Rod Cuthbert of Viator was kind enough to invite me to a drinks event with PhoCusWright CEO Phillip Wolf. Wolf was in Australia to attend the Tourism Futures conference on the Gold Coast. I talked all the attendees into joining in for a group photo. Rod had managed to put together a very influential group of attendees for this event - and I wanted to capture the moment. Not least of all because the photo includes local senior execs for each of Travelocity (Zuji), Expedia and Orbitz in the same room as well as me playing nice with people from Qantas.Phillip gave an brief but interesting speech. Two things he said particularly stuck with me.
Firstly he put an new spin on how to think about the battle between the big OTAs and meta-search/content companies. Rather than defining sites such as Kayak and TripAdvisor by their business model and functionality (meta-search and user generated content) he described them with reference to their control over content. He calls them "zero percent sites". That is sites where zero (or near zero) percent of the site content is controlled or produced by the owner. I like that as a descriptor because it goes to the heart of the difference with online retail sites. In telling the story of the battle between the zero percent sites and the OTAs he mentioned a stat I had heard before by is worth repeating. Currently Kayak is generating more air fare searches than Travelocity. Not to say that Kayak is selling more air that Travelocity but more people are clicking the search button on Kayak and generating a search result. Why is that so amazing? Well says Wolf, "Kayak has 58 employees, Travelocity 5,000". Four of the top ten online travel sites by traffic are zero percent sites.
He then took this analysis a little further through taking us through PhoCusWright's current Perfect Storm thesis (The Perfect Storm: Search Shop Buy). It is one thing for us as an industry to have better means for classifying the models and categorisation for each competitor but do our customers care. We as an industry think about supplier sites, OTAs, Hotel Only, Meta/Zero, Affiliates, white-label, last minute, etc etc. But the consumers don't do any of this. All they think about is buying travel. On the whole the distinctions between the models and methodologies are meaningless to the consumer. Wolf encapsulated this through this comment "In our study of consumer behaviour a statistically significant number of consumers actually believe that they buy their travel from Google".
This resonated with me. No matter how much we want consumers to see the market segmented like with think it is and no matter how much with want to believe that brand and model distinctions are being understood by consumers, in the end the average customer types in what they want into Google and are not at all certain who they are booking on in the end. Frightening stuff.
Back to the photo. Here are the attendees from left to right: Fergus Kelly (Qantas Holidays), Rod Cuthbert (Viator), Grant Swinbourne (Qantas Holidays), Peter Smith (Zuji), Arthur Hoffman (Expedia), Me , Philip Wolf (Phocuswright) , Vicki Potts (Viator), Steve Sherlock (Oodles), Carol Hutzelman (Phocuswright) & Mike Thompson (Stella)
11 comments:
Very frightening indeed!
I can see why meta-search travel sites are flourishing in terms of air fare searches (At least with international air fares) but I believe they will have a tough time attracting users who just wish to search for accommodation and even more so with activities.
The value that meta-search travel sites provide to consumers is the ability to find the cheapest rates and a large number of options. This works well when searching for international flights as the price vary from site to site.
With accommodation on the other hand, content is becoming a lot easier to acquire (through XML etc) as is price parity. If all the OTAs end up having similar content and pricing then this value add that meta-search engines provide will dwindle.
This is even more so the case for activities where the prices are usually fixed unless discounts are applied for members of certain clubs.
I am sure that meta-search sites will find multiple additional ways to add value to the consumers experience (other than by searching for the cheapest rates), but price parity has got to be a real threat to them.
I predict that OTAs are going to find it harder and harder to compete in terms of price and content and are going to have to focus more on how they can provide their users with a better experience than their competitors.
This is exactly what we have focused on with our one-stop travel website (still in Beta with some crucial things to be worked, on so I won’t mention the address here yet) and we look forward not only providing great rates and a huge range of options, but also to providing users with an experience which can't be found elsewhere and for which there is huge demand.
Jonathan
I have worked for many years in the online accommodation industry and disagree that price parity will be reached across the entire hotel industry - you will always have hotels who fail to manage their distribution channels correctly. There are too many smaller unsophisticated hotel operators out there who do not understand distribution. Hotel pricing is still a mess online and the real focus for meta search is in hotels - that’s where the money is. Roamfree failed because they also had a simplistic view of obtaining hotel inventory through XML – distribution relationships go along way
I wish you luck with your start up business, but I do caution you that positioning your site as “one-stop travel website” is very Web 1.0 . Today’s online businesses should not be about trying to be all things to all users. Be prepared for people not wanting to do everything on your one site.
Hi Anonymous
You are right that price parity will not be reached across the entire accommodation industry, but it is undeniable that it is becoming more and more common. There are still many properties without an internet presence at all, but those that are listed online give users plenty of choice and those that are not are unlikely to be missed.
