Pre-booked Sunbeds – Creative commerciality or a step to far?

I personally applaud Thomas Cooks creative commercial thinking behind identifying sun beds as another chargeable optional extra in a package holiday.

Low cost airlines first brought this phycology to the market place, by first making luggage a chargeable extra and then pre-booked flight seats. They rightly pointed out that this allows them to charge a lower price for the basic flight seat and leaves customers to choose what they want to pay for.

For example, why should a customer who takes fewer clothes via hand luggage pay the same as a customer taking a 22kg suitcase, which requires airline staff to check it in, transport it to the plane and then load/unload it. In this case there is a clear cost saving that the airline can pass on to reward hand luggage only customers.

Pre-booked seats, when it was first introduced, was more controversial as there is minimal extra cost to implement this and most airlines already offered the service free of charge to its customers, who expected to be able to pre-book seats next to each other. Supposed “Full Service” airlines such as British Airways initially resisted such innovations, preferring to sell on the basis of “Differentiated Service”, but after a number of years of losing ground eventually followed suit.

Therefore, you can only applaud Thomas Cook for becoming the “Easyjet” of the package holiday world and evolving its product offering to give customers the option of paying to pre-book the best sun beds. Just like Easyjet’s “Speedy boarding” service, this not only is a valuable service to some customers, it also provides a degree of “show off ability” that they are smart enough to pre-book and can afford to do so. A few seasons of “sun bed” envy will soon see the uptake of this service soar.

The subtle down side of Thomas Cook launching this policy, is that it does allow its major competitor Tui to take the moral high ground over its “differentiated” holiday products, where I am sure it will claim sun beds are so plentiful that there is no need to pay extra to pre-book. However, for me this has echoes of British Airways stance and is unlikely to have any real impact in a world where customer choice, is just as “Customer Centric” as full service options that cost more.

This year, Turkey is not just for Christmas.

As we sit recovering from one to many Christmas turkey dinners, it may be time to look at the year ahead and assess the role that Turkey as a destination is likely to play in the success of the UK Travel Industry this year.

The collapse of Monarch airlines gave a stark warning as to how nasty the “Spanish route” price war had got, with average yields having dropped by 30% over a 2-year period for most airlines.

As we all know, terrorism and political unrest has seen a massive concentration of demand into Spanish destinations, resulting in scarce last-minute hotel availability and large price hikes. Fortunately, for OTA’s whose flexible model allows them to be “parasites living off the misery of others”, these hotel price increases were offset by reduced last minute flight prices, as airlines struggled with excess last-minute capacity to fill their aircraft.

For virtually the first time, we saw how disastrous the low-cost model of discounting early can be, if high hotel price’s mean they cannot fill the last-minute seats and have to “double discount”.

The failed Turkish coup in July 2016 ensured that not only late demand for Turkey in 2016 was dramatically reduced, but also led to large swaths of capacity being redirected to Spain in 2017. Therefore, even though Turkey remained stable in 2017 and late demand surged back, there were few seats left to match with the plentiful and cheap hotel availability.

However, some airlines desperate to remove capacity from the Spanish blood bath, are flooding capacity back into Turkey for 2018.

Ironically, in these situations a high degree of “Exclusive”, but committed hotel product is working against TUI, who have increased capacity by 100k passengers, compared to the massive hike in capacity that Thomas Cook have put back into Turkey, with a virtual doubling of capacity to 600k passengers. Although, exclusive product is highly profitable, it cannot be moved around and does expose the owners to big swings in destination demand.

Also, the successful short duration, high frequency flying model of Ryanair combined with 5th freedom flight permissions issues, resulting from being an Irish rather than UK carrier, has kept them out of this potentially lucrative Turkey alternative. Easyjet on the other hand have no such limitations and having acquired profitable routes from GB Airways many years ago, know Turkey’s yield potential.

Easyjet’s biggest UK competition is likely to come from Thomas Cook being nervous of their large capacity increase and reducing perceived risk, by dumping flight only seats at low prices early to boost load factors.

