The power shift to Spanish hotels will give bed banks headaches and is helping drive consolidation.

When mass market tour operating came to the fore, back in the 1960’s-70’s, the key holiday element was the charter flight, as it often provided the only cost effective route to get to the holiday destination. This led to a tradition where hotels and tourist boards put greater value on relationships with tour operators, giving them better “Package” rates and marketing contributions.

However, the rise and rise of low cost carriers such as Easyjet and Ryanair has flooded the beach leisure market with capacity and effectively turned the flight element into a mix and match bus service, where Online Travel Agents (OTA’s) can offer 100’s of flight combinations for most days of the week. This has negated any real advantage of owning your own charter fleet and turned it into a disadvantage at times, fueling the growth of OTAs using Dynamic Packaging (DP) technology.

The visionary management of TUI, saw this threat early and over a 10-year period repositioned the Thomson and First Choice tour operations into “differentiated” hotels, which they control and have exclusive distribution for, protecting them from the attack of the OTA’s who have taken control of the “Commodity” price driven market. As we all know Thomas Cook were slower to react, but under the leadership of Chris Mottershead are beginning to make progress on their own drive for differentiation.

The growth of OTA’s in turn fueled a growth in Bed banks who consolidated demand and negotiated rates with hotels. The best rates often came from their “Castles” where they paid hoteliers “Early” via large deposits, using working capital funds generated by paying other hotels up to 90 days post departure. The collapse of “Low Cost Travel Group” with massive debts exceeding £100m, severely “burnt” hotels and has caused a major tightening of payment terms. At the same time OTA’s due to competitive pressure have reduced customer balance collections for 8 weeks to up to 2 weeks before departure. Hence, there is simply less cash around in the sector to fund either “Castles” or Early Booking discount payments to hotels.

At the same time the threat of terrorism has re-shaped customer demand with the loss of Egypt, Tunisia and effectively Turkey focusing demand into Spanish destinations. Last year saw record occupancy levels in the Balearics and Canaries, which of course has led to higher prices. However, the bigger impact is how hotels are now seeking to yield manage.

Historically, hotels signed paper contracts with various tour operators allocating their stock between them at fixed rates and then “stop selling” when tour operators reported back sales and hotels realised they were fully booked. This model was replicated when “Bed Banks” replaced tour operators, with hotels able to yield downwards via special offers, but rarely able to increase prices.

Spanish hotels are using the current buoyant market to take control of their own destiny by forcing Bed banks and OTA’s to access their stock via “Channel Managers”. These allow hotels to hold their stock centrally and change rates daily. These rates are either “pushed” to bed banks, to update the rates in their system or availability/price is “pulled” via XML queries on a live basis.

This is a massive shift in power and is a big threat to bed banks as OTA’s can easily cut them out of the chain and connect directly to the hotelier. In a market place where the hotelier is confident of selling its product, why would they bother giving the bed bank a better deal to protect a distribution network they now openly question whether they need?

Cash is still an important commodity in the purchasing chain, but with less cash available hotels are now just as focused on yield management, which in turns requires them to control their stock. Any element of the chain that restricts this or does not add value is likely to be removed.

The best way to counter this threat is to be so big and to dominate the leasuire bed sector so much, that OTA’s direct can simply not complete with you buying power or distribution.

Hotel beds owners TUI did not have the pockets or the will to consolidate the bed bank market to achieve this and it has taken the entry of a major VC to hover up and combine Hotel Beds, Tourico and GTA into a “Super bed Bank” that can easily ride through the storms ahead. However, VC’s are normally only motivated by the “Exit” potential, so don’t be surprised if this new group is quickly sold on. Its now a strategic gem that Pricelines, Expedia and the ultra agrressive Chineese are likely to fighting over shortly.

So yet again we see a continuation of a travel threme. The big get bigger and smaller players need to be gobbled up or simple disappear.

Chinese App giant is about to arrive in Europe

Attending the Phocuswright conference in Los Angeles during November 2016 provided a fascinating insight on the strategic intentions of the Chinese travel giant C-Trip.

The Chinese market is entirely mobile focused, with smart phone penetration at 80% and the desktop market being bypassed as prosperity has exploded in the last 10 years. Countless research reports emphasise that although customers may download hundreds of Apps, they quickly focus down to using only 5-6 Apps daily, meaning that for their travel needs they expect a “one stop shop” service, with their every need being provided by the brand they choose to remain loyal to.

