What is Channel Mix? And why tour operators should care

How diversifying your channel mix can boost bookings

In the ever-evolving travel industry, relying on a single source for bookings can leave tour operators vulnerable to the whims of changing trends. 

That’s where the concept of “channel mix” comes in – an essential strategy for diversifying your revenue streams and building a more resilient business. Let’s dive into what channel mix is, why it matters, and how you can leverage it to ensure your success.

What is channel mix?

At large, channel mix refers to the use of multiple marketing channels to reach a target audience. In the tour and activity industry, channel mix refers to how operators receive their bookings and the different pathways customers use to find and book your tours and activities. 

These pathways could include direct online traffic, affiliate partnerships, OTAs (online travel agencies), or even in-person sales. 

By understanding and intentionally managing your channel mix, you can gain clarity on where your bookings are coming from and make informed decisions that will optimize your business and bring in more revenue.

Why channel mix matters for every tour operator

Understanding your channel mix isn’t just a numbers game; it’s a gateway to smarter business decisions that can directly impact your bottom line. Here’s how:

1. Enhance operations and earnings with educated business decisions

• Pricing: By understanding your channel mix, operators are able to make smarter decisions around their tour and activity prices, ensuring they remain competitive while maximizing profitability.
• Marketing: Identifying the most effective channels allows operators to allocate their marketing budget efficiently and focus on strategies that drive the most traffic and capture high-intent visitors. 
• Booking software needs: Knowing your channel mix can inform your software requirements, helping you choose tools like FareHarbor that offers seamless integration and streamlined operations.

2. Create resilient and reactive revenue streams no matter the trends

By intentionally diversifying your channel mix, you can build a business that is not beholden to a single type of traffic and can be manipulated to maximize earnings. This approach allows you to:

• Ramp up profits no matter the season: Fill more seats directly during times of high demand or attract more customers from paid sources when direct traffic is slow.
• Quickly react to changes as they happen: Adapt to changes in algorithms on Google, shifts in paid marketing performance, or policy updates from OTAs to ensure you always have steady bookings.

Breaking down your channel mix

A strong channel mix includes a variety of pathways to attract and convert customers. The goal is always to fill as many seats as possible through direct traffic, as this has the lowest cost of acquisition (CAC). After that, we recommend the following order:

1. Direct bookings

• Direct offline: These refer to walk-up bookings or reservations made over the phone.
• Direct online: These are bookings made directly on your website. You can boost these by optimizing your website, improving your SEO, or building an engaged audience on your social media pages. Plus, you can include a booking link in your social profiles. 

2. Paid marketing

Paid marketing is a powerful tool for your channel mix because operators can easily control their spend and target specific audiences.

• PPC (pay-per-click): Run and test targeted ads on Google or social media to bring in high-intent customers.
• Traditional marketing: Consider using flyers, radio spots, or local print ads to capture offline or local audiences.

3. Affiliate bookings

Affiliate partnerships enable operators to expand their reach by selling their experiences through other businesses, granting access to larger customer bases. However, these bookings typically incur a commission fee, determined at the affiliate’s discretion.

• Low investment affiliates:
  • FareHarbor Distribution Network (FHDN): FareHarbor operators can leverage our extensive network of established affiliate relationships to boost their tour and activity sales. The FareHarbor Distribution Network (FHDN) includes regional and global OTAs, as well as other tour and activity operators, all working together to drive incremental bookings.
  • Local partners: Build relationships with other tour operators and businesses in your area to refer customers your way and boost the local ecosystem.
• High investment affiliates: These types of partnerships should be seen as the final piece of the puzzle, designed to complement your overall strategy. The goal is to use them just enough to fill all available inventory without negatively impacting your direct bookings. Examples include:
  • Local affiliates: Partnerships with nearby hotels, attractions, or other tour operators.
  • Big OTAs: While commission costs may seem high, you can think of them as a marketing expense. Their large-scale marketing efforts can help you reach audiences that might otherwise be out of reach. The investment can include time spent maintaining relationships or the actual commission cost.

How to define your ideal channel mix

There is no one-size-fits-all formula to determine your company’s target channel mix. Factors like location, competition, current search engine rankings, and your existing channel mix will all play a role. 

There is no one-size-fits-all formula to determine your company’s target channel mix. Factors like location, competition, current search engine rankings, and your existing channel mix all play a role. 

To define your mix, start with these steps:

• Evaluate current channels: Identify which channels are driving bookings and which are the most cost-effective.
• Understand customer behavior: Determine how your audience discovers and books experiences.
• Set goals: Decide on revenue targets for each channel based on your marketing spend and customer acquisition costs (CAC).

Build a strategy to match:

• Maximize direct bookings: Focus on online and offline direct bookings to cut costs and improve your customer experience.
• Use paid marketing wisely: Fill gaps during low demand by leveraging PPC and similar strategies.
• Balance affiliate efforts: Incorporate both low and high investment affiliates to supplement revenue without over-reliance.

Finally, track performance and adjust as needed. A flexible, well-monitored channel mix is key to creating resilient and diversified revenue streams.

Diversifying your channel mix is key to staying competitive and thriving in today’s dynamic travel landscape. By understanding your booking pathways and strategically managing them, you can create a business that’s not only adaptable but also poised for growth. 

To learn more about how FareHarbor can make it easy to define and master your channel mix, request a free demo today.