The hotel only sector in the UK is inevitably becoming commoditised as its easy for customers to compare prices by visiting multiple sites via Google or price comparison sites such as Trivago and Tripadvisor.
The same can be said for the flight only market, as I can’t remember the last time, Skyscanner was not my first point of choice, when looking for flights.
However, the same cannot be said when looking for holidays, although players like Kayak and Travel Supermarket are trying to establish a position.
Dynamic Packaging has exponentially increased customers holiday choices with thousands of both flight and hotel options, which when multiplied together yield around 100 million holiday options that each OTA can offer on their sites.
Putting an aggregation and comparison layer above this is very hard, with current sites only comparing offers on the cheapest flight option and passing customers onto the OTA to modify their flight choices. Given that most OTA’s have access to the same flight and hotel suppliers, the savings available from comparison are low compared to the total holiday price and often customers simply use the comparison sites as a listing of OTA’s to look at before booking.
The biggest comparison threat therefore comes from Google, who could combine their already successful flight and hotel search’s to allow customers to Dynamically Package their own holiday options in the same way the OTA’s do.
However, the new European Package Directive puts a massive regulatory block on this, as it clearly states that facilitating the booking of flights and hotels requires the provider be a “Principal”, provide bonding and taking responsibility for the delivery of the product.
This is completely alien to the Google media model and unless they enter the process via a partnership with a global player, willing to take on these responsibilities, its simply not going to happen.
You then look at the Global market place and quickly realise that the major players such as Booking.com and Tripadvisor only really operate in the hotel only market and currently not packages, leaving only Expedia is a likely option for the European market partner.
Although, Expedia worldwide are a major player, they have never fully got their heads around the European package market, leaving players like On the Beach, Love Holidays and Teletext to dominate the UK dynamic packaging sector. Combine this with the large element of the holiday market still accounted for by the traditional holiday giants of Tui, Thomas Cook/Jet2 holidays and you can quickly see that even Expedia could not provide an effective comparison tool for Google
So my simplistic conclusion is that although Google and Booking.com are set to dominate the hotel only sector, the Package Travel Regulations provide a substantial barrier against entry into the European package holiday sector, allowing further growth for the UK’s leading OTA’s not only in the UK market, but increasing in other fertile markets like Holland, Poland and potentially the highly competitive German market place.
This growth however is likely to come via acquisition, as the cost of establishing a brand in other European markets, is often greater than the cost of buying an established player and improving its performance by utilising shared technology and bed buying synergies in the background.
Cross European consolidation of the dynamic packaging sector is definatly coming, but it’s just as likely to be driven by UK OTA’s as international giants like Priceline, Tripadvisor and Expedia. However, don’t rule out China’s C-Trip buying one of the UK’s major OTA’s as the first building block to establish a European strong hold.