Rome and Florence are ram-packed with low-spending cruise passengers and … the sea gets polluted, plus per passenger emissions are higher on cruises that any other form of holiday.

The Tour Operator providers of All-Inclusive holidays – Although they have been around for a while (the concept pioneered by organizations such as Club Mediterranee and Sandals) in the past few years all-inclusives have made major market gains. First Choice, a subsidiary of TUI, for instance boasts that it is now totally all-inclusive.

This sort of arrangement offers the client above all security – security of expenditure and personal security, the operator gets the ability to contract very low rates – and manage the total holiday to their advantage. As world security becomes a primary issue it is likely that all-inclusives will gain more and more market prominence.

As a result of mergers and acquisitions over the last few years there are now just two big players circa $10bn TUI ag and $3bn Thomas Cook.

The (maybe 25 million) passengers (and their wallets) needs are met in the resort/hotel and consequently spend little in the destinations.

The Big Picture: It is possible for destinations to get sustainable cultural, social, environmental and economic gains from tourism, but to a large extent, tourism, even though it may benefit from what they have first right to – their culture, environment, history, beauty and facilities – is out of their control. Intermediaries (tour operators, OTAs, cruise companies) regard destinations and their attraction for tourists as free resources.

But the fact is that destinations are potentially powerful, multi-faceted brands that have a potent effect in the marketplace – as Estate Agents say there are three most important ‘P’s – Position, position and position. And a destination is position personified!

In the interests of their sustainability, the challenge for destinations is to turn the tables and take control of their own brands, manage them for their community’s benefit in the global marketplace and then use the OTAs, cruise companies, all-inclusives rather than be used by them.

The OTAs, cruise companies, big all-inclusive tour operators would leap at the chance of dealing with empowered destinations who had an eye for their own sustainability which in turn could be a powerful part of the destination brand.

Playing for big stakes minimum of around $2m a year per small destination up for grabs – and, as more than 50% or all hotel bookings go through OTAs, even a destination with 10 hotels or 1,000 beds is paying OTAs around $500,000 a year – maybe up to $1million. Plus they’re losing tourism revenue up to another $1million or so AND the remunerative ongoing visitor relationships.

Why would local intermediaries not negotiate rates? Why would destinations not organize, their tourism providers in cohesive entities? Why don’t destinations act to protect and enhance the interests of their communities?

The startling fact is that it just takes just one destination stakeholder group or even just one dynamic well-connected destination resident to get a minimum couple of million dollars a year of opportunities as a benefit for their community – Tripadvisor, Uber, Booking.com, Google et al have spotted the opportunities in the destinations, why can’t the locals?

More at http://www.sustainabletourism2015.com

Valere Tjolle                                                                                                                                     @ValereTjolle [email protected]

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