Commoditization Does Not Spell Death For Adventure Products

Commoditization Does Not Spell Death For Adventure Products

In my recent distribution and supply chain collaboration sessions at the Adventure Travel World Summit, I had an opportunity to sit down and discuss aspects of distribution with adventure travel operators and outfitters.  I was joined on the panel by a number of key players in the adventure distribution space including James O’Leonard (Founder & CEO, PEAK 15 Systems), Michael Valkevich (Director, Global Customers IT Solutions Amadeus), Helen Nodland (Founder, Nodland Travel Enterprises), Jeff Dossett (Chief Executive Officer, AdventureLink, Inc..).  The goal of the panel was to help the delegates identify key distribution opportunities and roadblocks in the adventure arena.

Suffice it to say, there was much debate around the subject of distribution.  What I did find, however, is that there are four key underlying themes that seemed to be at the core of the discussion.

1. Adventure products are too complex. I cannot begin to tell you how often I heard this statement.  By the end of the fourth session, I was beginning to lose my patience.  In fact, I should apologize to the poor fellow in the last session who was on the receiving end of my relentless “Why is it complex?” line of questioning.  My primary issue with this statement is that in my analysis, the products themselves are NOT complex but are in fact bundles or packages of simpler products.  For example, a multi-day African Safari might consist of three different hotel/resort experiences, three different guide experiences, and perhaps two airport transfers.  In this scenario, the adventure tour operator is in fact acting as a distributor for the outfitters and hoteliers who provide the simple products.  As long as you are able to break-down the product offering into its simplest form, then you have something that may be distributed.

2. There is no GDS support for Adventure Product. Michael from Amadeus confirmed this and Jeff from AdventureLink agreed.  That said, however, there is no support for Adventure product because there is not enough product in an electronic form for the purposes of distributing through a major GDS.  I don’t think that this is actually as important an issue as some think.  My sense is that it is much more important to consider the smaller more specific distribution opportunities, such as those that might exist within an organization or with a partnering agency.  For example, setting up a partnership with a major travel agency retailer may provide access to their worldwide agent network.  Although this is not GDS based, it is still an example of distribution and requires certain requirements to be met in terms of technology and standards. Other non-traditional distribution might include partnering with a listing site to enable direct booking, or distributing through a local DMO website.

3. Standardization for Distribution will result in Commoditization. A fear from many operators is that the standardization of product information delivery will result in commoditization of products.  Although I agree that creating standard criteria may result in comparison shopping, the likelihood of this is, in my opinion, is negated by the fact that the components that make up an adventure experience are very different from each other.  Although two operators may provide a 7 day Safari in Kenya, the components of each product could vary dramatically.  In my opinion, the ability to compare product details across a common set of standard criteria will actually increase product differentiation and make research easier for consumers.

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4. The Costs of Distribution are Too High. This is a tough one to debate in a market that has so little distribution.  Certainly if the products are not priced based on a retail model with a 30-40% margin, then distribution is going to be difficult to justify from a cost perspective.  My experience has been that the average distribution cost is between 18-30% depending on the channel.  As long as the operator has planned for this margin and also accepts the idea that a sale through a distribution channel is a sale they would not have received otherwise, then it becomes much easier to justify the increased cost of sale of the product.  Remembers that the distribution channel is often the one paying the marketing costs to sell the operator’s product, so they need to cover that cost through the commissions they earn on the product.

The road to distribution is not a straight path.  In order to start on that road, however, operators need to be adopt electronic systems for managing their product data and their inventory.  As Valyn Perini, from Open Travel recently noted, for many tour operator software vendors, their biggest competitor is Microsoft Excel, not other tour operator systems.  Once operators are able to “can” their products the next step of distribution will come swiftly.