This degree of coverage and brand loyalty may seem odd to online Western customers, who have grown up with the range and diversity of specialist products, available with one click via a Google search on your laptop or desktop computer. However, as the Western world goes through its own mobile revolution, we are already seeing Facebook, due to its high mobile utilization, explode as a remarketing tool and one stop shops like Amazon take center stage for our shopping needs.

Just two years ago the Chinese market was a profit graveyard, that scared off even the deep pocketed USA travel giants like Expedia, as the dash for the dominance of the app market, in the mobile centric Chinese market reached its zenith.

However, two years later and the Chinese travel market is virtually unrecognizable, having become highly profitable on the back of a complete market consolidation by the giant C-Trip, taking majority stakes in its nearest rivals E-Long and Tunnar. This profitability, access to capital and ability to take a long-term view of profitability, suddenly provides serious competition to the global expansion ambitions of the USA giants Priceline and Expedia.

The first demonstration of this was C-Trip’s $180m investment into MakeMyTrip as the entry point to Indian Travel market. Like China this market requires a much longer term view of profitability and a massive investment to consolidate the currently heavily loss marking travel sector. C-Trip has experience of both the requirements and the benefit of this type of consolidation, which enables them to play the strategic long term game.

The publically quoted USA giants, seemingly must play by different rules, with every acquisition needing to be profit enhancing in a much shorter time frame. Hence, their acquisition strategies are more focused on adding products that they can market to their existing client base or globalizing the demand of e.g. Priceline’s acquisition of Rental Cars, Expedia’s purchase of HomeAway and Trip Advisors deal to take Viator.

At Phocuswright, C-Trip declared that their eyes are now set on the European market and immediately followed the conference with an eye watering £1.4 billion purchase of the UK’s Skyscanner.net. This is clearly just an entry point, providing a large volume of customer eyeballs and an essential building block of any European travel App e.g. a comprehensive market view of flight prices across the world. However, logic dictates that this will be followed by acquisitions in the online accommodation sector, ground transportation and potentially Dynamic packaging OTA area.

Don’t be shocked if we see a future shopping list including the likes of online hotel specialist Hotelopia (Ex TUI owned Hotel Beds), Bla Bla Cars or country specific OTA leaders like On the Beach in the UK. At the same time C-Trip will also be looking to hoover up popular app utilities like the National Rail app. There may even be opportunistic acquisitions like the specialist division of TUI, Travelopia which is currently on the market.

Major deals of this nature, will also herald a major upturn in the Venture Capital interest in the travel sector, as VC’s look to consolidate undervalued individual companies, which are too small to attract C-Trip’s attention, into a consolidated proposition that looks more attractive.

Therefore, for the first time since the spending sprees of the major integrated tour operators, the mid-term future could be looking good for travel owners, despite the current headwinds we are facing due to geopolitical unrest and the adverse head winds provided by Brexit.

Are Google and Facebook fighting the “Cold war” of the Internet Age?

As a child of the Cold War years between the capitalist USA and the socialist USSR, I was struck by how the ultimate internet capitalists Google, are now under attack from a rapidly expanding Facebook Social revolution within the mobile space.

Facebook’s presentation at last week’s PhocusWright conference in Delhi, India, spelled out just how dominant the Facebook group are becoming in the mobile app space.

Although the average smartphone user has 27 apps on their phone, 80% of usage is concentrated within just 4 apps, with the Facebook group owning the top 4 downloaded apps in Facebook, WhatsApp, Messenger and Instagram. However, the most prominent platform, Facebook, with its 1.5 billion active users has struggled to prove its commercial benefits to business.

Gaining likes and fans, has simply not delivered a ROI, and even Facebook’s massive remarketing capability is delivering questionable results. Yes, Facebook does provide the fastest remarketing platform, with users dipping in and out of Facebook frequently via their mobile phones.

However, these customers are in a social mode and accessing the internet via a smartphone. Is this an environment likely to drive booking conversion? I personally don’t think so, and would this marketing exist without Google to complement it?

The explosion of Messaging with 60 billion daily messages, which out guns traditional Text SMS messaging three to one, may provide a more commercial tool for business.