A more left field threat is Turkey’s own low cost airlines like Turkish Airways, which have the benefit of being based downstream and so are able to move capacity around

Europe to exploit regional peaks in demand e.g. both Scottish and English school holidays with one flying program.

Turkey is one of the UK’s few major beach destinations outside of the Euro and with the pound having strengthened markedly against the Turkish Lira over the last 12 months (+20%), the price benefit of an All-Inclusive holiday to Turkey over its Spanish compatriots has never been higher.

Unfortunately, the same price advantage also applies to Germany, the other European beach power house, and capacity is also piling back in from that source market, so 2018 may be the one and only year for the British travel trade to gobble up as much Turkey as possible.

Mobile is fragmenting the OTA booking process and re-shaping their basic infrastructure.

For most online player’s, mobile represents more than 50% of their traffic, but has a much lower conversion than its desktop cousin. It’s no surprise therefore, that a “Mobile First” approach has become the key focus for most OTA’s with literally 1,000’s of A/B tests constantly being applied to try to find the ultimate “User Interface” (UX) for mobile sites.

The original focus of the industry was on “Responsive” sites, that optimised the desktop journey to represent it better on mobile devices. Quickly, the UX guys realised that the “Friction points” on a hand-held device from “big finger “clumsiness issues, required different solutions to mouse driven desktop interfaces. However, the “Real Mobile” difference, is the very limited time customers view their mobile devices at one time and the development of what the marketers call “Mobile Moments”. This means that the mobile journey must be much faster and to achieve this simpler.

The latest movement in UX is focusing on “Removing friction” in the booking journey. In laymen’s terms, this means understanding the users’ intent and ensuring that the experience provided is exactly what the user wants providing clear actions, in some respect this could be perceived as “dumbing” down the booking journey by removing any possible distractions. Just have a look at how different the “Booking.com” desktop and mobile sites are. On the mobile site, filters are hidden and once a customer is in the booking funnel, any distraction from the key goal e.g. book a hotel, has been removed.

The result is that ancillary sales such as car hire, transfers and insurance, are being shunted to a post booking pitches via email or clever “Remarketing”, using cookies that allow highly targeted “post booking” advertising of ancillaries. This “two stage” approach is facilitated by getting customers to downloading the “mobile App”, as even though many customers forget they have the app on the phone, it allows much more effective push marketing and links to content rich post sale processes. What is dressed up as customer service by companies like booking.com and Airbnb, is highly profitable in-resort revenue, relating to local excursions, transport options or dinning out. These allow them to maximize revenues once a customer has been acquired, but in a two-stage booking process. They would never interrupt their mobile booking flows with these options, but once they have the app downloaded they can easily become the customers “pocket passport” and sale a whole range of “ancillary” products by using both geo location and time sensitive metrics.

Other companies have adopted similar processes, but may become unstuck due to their dependency on email as the secondary customer contract strategy. As GDPR comes into effect next

year, travel companies will be able to email customers about their booking as part of legitimate interests, however it’s still unclear whether these emails can provide a marketing up-sell message in addition. The line between allowable customer service follow up and the sale of new products, looks blurred and grey to me. For example, is it customer service to offer a transfer to customers who have brought a flight or hotel from you or a new sale they have not opted into? I would argue it’s fine, but I’m sure somebody may soon object.

Speed is also a key in a factor in a “mobile moments” environment and multiple layers of “caching” are a fundamental requirement of a mobile site. Slimed down content pages driven by AMP or price caching to drive the speed of results pages are now common. Again, compromise is required and here it is the absorption of price increases during the jump from cache to live, as not absorbing reduces conversion by up to 60%.

The ease of linking between mobile and desktop to allow a booking to be started in a “moment”, but to be completed at leisure on a desktop is key. Currently the only realistic method of doing this is to get the customer to login, which is tough in the travel environment where customers are promiscuous and on average visit 23 sites before booking. Easy login tools using Facebook etc. have helped, as do high levels of repeat booking customers, but this is a hard one to crack and will be a massive advantage to the travel company that gets this right.

