Understanding travel industry fragmentation
Your Guide to Our Changing Industry
‘Fragmentation’ – Is it just another business buzzword…
Or is it something that we in the travel industry should be paying attention to? At Tourwriter we wanted to explore this concept further to better understand what Fragmentation is, how it is affecting the travel industry, and provide you with some ways you can prepare your business for the industry’s changing landscape.
What Actually Is ‘Fragmentation’?
Investopedia describes Fragmentation as “the use of different suppliers and component manufacturers in the production of a good.” Typically, fragmentation begins to occur in an industry when businesses become more global; accepting investment funds from offshore and expanding into multiple international territories. As globalization takes hold of our industry we’re seeing more and more businesses and consumers seek more cost-effective options.
One big way travel businesses can get more ‘bang for their buck’ is to switch to offshore suppliers instead of producing their goods or services entirely in-house. From a travel industry perspective, this is where we begin to see travelers opting to shop around for the best price, even if that means sourcing their trip from multiple suppliers.
How Fragmentation Is Affecting Travel
Expedia Media Solutions published a report that found leisure travelers are likely to visit around 38 travel websites over 45 days prior to purchasing their holiday packages. With naturally higher margins to cover, tour operators and travel agencies are getting pipped at the post by online solutions. There’s a growing trend in which travelers are essentially cutting out the middleman.
But wait…all is not lost
It all sounds a little bit scary, right? After being in the travel industry for over 14 years, we at Tourwriter have seen some exceptional tour operator businesses provide their customers with experiences and service that’s second to none. The last thing we want to see is that aspect of our dynamic industry disappear!
The rise in the DIY traveler phenomenon has a silver lining (we promise!) Long story short, tourism is booming! 2016 recorded a 3.9% growth in international travelers (which equates to a whopping 46 million more people exploring new destinations) and this steady growth is not expected to stop in the foreseeable future. With all that growth, there’s still a huge market available for your business to service.
People are traveling younger, and according to the Guardian, it’s these younger travelers that are making up the large proportion of the DIY traveler segment. The other big chunk of travelers are baby boomers and Generation Xers, who still value the service that travel agents and tour operators provide.
According to the US Travel Association, the largest demographic group of travelers is still Baby boomers, with 37% of all US travelers in 2016 identified as 53 or older. This trend won’t be slowing down anytime soon, with the UN estimating that the aging population is expected to grow internationally by over 50% by 2030.
Many baby boomers are trending towards traveling with their grandchildren, with over 70% of these multi-generational travelers stating that they trust and value travel agent recommendations, according to Senior Living magazine.
So, while the industry is certainly changing, it’s not over for tour operators and travel agents. Your expertise, service, and attention to detail is still in hot demand; better yet, it’s demanded by the largest growing segment of our international population!
How You Can Prepare for Travel Fragmentation
Awareness is key
Understanding that there is a now a new subset of travelers that seek a different, more hands-on way of traveling is liberating! Travel agents and tour operators can now retarget their focus towards other segments of the market that will ultimately find more value in tailor-made itineraries and the expertise that comes from working with a specialist trip designer.
Maximise your profitability
Utilising enhances in technology can help tour operator businesses counteract the effects of fragmentation. Tour operator software designed to turn the time intensive job of creating tailor-made itineraries into something that takes minutes is one way that technology is being used to enhance the profitability of the travel industry.
Technology advancements open new avenues for you to broaden your offering. Online itineraries and mobile apps are excellent opportunities for you to bring new revenue streams into your travel business.
Crafting bespoke tours that speak to growing markets, like baby boomers and multi-generational travelers will go a long way towards ensuring that you’re providing value to the right target market.
Focus your messaging on what makes you special. Expertise and attention to detail set you apart, and the peace of mind and genuine care you give your customers is something that they aren’t going to get elsewhere. You should be proud of that because we sure are!