Working with Inbound Tour Operators (ITO)
What is an Inbound Tour Operator (ITO)?
Answer: A wholesaler who contracts with both International Tour Operators and local (regional) suppliers (lodges, ranches, attractions, services) and will then act as a go-between.
Inbound Tour Operator Overview
An Inbound Tour Operator (ITO) sells your product, whether it’s included in a tour itinerary or is sold alone, to tour operators and/or travel agents.
They are a wholesaler and do not sell directly to the public. They produce a tariff that gives the specifics and rates for all products they carry — whether they are hotels, ranches, bed and breakfasts, sightseeing tours, horseback rides, bike tours or transportation.
Tour operators consult ITOs for assistance in setting up their own tours and itineraries, whether they are for motorcoach tours, FITs, fly/drives or tailor made itineraries. The tour operator may not know much about a region so they need the assistance of an ITO to help them with identifying hotels or services or setting up itineraries.
For the International Tour Operator it is much easier to work with the local/regional Inbound Tour Operators for the FIT (Fly-drive) or Group bookings than to try to book with each individual property. Many bookings may involve multiple lodges/activities and working from overseas this can be very time consuming and costly for the tour operator. They would rather send the information off to the Inbound Tour Operator and have them do the work, especially since they may be on the same time zone as the supplier.
Money exchanges are much easier for Tour Operators to send one payment (often on a monthly basis for all of their bookings) to the Inbound Tour Operator and have them distribute this to all of the lodges/activities booked than to have to send off dozens or hundreds of checks to each individual property. Some Tour Operators may work directly with a supplier if they feel that they are sending enough business to warrant this action, but for many lodges/attractions they would prefer to work with a trusted and reputable Inbound Tour Operator.
For the Suppliers, it is easier for them to work with an Inbound Tour Operator with one contract than to try to keep up with the dozens of Tour Operators that this ITO might be working with – again both for the booking process (sending out contracts to tour operators that may only book 20 – 30 rooms a season when they can work with an Inbound Tour Operator who, through the volume of working with many tour operators, may book 150 –200 rooms a season) and for their own billing and payment programs. Most payments are now done through bank transfers and this is a costly procedure for both the sender and the receiver!
As mentioned above, Inbound Tour Operators work with as many Tour Operators (booking partners) as they can sign up; often this is dozens or hundreds of Tour Operators. If a Supplier is working with the right Inbound Tour Operators, they are really reaching out to many more potential buyers than they would be able to reach on their own.
Reaching International Consumers
Inbound Tour Operators who carry their lodges/activities in their tariff also act as a marketing arm for their services as they will attend multiple trade shows in the USA and in foreign countries, giving each supplier in their tariff a representation at each show! This service is not paid for until they book into your property – and then the payment comes in the form of a reduced cost that they can pass along to the tour operators to pass along to the booking client.
Pro Tip: Rather than spending several thousand dollars to be at a show in Berlin or London – work with an Inbound Tour Operator who is promoting your products via their tariff. If you do get a booking the dollars you mark down for this service is much less than the dollars you would have spent on your own to get the same booking.
What rate is an Inbound Tour Operator looking for?
Inbound Tour Operators are looking for a net rate (much easier to work with than a commission rate) that reflects a discount off your “rack rate” of 20–25%. Does this all go to the Inbound Tour Operator? Absolutely NOT. The cost is shared down the “Booking Channel” so that the client will (hopefully) be charged an amount that is not exceeding the actual rack rate they would have received had they booked with the supplier directly.
This channel is:
Supplier >>>>Inbound Tour Operator>>>>Tour Operator>>>>Travel Agent>>>>Client
When working directly with a Tour Operator, a net rate reflecting 15-20% is all that is required for this channel.
You must remember that each party is working to help you to sell more rooms.
- The Inbound Tour Operator is marketing your product to reach as many Tour Operators as possible
- The Tour Operator is putting together a marketing tool that will sell your product within their country (online brochure or high gloss brochure publication, interactive website, etc.)
- The Travel Agent is doing their best to get the business of the client by selling them on an exciting holiday package and they are the original contact to get the client interested in the first place (and not going to Florida, Thailand, South Africa, etc.)
Remember that you do not pay anything UNTIL a booking is made.
How do I work with an Inbound Tour Operator?
There are Inbound Tour Operators who work with FIT (Fly-Drive programs), those that work only with group programs, some that work with on-line booking services or Host-2-Host program (direct web bookings from the guest into the system of the Inbound Tour Operator).
Some work with lodges/services nationally, regionally or just on a local basis. What each supplier needs to do is find the Inbound Tour Operator that they feel will work best for their lodge/ranch/activity/service. Ask around about which Inbound Tour Operators others in your industry are working with, who has the best payment programs to fit into when you need to be paid, etc. Then approach these Inbound Tour Operators and find out what they need to fit your product into their tariff and work out an agreement that will work for both of you.
You do not need to work with all Inbound Tour Operators and not all Inbound Tour Operators may feel that your product will work for the markets they work with internationally. Do not give up after one year as it sometimes takes a few years to get a new location or product successfully into programs that are being featured and sold by the Tour Operators through the Inbound Tour Operators. Be willing to work with the rate structure that is being proposed.
And, very important, be willing to work within your check in/out programs so that the rates given to the Inbound Tour Operators (or directly to any tour operator) are confidential between the two parties. You do not know what rate the consumer has paid for your product and the consumer should not be shown what rate the Inbound Tour Operator paid because there will be markup along the chain of bookings (as shown above). If the client should suddenly see a rate that he knows is 25% lower than what he paid, he will have no idea as to why he was not charged this rate (and the International Tour Operator and the Inbound Tour Operator did not take their “commission” out of the cost he has just been shown). The client does not understand that this is a net rate and commissions are added to this rate, along with taxes, service charges, etc.