OTA’s are also taking a good look at payment options and how these can be simplified, whilst at the same time pushing customers to the cheapest merchant clearing option. From January 2018, the industry will no longer be able to charge the global 2% surcharge for booking with a credit card, compared to a debit card. Logically, most customer will opt for the greater protection and better payment terms offered by booking via their credit cards. Many OTA’s already have plans centering around flexible deposits and payment terms only available for customers paying via debit card, but these tend to be complex and conflict with the requirement to simplify the mobile booking journey. Again, I think we may see a two-stage process with deposits being taken in the simplest way possible and any complexities being aimed at the balance payment process.

The key conclusion from this article is that Mobile is forcing not only a shift in booking flow but also a fundament review of booking process and the infrastructure supporting OTA’s, with caching and two staged booking process soon to become the norm. Well it would be boring if the rules didn’t keep changing in my view!

Easyjet Holidays trade launch and a further evolution of dynamic packaging in response to the European Travel Directive implementation.

Travel Agents quickly adapted to the dynamic package (DP) revolution, developing their own systems or buying relatively cheap pre-built Dynamic packaging platforms, that allowed them to combine low cost carrier seats with multiple bed bank XML feeds.

The initial DP battle was all about “Price and Range”, with agents looking to have the biggest range of hotels and the most suppliers per hotel, to ensure they could always offer the cheapest price. Many smaller travel agents and OTA’s have never moved past this “Range” is everything model.

However, over time, bigger OTA’s like On the Beach have consolidated consumer demand into a much smaller range of “Recommended Hotels”, so that they have enough volume to justify contracting the hotels directly via an in house buying team. This in turn yields lower rates and/or higher margins, which has allowed them to advertise these hotels harder and create a virtuous circle of growth, with 65% of all sales going into directly contracted product and expanding sales over all.

The introduction of the European Package directive, which comes into force in June 2018, effectively bans “Flight Plus” ATOL’s and will force all UK Dynamic Packaging companies to move from their current status as “Agent” of the Hotel to full “Principal” status.

We are told by legal experts, that this will not affect the VAT status, keeping DP agents out of the extra £20 per passenger cost imposed by UK TOMS VAT, however there is no avoiding the extra-legal responsibilities that principal status gives.

As “Principals” each agent will be responsible for implementing their own Health and Safety checking procedure and have at least one person in the company trained and responsible for implementing their policy.

In reality, H&S is a relatively low cost issue as there are a number of independent industry experts, offering off the shelf “Self-Assessment” systems that can provide the required protection. In my experience, it is very difficult for DP agents with relatively scattered sales, across 1,000’s of hotels, to actually influence the H&S implementation of an individual hotel. However, it is vital to identify any high-risk properties and to drop them immediately. In a world where you have 100’s of alternatives to offer your customers, not doing so is reckless and potential commercial suicide. Agents should also be warned, that the worst possible outcome is to implement a H&S policy and not follow it 100%, as this ratchets up the criminal liabilities of the management of the business.

In my opinion the biggest issue facing agents when they become “Principals” is the cost of Public Liability Insurance.

Currently, either customers or more beneficially the ambulance Chasing” lawyers powering the wave of “Sickness” claims sweeping the industry, do not bother with DP Agents who are acting as the agent of the hotel, as they cannot effectively sue them in the UK and would have to take cases to the hotels home country.

However, from June 2018, DP agents will become UK principals allowing customer to sue them in the UK for any accidents or sickness issues, which is obviously a major concern for the insurance companies providing Public Liability quotes. Currently, most agents have just extended their current policies up the change of law date in June 2018, as Insurers simply will not quote yet or are asking for up to tenfold increases in premiums.

I personally expect that the cost of Public liability insurance will quickly stabilize and reduce as claims histories under the new Principal status are understood. However, the need to reduce Public liability cost may force agents to cut the number of bed bank suppliers based on the H&S policies and public liability indemnities that each supplier is willing to give. This is because these “pass on” indemnities will have a major influence on the agents own public liability costs.