Facebook recently announced a set of “Chatbot” tools for business, which could revolutionise how businesses interact with their customers. Just as customers simply look up friends in Messenger to start chatting to them, they can now do the same with businesses. In turn business can use Artificial Intelligence and machine learning to allow electronic “Concierges” to chat with customers in order to answer their questions at incredibly low cost.

Post booking customer service is an obvious area to explore, with FAQ’s being databased and used to answer questions in a semantic language way, where customers can pose free form questions and enter into an extending conversation, until their questions have been fully answered.

However, it’s the contextualisation of the mobile sales process that interests me most. Much of our mobile usage takes place whilst travelling on trains, or in public places where phone conversations are less practical or desirable. However, imagine being able to start a travel enquiry by having a “chat” about potential destinations and dates? Chatbots can engage with customers to refine requirements before queuing the sales lead to a call centre agent, to make a call at an agreed time to run through pre-qualified options using co-browsing technologies. Change is coming fast!

Using 50m users as a benchmark allows us to see the massive acceleration in technology roll out and adoption speeds. Radio took 38 years, TV 13 years, but internet 4 years, Facebook 3.5 years and iPods 3 years. However, in today’s mobile enabled world, games like Temple Run 2 only took 13 days!

Secondly, we are beginning to see the spread of Apps into environments outside of the smartphone space. Shortly we will be seeing car dashboards and smart TV’s in hotel rooms, equipped with apps so that we can simply login to media apps, like Spotify, BBC iPlayer and Sky Go, to allow our music and TV services to be personalised to our specific tastes and requirements. Inevitably, this will lead to apps becoming more integrated into our daily lives, which in turn will drive further use of this ecosystem and, in particular, single login tools such as Facebook’s.

So although, to date, the Socialists at Facebook have lagged behind the massively profitable Google, relying on the potential of their huge reach to fund expansion. But the tide of the war seems to be shifting and massive profits will follow if Facebook can use the rapid migration to mobile to drive transactional revenue via Chatbots and commercial messaging.

The Cold War between the Facebook and Google ecosystems may be just about to really heat up.

 

Will OTAs ever own shop networks?

High Google acquisition costs have forced all major OTAs to invest heavily in Above The Line advertising mediums such as TV, in order to generate brand awareness. This has resulted in more customers visiting sites directly, or searching using brand terms, which could help bring down the cost of brand traffic from Google searches.

Few OTAs now make money from advertising on generic travel terms because of the highly competitive nature of PPC. High click costs and sub 1% conversion levels are making more OTAs encourage the phoning to book or online chat session methods. Not only are they saving on cost, but the human contact dramatically increases conversion levels. Hence, we are seeing the merging of online booking and call centre fulfilment, with relatively seamless interchange between the two media.

We are also seeing high street retailers like Hays Travel successfully supporting their shops network with websites, which pass phone call leads back to their shops for completion on bookings. It is therefore a surprise to me, that major OTAs like Travel Republic and On the Beach have not acquired a network of retail shops.

These shops would dramatically improve their brand visibility and provide physical shop locations, to add to their online brand presence. Logically, by offering a shop, click or call booking models would also make their TV campaigns more cost-effective and increase customer convenience.

However, the UK DNATA group which already owns the required assets (high street shop Global Travel, the OTA Travel Republic and the Sunmaster call centre business) has not yet made any moves to introduce common branding. I suspect a major reason is that their retail network is a franchised model, rather than an owned shop network. The key problem here is how do you motivate all the parties to work together and share bookings?

Online marketing progressed when sophisticated attribution models were introduced. These allocate the commission from a booking across its online “route”, rather than a last click model, and recognise early stage marketing activities. In the future we may need to adopt similar attribution models to allocate benefit to shop networks, not just for the customer leads that start via a shop, then concluded online, but also for the brand benefit they provide.

The implementation of the European Travel Directive in 2017, assuming the UK does not vote for BREXIT on the 23rd of June, may also provide a motivator for a combined online and shop network. There are clear financial benefits in basing a dynamic packaging tour operation outside of European boundaries (avoiding the threat of an estimated £20 per passenger TOMS VAT charge for one). This may tempt many retailers to stop dynamically packaging holidays within their shops and use a central offshore tour operation. Logically, these tour operations should also have an online presence, supported by an offshore call centre, to complete customer choice.

