Eliminating the intermediaries in the travel industry

Published in

15toGO

10 min readAug 20, 2018

Empowering the locals to sell and communicate directly to the end customers will create the foundation of better curated and tailored-made experiences

The travel industry is a giant and complicated maze of relationships between the players in the fragmented market. The relationships between the parties are legacy and inherited from the old days when the only way to travel somewhere was to ask someone who has established connections with the locals. That is how the network of intermediaries was born. The internet is shaping the landscape giving even more power to the well-established players. The blockchain technology and the decentralized ecosystem building is here to empower the locals to establish a direct connection with the clients and to bring more value for both clients and service providers.

1. Booking isn’t really for free

The travel market is among of the most complex ones — there are so many different players and middlemen involved in it, that it’s mind-blowing! Most of the people don’t even realize how many intermediaries their money goes through when they book their vacation.

Тhe client is often left with the wrong impression that he isn’t paying anything whatsoever during this process. This does not mean that the service is free though. The LTO has no other option but to raise the price of the offered package in order to be able to pay all the intermediaries at the end.

2. Who the players on the market are

All the participants involved can roughly be broken down into the following categories:

1) Tour operators — they combine different travel services into one package that they sell to clients. Tour operators are an essential part of tourism’s ‘Activities’ sector, which is growing exponentially with every single year. Those group activities involve trekking, bicycle tours, sightseeing, diving, sailing, kayaking, desert tours, etc. The package often includes accommodations as well.

Tour operators themselves can be divided into several types:

a) Inbound (Incoming) Tour Operator — ITOs are locally-based, and their aim is to boost the appeal of а destination in general to potential travelers. These are often associations of business owners and industry leaders from a specific location, collaborating in their attempts to popularize the region that they operate in.

Inbound Tour Operators regularly cooperate with other travel agents and distribution partners to put together and promote packages. As a part of their marketing strategy, these holiday packages are often created — comprising of accommodations, transportation providers and tour operators. Market segments that are most likely to pay a visit to the region in the upcoming months are targeted as a part of the promotional campaigns.

Local tourism businesses need the ITOs to increase the visibility within their destination.

b) Domestic Marketing Company (DMC) — they often act like Inbound Tour Operators. The DMCs are proficient in the social, legal, economic, political and technological (SLEPT) specifics only of their own destination and can offer more tailor-made trips than the ordinary Outbound Tour Operators. However, they also aren’t offering any activities, that they are personally managing.

c) Outbound (Outgoing) Tour Operator — these intermediaries normally serve international travelers. They create packages and tours designed to allow travelers from one country to conveniently visit another one of their choices. For travelers, booking a tour through an Outbound Tour Operator gives them the opportunity to get all that they require easily.

OTOs tend to specialize in a particular area, such as South-East Asia for instance. Local service providers attempt to appeal to Outbound Tour Operators so that they can present themselves to travelers from emergent international market segments. By networking with Outbound Tour Operators and making them aware of the products and services they can offer, tour and activity operators try to have their tours and activities included in the upcoming packages.

d) Wholesale Tour Operator — Wholesalers sell tours and activities to independent travel agents, and also collaborate with Inbound Tour Operators in order to manage the particular specifics of the itinerary.

Travel agencies are the second main category of the travel market. Their main objective is to resell both packages and single services from the service providers to the end customers.

a) Retail Travel Agencies — the physical entities that deal with clients directly. These were quite common in the past, prior to the Internet era, but their popularity has been gradually decreasing. The number of full-time travel agents in the US has dropped by more than 60% since the year 2000.

The travel agent’s main value proposition is personalizing one’s tour, saving him time and being there to help when an issue such a flight delay occurs. However, most of these services can also be offered by a platform that enables users to request tailor-made trips for themselves and their friends, while presenting them with 24/7 customer support.

b) Online Travel Agencies (OTAs) — such examples are the famous Booking, Airbnb, Expedia, TourRadar, Trivago, etc. OTAs have dominated the travel industry for more than a decade now. It is quite obvious that they facilitate vacationers in the search for accommodation. However, this convenience costs the bookers between 15% and 25%, of the total price — paid both by them and the Local Tour Operators.

According to studies among the main challenges to digital relevancy for LTOs are to stay relevant to the customer, and to compete with Google, OTAs and metasearch sites. There is another reason for LTOs to try to distance themselves from the OTAs. The latter control all of the customer information, which prevents the Local Tour Operators from advertising directly to their own clients and from being able to improve the quality of the trips that they organize. Since the OTAs store the valuable data about all the travelers in centralized servers, they are also more prone to malicious hacker attacks.

3) Global Distribution System (GDS) is the third category and most of the normal travelers are not even aware of its existence.