Conversely, not having a bed bank provider to pass on Public liability costs may make the benefit of direct contracting less attractive where passenger volumes are lower in the major OTA’s, although I expect this impact to me minimal.

It is also likely that DP agents will ask the question “Why have 1,000’s of hotels on sale, that we have not sold in the last year? as doing so increases costs.

Chuck into the mix, the need to have a 24-hour duty office and emergency procedure training for all senior management and you quickly get a strong case for consolidation of product supply.

Therefore, within the next two years, I therefore expect all major consortia such as TTNG, Advantage, Global, Hays Travel etc. to be powering not just part of their agents DP operations, but 100% with there also being an increase in sales for Low cost carriers holiday operations.

Jet2 Holidays have lead the rush to replace the supply of “Standard” beach holidays to the independent travel agent sector, as both TUI and more recently Thomas Cook, abandoned the “Commodity” beach holiday market, in favor “Differentiated hotels”. However, the appointment of Johan Lundgren, the Ex Tui Boss, as Chief Executive of Easyjet must spell a major move by Easyjet into the Holiday sector.

I have previously been critical in articles of Easyjet insistence of finding outsourced partners to run their holiday division, but believe that given Johan’s vast experience in the holiday sector, he will quickly move the holiday operation in house and launch a major program to the UK Travel agent community in time for Summer 2019. I may be wrong but I willing to take some large wagers if anybody but Johan is willing to make them!!!

Focusing on service to boost brand

I must confess to be a “Brand” convert, believing nothing is more important than building brand traffic to reduce ever increasing Google advertising cost and its nice to be Chairman of a brand like Teletext Holidays, which I’ve interacted with an for over 25 years now.

Teletext is lucky to enjoy unprompted brand recognition levels of 40%, which puts it on a par with UK travel giants such as TUI, Thomas Cook and Expedia. This alone delivers significant volumes of direct brand traffic via SEO and PPC channels, reducing average customer acquisition costs compared to other OTA players such as Travel Republic, On the Beach and Love Holidays.

Unfortunately, our customer “Consideration” is much lower as many customers lost touch with Teletext when it ceased to power the pages behind their TV and moved fully online. We are obviously addressing this with above the line TV advertising and sponsorship deals such as the recently announced tie up with newly promoted Sheffield United (Another historic giant on the rise).

Legacy brands such as Teletext Holidays also offer a key advantage that customers already know what the brand stands for. Extensive research shows that customers view Teletext as a “late deal” offer site for beach holidays booked by phone.

To offer the “by phone” service we outsource call fulfilment to Truly Travels Indian based call centre, at a considerably reduced cost versus an equivalent sized UK call centre. Conversion levels are extremely healthy compared to any UK call centre, and our ability to switch and directionally sell products means we have enjoyed strong margin growth, however the NPS scores were not at an acceptable level when I joined and have been a KPI that we have been looking working hard to improve.

It’s my belief that in today’s world of social media and review scores, focusing on the customers that do not book with you has never been more important as word of mouth and review scores can kill or make a brand. However, like many call centres our metrics and focus was primarily on conversion levels and profitability per call alone.

In order to find a cost effective solution to this problem we looked towards our sister technology business Zen3, and worked with them on the development of their Sayint Speech to Text system which has revolutionised our approach.

Sayint allows us to record every inbound and outbound call into the call centre and then translate these in too written words, so that they can be data mined using the latest big data AI (Artificial Intelligence) algorithms.

Sayint has allowed us to create “Sentiment” algorithms weighting basic factors such as call length, hold times, silences etc. and then overlay them with scoring based on the presence of both positive and negative phrases. Some examples of negatives are phrases such as “Can you repeat that, pardon, that’s more expensive, I don’t want that” and phrases like “Can I talk to your manager”. Over a period of time we have built algorithms that we use to automatically rate a call, in terms of customers satisfaction levels.