I still believe the most sustainable distribution models, are homeworker networks like Travel Counsellors, who have built a localised community brand recognition through exceptionally high customer service levels. High repeat customer levels, combined with minimal marketing costs, make this a highly profitable and sustainable model.

To me the ultimate distribution network is a shop network staffed by homeworkers, working in the shop on a rotational basis and using it as an office to support their own localised customer networks. Boost this with a centralised call centre, online bookable web site and offshore centralised tour operation in order to create a future-proofed, highly profitable travel model fit for the 21st Century.

However, unless somebody is willing to write some very large cheques, this ultimate distribution platform is likely to remain a work of fiction in blogs like these.

Will Uber evolve into a major disruptor of the Travel Market?

The rapid migration of customer interactions to mobile devices undoubtedly poses a major challenge to travel businesses, who need to contextualise their booking path to users’ locations, as well as device size.

Clearly, this will allow some businesses to gain an edge for a period of time before the chasing pack copy all their good ideas, which they unfortunately have to publish to the world wide web!

With marketing costs remaining the biggest online cost of sale, it is difficult to see beyond the existing major brands in terms of who will dominate online travel in the near future. I say this because the likes of Expedia and Priceline have the resources to either copy new concepts and introduce them to a wider audience, or simply buy the innovative start ups.

The only threats to their dominance, that I can see, are likely to come from the domineers of mobile traffic, such as Facebook or Google e.g. Google Destinations or the sharing economy in the form of Uber and Airbnb.

Within the sharing economy, the massive valuations that Uber and Airbnb currently enjoy reflect the view of the financial community, that both are only just at the start of their massive growth potential. Obviously, financiers can get it completely wrong but in my experience, it is rare on companies of this scale.

Just as the online travel community has consolidated into two major camps, headed by Priceline and Expedia, I would not be shocked to see consolidation in the sharing economy given the major players’ abilities to raise the vast sums required to buy the likes of BlaBlaCar etc. The logic of combining Uber’s city-centric taxi services with BlaBlaCars’ 200 mile plus intercity service seems a highly synergistic move for territories outside of the US. However, given BlaBlaCar’s stated intent to avoid the US in order to concentrate on emerging markets, this deal may not be a high priority for Uber’s US-based financiers. A merger of Uber with Airbnb may initially appear less obvious, although audience synergies and cross-selling opportunities do exist.

The high transaction frequency of Uber makes it a logical creator of a “Western Super App,” in similar way to how C-Trip now dominates the Chinese travel market.
Apps allow a richer consumer experience, but “Appnesia”, where even customers who have downloaded the app forget about it, is a key problem. C-Trip overcame this by driving the frequency of use up, packing every conceivable travel service into one app in order to create a deep and broad travel vertical within a one stop shop.

High frequency usage drivers, like taxi services or domestic train/bus services could be the key bedrock for a “Western Super App.” Hence Uber with its high valuation and deep pockets, may be better positioned than Expedia to deliver this app via an acquisition drive. I say this because as an established player, Expedia can take less risk on acquisitions, as each one is expected to be earnings-enhancing. Conversely, the loss making Uber’s valuation is based on its potential and as such, it probably has more scope for riskier acquisitions.

Airbnb poses a major threat to hotels because its individual home owners often take a “Sunk cost” approach to pricing, looking to cover just their operating costs whilst making capital gains on disposal as house prices increase. This makes this accomodation much cheaper than traditional hotel stock.

I have recently invested in a start up called “Experiential Breaks,” which seeks to “package” private accommodation with tickets to “Events” e.g. NBA basketball and shopping/dining, to deliver a “Live Like a Local” holiday experience.

Ironically, the biggest problem with this niche type of product is that customers do not know they want it until they know it exists. Creating B2C brands to carry out this form of marketing is very expensive. Hence, Experiential Breaks’ strategy will be to work via travel agents on a B2B2C basis, selling ATOL bonded packages with the required H&S policies and insurance required to take this type of accommodation into a packaged environment.

However, this is just one niche and so far, sharing economy businesses such as Airbnb or Uber, have shown little appetite to disrupt the holiday market, focusing instead on the lower hanging fruit of the business traveller sector.

Disruption seems like an every day event in travel as a whole, but it’s hard to see the top online players loosing their grip on the current travel market.

Does Turkey hold the key to the Summer 2016’s late’s market?

Trying to accurately predict a UK lates market usually requires a crystal ball and a lot of luck, given the sheer number of influences that impact the UK travel market.

Unfortunately, the rise of ISIS and resulting terrorist attacks is having an increasing impact on the lates market, with the virtual removal of Egypt and Tunisia as winter sun late hot spots and the potential impact on the larger summer lates sector still to come.

January’s early bookings for summer 2016 have remained resilient, despite further terrorist incidents, with travel agents reporting 10% plus growth year on year. However, UK demand is polarising towards the perceived safer Spanish destinations, whilst other destinations such as Turkey and Greece lag well behind.

Turkey may hold the key to how the Summer 2016 late market turns out, as it looks destined to provide the highest volume of cheap late accommodation, combined with poorly loaded UK flight capacity.

Germany is seeing an even more polarised version of the UK trend, with industry commentators forecasting 2 million less German victors to Turkey, post the recent Istanbul and Ankara attacks. Some of these holidaymakers will simply not travel, but Spanish hoteliers are already putting up rates in the expectation of selling out due to buoyant German and UK markets.

This polarisation is likely to lead to very expensive late deals in Spain and very cheap deals to destinations such as Turkey and Greece.

Ironically, it is the big tour operators with their fixed capacity models that will suffer the most from this polarised lates market. It is much harder for their yield departments to manage a program with hundreds of seats flying empty close to departure and therefore the traditionally well-controlled market for charter seats to Turkey and Greece, looks ripe for exploitation by the major OTAs.

OTAs are geared up to exploit distressed markets, as they take no commitment and simply apply relatively fixed mark ups. This allows them to exploit the distress of airlines and hoteliers with committed stock, to create the low prices required to persuade customers to travel to less popular destinations.

However, further terrorist activity in these destinations could create a situation where customers will not travel at any price, creating a problem for all players, with little sellable stock being left available when we reach the lates market.

The impact on holiday demand as a result of UK weather has never been more pronounced. If we experience sunny weather leading up to the key school holiday period, many parents now opt to simply holiday at home, as the kids are perfectly happy playing on the Xbox, messaging friends over WhatsApp and watching hundreds of TV channels via Sky.

June’s European Football Championship in France, with easily accessible ferry crossings and low cost camping options, as demonstrated by 2008’s Euros in Germany, could dramatically impact lates demand. If Dad uses up precious holiday days in June it leaves less for the family beach holiday, leaving Mum to holiday at home with the kids.

Things could play out in many different ways in Summer 2016 with, not surprisingly, the location of the virtually inevitable Terrorist attacks being a key influence. It could be a great year for OTAs, but I think it’s more likely that we are all in for some sleepless nights ahead.

Will high Google acquisition costs drive further market consolidation?

The Phocus Wright conference in Fort Lauderdale last month again provided a deep insight into the strategic thinking of leading US travel players with a variety of presentations and one-on-one interviews.

The US online sector saw massive consolidation last year, with the formation of a virtual duopoly between Expedia and priceline groups, which now control 65% of the market, post the acquisition of Travelocity, Orbitz and HomeAway by Expedia.

The consolidation of Travelocity and Orbitz was driven by more traditional synergy motivations. The ability of Expedia to roll out its back office across both brands, whilst maintaining separate consumer-facing identities, provided the opportunity to cut costs, and make Expedia’s annual $750m investment in technology work harder across an increased market share.

However, the reasons for the acquisition of HomeAway touched upon motivations, which then reappeared during many of the other speakers’ interviews.

The strategic drive behind the acquisition of HomeAway may have been a desire to gain a foothold in the rapidly expanding private accommodation sector, spear-headed by Airbnb, in order to gain some of the ridiculous valuations currently given to sharing economy products. Currently Airbnb is valued on the private equity market at more than the entire Expedia group at $25bn, not to mention Uber’s current apparent worth. However, it was short term day to day financial motivation that was more interesting to me.

Expedia believes it can reduce HomeAway’s customer acquisition cost by co-mingling its product within its traditional hotel searches, thus giving HomeAway access to its large volume of low cost brand traffic. This lower acquisition cost will in turn allow HomeAway to enter markets such as Cities, where previously high Google bid costs combined with short durations stays made it uneconomic for them to operate. Similarly, Expedia is investing heavily into the “Air Sector”, because flights have a high attachment rate to its strong accomodation product, allowing it to make money in this lower margin air sector whilst other players are struggling. So it appears that high Google click costs are shaping its purchasing agenda, as it seeks to get more “Bang for its Google bucks”.

The acquisition of Viator by Tripadvisor follows a similar logic to the above, with Tripadvisor being able to promote Viator’s products to its customer base, whilst Priceline have openly stated that it is looking for further purchases similar to Rentalcars.com, which it has managed to roll out globally, following the footprint already in place with Booking.com.

Hence, all the major US players seem to be following the same consolidation program, aimed at maximising the benefit of their existing customer databases or Google spend, to deliver traffic to related products at a lower customer acquisition cost.

If this thought process is brought to its logical conclusion, then the merger of Airbnb or Uber with one of the major OTA giants has a lot of logic, with the high transaction frequency and app orientated customer base of Uber being the most prized asset. However, this is highly unlikely to occur in the short term, whilst these giants of the new “Sharing” economy, enjoy valuations on the private equity markets, which value them higher than the whole Expedia group, despite their massive variation in current real world profits.

The above model may also provide the rationale for further consolidation in the European OTA market, now that companies like On the Beach have access to more fluid funding via their stock market floatation. However, I think it’s more likely that the UK based OTAs will seek to scale further via the acquisition of branded OTAs in other European or Eastern block markets, as in the longer term a pan European footprint, is the only thing likely to attract the mega bucks offers from our friends across the pond.

The first of these the pan European footprint deals is likely to be the sale of the Hotelbeds group by TUI, for what I am sure will be a shockingly large price, for what in the past has been perceived as a relatively unsexy B2B hotels player. However, the strategic benefit of its massive B2B hotel buying power, particularly in the traditional beach hotel sector, that is likely to be a prize that few of the major B2C USA players will want to miss out on, so, “Watch this space” and expect consolidation to increase at a rapid pace.

Google Destinations – Ultimate Meta site?

The shiver of collective OTA fear during the Google Destinations presentation at this week’s Phocus Wright conference in Fort Lauderdale was palpable.

Google has applied its vast technology resource to produce a product which could easily dominate the top of the travel search funnel; it’s called “Google Destinations”. With an emphasis on inspiration via content aggregation, and a laser focus on price comparison using cached pricing data, Google at first glance appear to have produced another killer application.

The key advantage Google has over any other travel player is its total dominance of search, which gives it the ability to deliver huge customer volumes to any new tools. So when Google launches a new travel product, we had better take notice.

Apparently 45% of travel searches start with a destination-led query e.g. ‘holidays to Majorca’. Google, via a visual carousel, will place “Google Destinations” at the top of organic listings and are therefore set to divert traffic from traditional link-driven search, to a content-rich format.

Once a destination has been chosen, customers will be delivered to an aggregated super page of relevant content, featuring destination and attraction information, video, weather etc. This is supplemented by a popularity index to show the best time and date to travel based on weather and price. Admittedly great content, but nothing too scary so far…

It was the ‘What’s next?’ section of the presentation that created the shiver.

Google are using cached flight and hotel data to create daily best-value destination and route pricing. This is presented as a simple slider, showing the cheapest periods to travel to the destination across the year within a month by month view or a more traditional specific date search. Alternatively, customers can utilise a budget slider to see which destinations fall within their budget and desired dates.

Once customers have decided on their destination and date of travel, they can drill down through results using traditional filters such as star ratings and UGC review scores, as well as continuously comparing prices between non-stop flying and via flying, or their chosen duration verses slightly longer or shorter stays e.g. the price to add an extra weekend on a 7-day trip to extend it to a 9-day trip.

Once the route and dates have been decided, the customers will be deep linked into the existing Google flight and hotel searches, which currently still link out to suppliers’ sites. However, it was 100% clear at the conference that instant booking and payment via Google Pay are fast approaching.

The scale of the data being aggregated and the speed of results being presented back are amazing. When combined with Google’s ability to deliver simple user interfaces, this creates a very impressive product that, in my opinion, could quickly become a game-changer.
Google continues to avoid the regulatory downsides of being an OTA by maintaining a media model where bookings are made directly with suppliers. However, the customer tools Google are providing squarely compete with the functionality delivered by the traditional OTA sites.

Google again stated that the motivation for the new “Destination Search” is to improve both customer inspiration and remove friction from the mobile booking process. I have to say they are doing a great job.

A less obvious but key motivation may also be to rebalance the power game in a USA OTA market, where 2015’s mega consolidation game resulted in Expedia and Priceline controlling 65% of the market. In a mobile-dominated world where real-estate is restricted, these two advertisers completely dominate. The new destination search will allow Google to flow bookings to a much more diverse customer base by acting as a virtual OTA, whilst maintaining its media model.

You may ask, “Why are Google bothered about other advertisers when competition between the big two keeps click cost high?” Google have always taken a long term view and realise that if they stop providing traffic to smaller players, these will be forced to work more closely with their biggest competitors i.e. social media giants like Facebook. Secondly, if competition in auctions is controlled by two players, competition could mysteriously disappear.

Being the best market place for advertisers, whilst reducing consumer friction in the mobile world remains the Holy Grail for Google, and they appear to be on the right track. Unfortunately, bi-product may be direct competition with OTAs.

If the only differentiator between the two offerings is how payment is made, it appears inevitable that OTAs will soon be complaining in the courts about an abuse of power by Google, in terms of how prominently “Google Destinations” is promoted within search results. An answer that its decided by a “secret source algorithm” may not cut it as a justification.

BrightOn Travel to explore “Roads to the Supermarket”

The upcoming BrightOn Travel seminar, on Friday 25 September, will focus on different ways to drive cost effective traffic to travel websites and look at how the advent of mobile traffic may require a complete re-engineering of many booking paths.

I often use a supermarket analogy when looking at travel websites. In my opinion, too many companies focus their attention on re-arranging the shelves, putting up special offers and training check out staff, when their main focus should be on making sure people can find their supermarket, and park.

Google has long powered the main travel to our theoretical supermarket. Google is the motorway, and has well signposted SEO routes and increasingly expensive PPC ‘toll roads’. However, alternative roads are now being constructed, such as social media channels and mobile; to use our analogy, these act as satellite navigation tools which are changing the way we find and travel to the supermarket.

As PPC costs continue to escalate, travel companies are reverting to traditional marketing methods in order to develop brand identity. However, offline advertising on TV, radio and billboards still present challenges for the marketer.

An obvious one, is that companies seem to be re-allocating spend from highly measurable PPC budgets, to areas such as TV. Demonstrating the return on investment from offline advertising is much harder. Years ago one major price comparison site, described their TV advertising campaign as “Taking a big bucket of water, chucking it against a wall and then making sure you have an even bigger online bucket to catch it with”. The implication being that, ironically, PPC budgets need to increase when you do offline advertising and not decrease!

Historically, accountants within many organisations typically treat marketing expenditure as an overhead with fixed annual budgets. However, to accommodate the above quandary, many are now moving to defined metrics around Cost Per Acquisition (CPA) and treating marketing spend as operating costs; as long as the increased spend is delivering a return, why restrict it?

How companies are rated by review sites such as Feefo, Trust Pilot and Review Centre, contributes to the size of the catchment bucket. A lack of star rating, or poorer star ratings than competitors, operates in reverse to offline advertising, driving higher CPA costs. Review metrics are bit like making sure you have sufficient parking at the Supermarket.

The second big topic of the BrightOn Travel seminar is trying to get companies to look beyond responsive design, as their main mobile first strategy. Marketing directors tend to lead mobile first strategies focused on allowing their existing sites to be used via mobile devices via responsive design, but few have the power to force other departments to review how they work in a mobile-first world.

The seminar will look at how companies like Teletext Holidays are trying to re-engineer their search and booking process. Teletext is reviewing ways to encourage mobile customers to call or web chat, with their call centre staff, using techniques such as mobile push recommendations. It is amazing how many different elements of the business are impacted by what looks like a simple change in process.

I personally think many travel companies are failing to engage in the process of understanding how customers’ interactions with them will be impacted by device size, and the environment in which people are searching. Here are a few examples:

  •         Environment: Customers on a train surfing via their mobile, are unlikely to want to phone to book, so providing online chat is important.
  •         Recommendations: The combination of slower connectivity via mobile devices and smaller screen sizes, make it harder for customers to review results, giving a preference for more recommendations.
  •         Facebook. The Facebook app on people’s phones dominates internet usage, so how does your Facebook advertising reflect this.

BrightOn Travel intends to create discussion around these topics, with speakers from leading travel brands sharing their experiences and flagging key areas for review. We will have a lively daytime event and an even more dynamic discussion afterwards in the sponsored bar at the boutique MyHotel.

Ensure your place at the event via the Eventbrite page.

Does the Tunisia crisis show the need for an OTA Trade body?

Like the rest of the travel industry my initial reaction to the Tunisia atrocity was one of shock, followed by reaching for the phone, to make sure the various companies I consult with had kicked their emergency response plans into top gear.

The TUI management team, along with their staff, must be congratulated for a superbly organised and rapid response in such difficult circumstance. Its impossible to know at this stage, but in my opinion TUI enhanced their brand perception with the UK public, because they made exactly the right key calls, by repatriating all guests who wanted to leave Tunisia immediately and allowing free amendment or cancellation to the end of the season. They also fielded their most senior team for UK PR purposes and deployed emergency teams in resort, to assist their guest in any way they could. It really was a well planned and executed response that the industry should be proud of.

Several commentators have pointed out in the press the differences between traditional tour operators and Online Travel Agents (OTAs in terms of how they are able to deal with incidents like Tunisia and to be fair most make highly valid points.

The major tour operators do indeed have a much greater degree of control over how they are able to protect their brand propositions, in crisis situations like the recent Tunisia attacks. Their greater levels of in-resort staff, infrastructure and the control over their airlines, are indeed key assets.

However, this does not mean that OTAs and dynamic packaging firms cannot learn from the major operators and follow their excellent example in terms of disaster planning. Most reasonable sized companies already had in place emergency teams compromising key personal, who would have instantly been contacted on Friday when the UK first became aware of the Tunisia atrocity and kicked into action.

In this particular case the customers directly impacted where Thomson’s, meaning the primary responsibility of OTAs was dealing with other customers in Tunisia as a whole and customers who where due to travel.

Therefore, the requirement was to instantly understand which airlines and bed bank suppliers an OTAs customers where booked with, in order to communicate their respective policies to customers, before the customers had time to react and contact the OTA. This is vital in terms of controlling inbound call volumes and allowing personalised proactive communication to customers, to compensate for OTAs key weakness in these situation. This is their inability to control policy, in order to be as customer centric as possible and the complexity of communicating differing policies that tend to change on a rolling departure date basis.

The lack of control over airlines amendment and cancellation policy is a key weakness in terms of protecting an OTA brand, but to be fair the OTA can hardly expect to take all the benefits that

Dynamic packaging gives them without some downsides. It is unlikely that airlines will take any notice of OTAs when setting policies, but pre-agreeing policies with bed banks or pressurising them for more sensible terms is completely achievable and something that could be improved I believe.

The impending “Greek Euro Exit” meant that most OTAs would have recently reviewed their emergency procedures prior to Tunisia, but I personally think that the sector would benefit from a central trade body of OTAs, where “best practice” could be shared and pressure exerted by joint buying power. Ideally this body would also include the major bed banks, to allow a more coordinated approach by the DP sector.

Should this body be a sub-set of ABTA or does the DP sector need to dust off the “Association of Travel Agents” framework, put in place for the failed fight to shape the European Package Regulations? I’m not sure, but Tunisia did highlight that more coordination is required.

One of the key benefit OTAs and dynamic packagers have over traditional tour operators is the flexibility that their “asset light” model gives them. For example I would not like to be TUI’s yield planner trying to work out were to move 20 plus flights from Tunisia to the end of the season. As well as the impact on demand posed by the seemingly inevitable Greek Euro exit, initial post Tunisia sales indicate customers are also showing concern about booking holidays to Egypt, Morocco and to a lesser extent Turkey, because of their perceived closeness to ISIS strong holds. Hopefully this may prove to be just a short-term blip for these great destinations.

Being able to play a wait an see game at such crucial juncture, may be the key asset enjoyed by dynamic packaging OTAs, that outweighs the clear advantages the major integrated groups have in terms of protecting their brands in times of crisis. Personally, trying to get the best of both worlds needs to an something the whole OTA community would benefit from working together on.