In short, the GDS offers B2B services. It is an enormous computer network that provides inventory and rates for hotels to both travel agents and travel sites. It is also utilized by other major travel segments, like car rentals and airlines. It’s made up of data that is collected by the giant companies Galileo, Sabre, Pegasus and Worldspan. The GDS does not really maintain inventory and rates but passes it through to the end user from the hotel. The hotel will load rates. When a query is made the GDS simply passes the information to the end user. There are certain fees and commissions charged when a booking is made through the GDS platform. Moreover, the GDS cannot guarantee that personal information of the customer won’t be lost, hacked or changed, as it is untraceable and everyone who has direct access to the system could alter the data. The transaction data is openly available and is not controlled by any party while the data on the blockchain is maintained and controlled by the community rather than a central authority.

3. Examples

The whole process of booking an experience is incredibly complex under the hood.

Let’s say you live in Bucharest, Romania, and you would like to have an adventure in Acapulco, Mexico. There two main scenarios for you and both of them lead to passing through several intermediaries.

In case you make a reservation via an OTA (such as TourRadar), the data will be pulled through the GDS (Global Distribution System). Sometimes the smaller Tour Operator would be a part of a service package, which means that the greater Tour Operator takes a percentage from this whole money transfer as well.

If you prefer to book through a Romanian Retail Travel Agent instead, you would most likely visit him first in person to enquire about the different options that he or she can propose to you. The Travel Agent then plans a comprehensive itinerary through the brochure of a Spanish Wholesaler and then proceeds with booking all the operations. The Spanish Wholesaler is responsible for Latin America and contacts the Mexican Inbound Tour Operator, who may redirect the booking request to the actual service provider — the Local Tour Operator, based in Acapulco.

Both you and the LTO lose a lot of money in this whole unnecessarily complex process.

4. Why do these middlemen exist?

The primary reason is the lack of communications that used to exist fifty years ago when there was no Internet, no mobile phones, no way to research, choose and book your vacation.

Another big obstacle is the language and culture barrier. This is the main reason travelers prefer to book through a Travel Agency that speaks their language. An application that automatically translates whatever messages they have for the Tour Operator (and vice versa) would considerably facilitate the entire communication and would push them one step further away from the travel agencies.
Furthermore, many of the travelers believe that when they organize a trip themselves and book through an OTA, they choose the cheapest option out there. The fact is, that their trips can be a lot more affordable in the absence of the intermediaries and their unnecessarily high fees.

Many Tour Operators (and hotels for that matter) offer few payment options. The expensive and slow payments through bank transfers scare many potential clients away. They know that through an OTA they can always use their debit or credit card effortlessly. Giving them the chance to pay in a traditional way, be secure and spared from any fees would a dream come true — which is what we are actually trying to achieve.

5. How we envision the future of travel

We believe that travel should be accessible to everyone. It is no coincidence that more and more people are choosing to book and organize everything by themselves. But even then they are just moving from one intermediate to another.

We, at 15toGO, envision a world where you could book your trip directly from the service provider without any intermediates in a new, safe, easy and transparent way. This could happen thanks to the blockchain technology, which allow us to create a decentralized system in which there is not a single entity being in possession of the content and collecting sizeable fees.

The Internet is all about putting people directly in touch. Cutting out the middleman, who barely provides any additional value, will gradually become the norm for many of the B2C and B2B industries. The travel industry will be among those that will experience this change the most. Through the 15toGO decentralized marketplace, LTOs will be enabled to directly communicate with their customers, so that they can understand their needs and desires better beforehand. Only this way they can personalize each and every experience — an utmost necessity for today’s consumers.

6. The 15toGO Platform

The majority of travelers are looking for the best rates out there. In case an LTO can offer a better deal than the OTA, then the travelers wouldn’t hesitate to take advantage of it. Thanks to the distributed ledger technology, that 15toGO employs, the OTA’s hefty commission can finally become a thing of the past.

But the price is not the only factor that can influence the traveler’s decision-making process. We at 15toGO think that for most of the people there is another factor — the social one. Traveling is the best way to find new friends and to establish meaningful relationships. That’s why we build the 15toGO network as an open and secure environment that can help people not only book the experiences but to choose their travel companions.

The 15toGO’s team is also aware that the best offers include other factors besides the price though — such as flexible cancellations and upgrades like free breakfast or included tour guides. On our platform, all the LTOs will be both in control of their own itinerary and more visible thanks to our user-friendly app.

The focus of our project is entirely on the group traveling experience since it is an emerging trend and the market isn’t dominated by an application offering these services — yet individual travelers may have multiple options, but for bigger groups, there aren’t many alternatives. In their case, the booking process is dominated primarily by the Outgoing Tour Operators, who rarely adds any value for the travelers. Our platform involves another noticeable tendency as well — being socially active and sharing one’s experience with the world is on the rise. Having space to both meet new people to travel with, book trips and share content from them afterwards is a dream come true for both users and LTOs.

The Local Tour Operator (a term that we came up with) has a deep knowledge and understanding of the place, in which he’s active. He is capable of creating different itineraries and tours, showing the best that the destination can offer. There is no reselling in his case, no hidden fees. The LTO works directly with the community and creates its packages together with local businesses that provide accommodations, transport and activities.

Our whole personal philosophy in regards to this matter can be summarized in the following way: