For many in the World, Asia represents the exotic. The jungles and resorts of South-east Asia, elephant trekking through India and Thailand, river cruises along the Mekong, these are experiences that can only be found in Asia. The unique, the once in the lifetime, and the seemingly difficult to book. But I believe that this is about to change.
Based on our aggregate booking data, customers booking excursions and activities in Asia tend to book with long lead times, as far in advance as 30 days. Compare that to customers who book North American excursions less than 7 days out.
What does that tell us? Well, on the surface it tells us that those booking their trips to Asia book well in advance (if at all). Another interesting statistic however is that the majority of operators in Asia don’t accept real-time payment from customers, choosing instead to opt for manual payment methods, like “Pay on Arrival”.
I would argue that there is a two-fold challenge for operators in Asia when it comes to taking full advantage of advanced bookings for their tours and activities. The lack of access to online payment systems for small enterprises in Asia have long been a hurdle for operators and the relative lack of ubiquitous Internet access. We are however, starting to see both of these changing, especially in the major tourism centers.
When we first launched in 2007, we found that the majority of operators in North America and Europe were not using electronic reservation systems or accepting online bookings except through aggregators such as Viator. Really, this hasn’t changed all that much since we know that in North America, less than 14% of operators use electronic reservation systems even now.
Although there is no quantitative data available for the Asian market, I would estimate that number to be equal to or even less than that. The advantage for the North American market is relatively homogeneous nature of payments. Online payment systems and merchant accounts have been readily available for some time and the technology is well established. This has helped tremendously as small businesses have shifted from a local only in-destination approach to an online inbound focus.
A big advantage for Asian excursion operators is that software as a service reservation systems have reached a relative level of maturity. Unlike their North American and European counterparts who adopted desktop systems much earlier on, there are well established SaaS reservation systems that have been around for many years and are well positioned to service the needs of operators in the Asia market looking to shift online and take advantage of advanced bookings.
The success of these incumbents has spurred on several new entrants into the SaaS reservation market in the last few years, each providing their own particular approach to the online booking equation. Despite the opportunities on the software side however, there still remains the issue of payments.
Although many would argue that mobile and local payment services abound, the reality is that inbound foreign travellers are most likely to use their credit cards to pay for advanced bookings. If an operator is highly specific in their target market, for example China, they may opt for a system like Alipay or another China specific payment method. But even in those cases, the operator has to meet very specific criteria before being able to accept payments that are considered local to a particular market.
In my opinion, the greatest challenge and opportunity for the Asia market is to solve the advanced bookings dilemma by focusing on providing payment solutions that are developer friendly and convenient for small businesses while providing customers with recognizable payment options.
Despite arguments that Visa and MasterCard are not the World’s most popular payment methods, our booking statistics show otherwise. Globally speaking, 86% of bookings are paid for with credit cards even though over 80% of operators accept PayPal as a preferred payment method.
What is even more important to note is that cancellation rates are also significantly lower for credit card based bookings then with alternative payment methods such as PayPal or even manual payments like cash. The cancellation rate for Asian operators who accepted credit cards, for example, is approximately 9%. The cancellation rate for those operators who received bookings paid with PayPal is 31%, which is, surprisingly, the same for bookings that were received with a manual (cash at the door) payment method.
In summary, the Asia market is uniquely positioned, thanks in part to the rise in popularity of online services and the ubiquity of Internet access (whether wired or wireless), to take advantage of the growing traveller demand for advanced bookings and mobile in-destination booking.
Infrastructure improvements, decreasing mobile network costs, software as a service, and more merchant processing capabilities will help to drive the Asia excursions market forward. How fast it moves will be based on how flexible and adaptive the banking infrastructure will be to support the ability for small and micro businesses to accept credit card payments from their foreign customers.
• Stephen Joyce will be talking about how to realise the full potential of tours & activities at the WIT Conference Oct 21-23, Singapore.
