What is lacking in the current OTA model (and present on the Smart Trip Platform)
When we describe the concept of our platform to outsiders (especially people connected to the travel industry), the same question pops up again and again. Why another travel-booking platform? Aren’t the existing OTAs enough?
It’s true, OTAs (Online Travel Agencies) are everywhere and own huge shares of the market, especially for hotel bookings and plane tickets. In fact, they have overtaken the industry so much that many small travel businesses cannot survive without joining an OTA network. For example, if you have a family hotel, you absolutely have to have a page on Booking.com — otherwise all tourists who stay at other places that are already listed there. If you search on Booking.com and find a hotel for a good price, why would you search for others on Google?
However, OTAs rarely provide truly good conditions for affiliated travel businesses. For instance, a hotel usually pays 20% off each transaction to Booking.com. AirBnB has a different pricing policy: property owners pay 3% (the payment processing fee), while most of the actual cost is transferred to the customer, who pays 5–15% depending on the amount. If a hotel wants to be featured in the Recommended list of properties, than Booking.com fees rise to 35%! As you can imagine, this results in either a severely reduced revenue for the hotel or… correct, in a price increase! Hotels and customers both lose, but the OTA wins.
Things are more complicated in the tours & activities market. You see, no OTA has yet succeeded in overtaking this huge but very, very fragmented market. Just think of it: treks, city tours, wildlife, safaris, cultural excursions, cruises, adventure sports, culinary trips… It’s like a whole world of opportunities, so no wonder that the largest players in the industry (Booking.com, AirBnB, Expedia, and others) are now busy buying startups that work in this market. On the other hand, many companies are developing software for tour & activity providers, to allow them to accept bookings online. Yes, that’s right — over half of businesses in this segment don’t have any online booking system at all!
So how do you book with such a company? Let’s say you want to go on a birdwatching trip in Costa Rica somewhere. Usually you’d need to fill in a booking request, after which the company will send you an invoice and an agreement. You need to print out the agreement, sign it, scan it, send it back to the company and pay your deposit via a bank transfer. If you don’t live in Europe or the US, then the transfer can take a week or even more. This is very frustrating business, but unfortunately such travel service providers don’t really have anywhere to turn. A convenient aggregator platform hasn’t been created for them yet.
Smart Trip Platform aims to solve both issues: high fees charged by existing OTAs and the absence of a good resource for more niche travel providers. What we are building isn’t an aggregator, however — quite the contrary. An aggregator (a classic OTA model) is a highly centralized system where travel businesses aren’t allowed to communicate with customers until a transaction is made. Think of Booking.com: their hotel pages don’t include email addresses or phone numbers. Only once you book, you get a phone number in an email. AirBnB does allow you to exchange phone numbers once you’ve paid the booking deposit, but before that you have to use the “contact the host” form on their site.
We are proposing a radically different model. On Smart Trip Platform, travel businesses and their clients will be able to communicate directly via chats and chatrooms, negotiating prices freely. The trick is that transaction costs on our platform will be much lower than what they can get outside of the platform. This way, there will be absolutely no reason for them to try and arrange a booking in some other way. Since Smart Trip Platform is decentralized and will run on a carefully chosen distributed ledger, our operational costs will be minimal.
