Last week at the Signature Owners Meeting in Orlando, I met Larry Martin of Food & Wine Trails. Based in Sonoma County, Calif., his agency markets and runs wine tours, often in partnership with cruise lines.
For a long time, his primary competition came from other niche players, but recently both Expedia and Costco have begun offering wine tours. How concerned should Martin be?
It's instructive to note that his father got into the travel business in the 1920s, first offering rail and steamship tickets. As the industry evolved, he became an FIT specialist, planning every detail of his clients' trips abroad.
But beginning in the 1950s, and increasingly through the years, he found himself competing with large packagers who could offer similar-sounding trips at much lower prices, and it hurt his business.
Was his son about to face a similar fate against very big players who suddenly appeared on his turf?
Things have changed. It's now a truism in the travel industry that it's best to be either large or small. The large players -- the Expedias, Costcos and legacy businesses like American Express or Liberty Travel -- can take advantage of economies of scale and do quite well on relatively slim margins.
But they typically can't compete head-to-head with niche expertise. A tour leader who's also a sommelier specializing in Alsatian wines will always find a group of enthusiasts to gather in Strasbourg and visit area vineyards. True oenophiles are, frankly, snobbish, and would sooner drink hemlock than be seen following a guide holding up a large "Costco" paddle.
Midsize companies, alas, occupy a no man's land. The big guys will beat them on price, and the niche players offer a more granular expertise.
But back to Martin's specific situation: I think he has more reason for optimism than concern, because there's often a symbiotic relationship between the large and the small, and it can benefit the small when the large come into their market.
In Martin's case, it's likely that Costco and Expedia will raise the general level of wine appreciation among the masses, many of whom will then "graduate" to Martin's more sophisticated offerings.
For small agencies feeling intimidated by large ones, online or offline, it's instructive to look at two other industries where scales can be extreme: cheese and beer.
There has been an uptick in interest in artisanal cheeses and craft beers.
You'll see the cheeses mentioned on menus in upscale restaurants, which proudly note they have sourced a small-batch noble cheddar, shipped in aged birch bark from a farm in central Vermont where the grass has unusually high sugar content and the cows chew their cuds in time to Mozart.
For now, the CEO of Kraft Foods continues to place her bets on Velveeta. She isn't losing sleep over the artisanal movement.
But beer trends offer her a cautionary tale (and offer reassurance to small, niche travel agencies).
At a dinner hosted by Denmark, I sat next to the brewmaster of Carlsberg, a respected Danish beer, and asked him what he thought of American beers. "I really admire American brewers," he said. "You have no idea how hard it is to make tasteless beer. Anyone can throw in ingredients to make it flavorful, but making it flavorless is difficult."
American brewpubs and microbreweries creating distinctly flavored beers began small and regionally, but their growth has accelerated in recent years. According to the Brewers Association, overall beer sales, by volume, were down 1% in 2010, but craft brews were up 11%.
Most encouraging for niche companies competing against large companies is that although craft beer, by unit, represents only 4.9% of total beer sales in the U.S., those units represent 7.6% of total dollars spent on beer.
I'm not suggesting that the experiences offered by large-scale travel companies are flavorless, but I am saying that small agencies that complain they can't compete on price with larger travel sellers are missing the point.
There is a market that is willing to pay significantly more for expertise and rich experiences. If you're small, it's important to realize that neither you nor your clients are mass market, and if you are trying to compete head-to-head against mass marketers on price, you'll lose.
Scale your business to your client base, provide excellent service, and don't worry. In the 21st century, David and Goliath can coexist rather than fight.
Email Arnie Weissmann at [email protected] and follow him on Twitter.