These allow us to generate a ranking by agent and an understanding of which agents are scoring well for service whether the customer books or not. The correlation between top seller and generator of highest customer satisfaction over all is often not what you may expect. The tool also allows managers to walk through calls with an agent, using drill down tools that allow them to enter the written conversational record where that negative phrase occurred, so they can then listen to that exact section of the call and coach a better approach.

This has allowed us to focus management review and training precisely where it was needed, which in turn has increased the average satisfaction levels on non-booking calls by 26%, as well as increasing call centre conversion by 15%.

It is however the improvement in satisfaction levels on non-booking calls that Teletext continues to focus on because this is both where its ability to increase profits lies and the biggest numerical influence on its average review scores in sites like Trust Pilot and Feefo. Good scores in these areas in my opinion make customers more likely to click on your brand adverts when they see them or book with you if they are looking for that third party reassurance.

Sayint also has allowed Truly to reduce its call audit team from 10 to 4 whilst increasing the volume of audited calls by 400%, by being able to accelerate the speed at which keywords in booking calls can be found.

Like most large call centres, I know we have and continue to have quality issues to deal with due to a relatively high staff turnover, but at least management now have a tool in Sayint that gives them the measurability and visibility to force the required action to make improvements.

Will Easyjet Holidays ever catch up with Jet2 Holidays?

At the recent Travel Weekly lunch briefing, Easyjet CEO Carolyn Macal admitted that EasyJet Holidays tended to get lost in the priorities of an airline carrying 58m customers and needed a separate management team to focus on it.

Having provided the technology powering Easyjet holidays for the last three years and the launch platform for Jet2 Holidays, I feel reasonably well positioned to contrast both company’s approaches.

Philip Meeson has relentlessly driven the growth of both the low-cost airline Jet2.com and Jet2Holidays on a very personal basis. Philip quickly realised that having a tour operation to complement his low-cost airline distribution, offered some major strategic opportunities.

Yield management

Low cost airlines use a yield model where they move prices up from launch, as buckets of seats are sold, depending on how its computerized algorithms estimate the required rate of sale, based on historical sales patterns by destination. However, the yield program also looks at the comparative price of other low cost airlines, since this obviously impacts the rate of sale. Price competition between airlines based on highly transparent flight only prices often suppresses yield.

Jet2 quickly realized that “package holiday” sales not only gave it another distribution channel, but because prices are “opaque”, gave it the ability to dump the prices of seats on slow moving routes, in a hidden way without impacting the higher volume flight only prices.

Early sales.

Low cost carriers tend to achieve higher average sales prices, the earlier the sales pattern is on a route, as early sales allow it to move seat only prices up faster and still achieve the targeted load factor.

Package holidays have an earlier booking pattern than flight only and thus have been credited with allowing Jet2.com to achieve higher average yields than some of its competitors.

Route development.

Initially Jet2.com saw its holiday program as a volume top up on its traditional flight only routes, but as volumes have grown, it now deploys aircraft based on its holiday company’s requirements and tops up sales with flight only.

The above points only work if you have a “One Company View” of profitability, with one yield team making the crucial seat pricing decisions and flowing those prices into both companies equally or with hidden discounts to the tour operations. For example, agents are often forced to sell Jet2 Holidays simply because the tour operation has access to lower priced seats than they can package up themselves using Jet2.com.

However, in my opinion the most significant decision Jet2.com made was in recognizing that the management of a tour operation is a very different skill set to managing an airline. They therefore recruited experienced operators like Steve Heapy,

who in turn picked up a lot of the staff Thomas Cook made redundant when they closed the Air tours operation in Rochdale.

The proof is very much shown in the results with Jet2 Holidays on the way to taking the number 2 spot in the UK away from Thomas Cook, with holiday carrying of over 2m passengers, whilst Easyjet collaboration with Hotel Beds has generated a much lower number.

In September 2017 the deal with Hotel Beds comes to an end and it will be very interesting to see what Easyjet decide to do next. At the end of the day, they still have the most customer focused brand in the low-cost sector and in my opinion could easily become one of the top 3 UK tour operators. But, only if they achieve the focus that Carolyn has now recognized is required.

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.