Channel managers and booking channels (V3,RMS etc) are gaining popularity and you just have to look at the number of last minute sites that have popped up recently (with much of the same inventory and the same pricing for most properties) to see the way the industry is heading.
I definitely do not dispute that accommodation is where the money is, just that (at least here in Australia) price is becoming less of a competitive advantage (just compare rates on wotif vs needitnow and ratestogo, check-in, stay247 etc) and that meta-search sites must see price parity as a threat (not necessarily to their survival, but to their profits).
Obtaining a huge number of listings and price parity through XML does not provide a company with a competitive edge when it comes to attracting and retaining consumers in todays market, but I would rather not discuss how successful other companies have been or will be.
Thanks for your comments regarding our startup. Offering a one-stop travel site in itself is not what makes our service unique and we do not expect people to use all of our functionality, nor do they have to in order to benefit from using our service. We focus more on the parts of the site which make us unique and for which there is demand, but by providing additional services which our consumers want, they are not forced to look elsewhere to fill this need. Also, as we see a change is the needs and desires of our users we are able to easily shift our focus to better cater to these needs and desires (without losing focus on the rest of couse).
Using the term "One-stop travel site" may not be Web 2.0ish, but most consumers do not know, let along care about what "web 2.0" is so long as they are able to find a good deal and are given an enjoyable experience. The term may not impress techos and I had initial doubts about using it myself, but became convinced over time and after speaking with a number of average non-tech types. It clearly conveys an important part of what the site offers (Accommodation, entertainment, vehicle hire, flights etc) without spelling it out for people, which is good for marketing purposes where it is good to be succinct.
I'm so glad to see that there's some serious consumer behaviour research being done in this sector - it is so vital if the sector wants to truly grow up. And damn straight consumers don't care less about market segmentation and whether you're an OTA or a content site or whatever. That's just common sense. Go and ask a person on the desk in a walk in travel agency what the difference is between each - the majority of them wouldn't have a good grasp of the differences so why would the consumers?
Serious, detailed resarch is needed to truly understand the consumers buying patterns in the online space. It is barely understood because in the drive for efficiency we rely too much upon guessing about statistics produced by organisations like Google. That's fine for some elemential aspects of the search/booking/purchasing/buying process , but it doesnt tell us a lot about the actual human part of the decision and what people are thinking or that fact that many people don't think much at all.
Frightening... or promising.
The fact that there is no price parity is the root cause the consumer does not trust the one stop travel site. It is the main reason why the consumer shops around.
This IS the value of Travel search engines. Saving the consumer time, making him believe he has done his research to get the best deal.
The challenge is to educate the consumer that a more direct distribution process will benefit THEM in the end. To encourage direct sales (and this can be done by leveraging the exposure via OTAs / our partners).
Indeed the customer does not care what a mess and overly complex layered distribution process we have created.
If as a supplier you can not make it abundantly clear why the consumer should book with you, there is no reason for them to do so, and as a result they might just continue to use the familiar (trusted) OTA site.
What is frightening is that we believe we as an industry need 5000 + 58 employees to attract customers. But what is promising is that consumers are interested to find out if the supplier is willing to provide the ultimate deal.
Convergence vs Divergence (refer Orgin of Brands. Al Ries)
I think the debate about "one stop shops" etc is more about the orgin of a brand i.e. does a brand come from combining products together or from seperating them?
Al Ries in his book, Orgin of Brands, argues that brands are born from divergence and creating a new category rather than combining categories.
An example that Ries uses is the American Road-House which combined oodles of things together and sold coffee, cola, pizza, hamburgers, sandwiches, fried chicken to name a few.
Starbucks took just the coffee out.
Coke took just the cola out.
Pizza Hut took just the pizza out.
Subway took just the sandwich out.
Mc Donalds too just the hamburger out.
KFC took just the fried chicken out.
In online travel:
wotif took accommodation out of travel agent.
Webjet took flights out.
Oodles.com took car rental out.
I'd argue by taking one item and doing it very very well, a business has a chance to get cut through on the back of a new category.
Gotta mix some art and luck in too.
So as for one-stop shop for travel, if its focus on a particular market segment i.e. one stop shop for pensioner travel, that might get some cut through.
Steve
Whats Oodles? Is it something you eat :)
Oodles is an Australian based car hire meta-search company
If Wotif "took accommodation out", why are they working to integrate travel.com.au's flights? If "Webjet took flights out", why have they been trying so hard (with mediocre results)to make hotels work (eg.lotsofhotels etc)? Having said that, yes you were right to scale back the Oodles plan to focus on cars.
Anonymous, can you tell us if your
"one stop shop" has a generic name
ie. like travelonestopshop.com.au,
webjet.com.au, realestate.com.au, or more like
a real name ie hertz, wotif,
ebay, google etc?
I am a big one for real names. They certainly seem to dominate the market place - offline & online -, are easier to trademark & I guess, once we learn them seem to be easier to remember.
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