Sunday, January 03, 2010

2010 Predictions: The BOOT on what to expect for 2010 in the online travel industry

You think 2009 was full of surprises. Well fasten your safety belts, lock in the tray table and get ready for the turbulence, change and excitement that I expect 2010 to bring.

Here we go - I have five predictions for 2010 (two of them drawn from my contribution to the Tnooz post "Tnooz predictions for 2010"):
  1. The non-refundable not enough: 2009 was the year of the deal. Lastminute specials returned and ADR/Ave ticket price fell through the floor, past the basement and almost reached magma. But the main (maybe the only) weapon in the 2009 deal war was the non-refundable. I predict that to win round two of the deal smackdown will require suppliers and intermediaries to come up with something more creative that just non-refundables The non-refundable is successful in driving demand while protecting "normal" pricing (ie BAR). But it is a crude weapon - targeting only those with no scope for a change in plans. Driving demand in 2010 will mean finding additional market segments. Which in turn will require more creativity and subtlety in pricing and deal structures than afforded by the non-refundable. Jeremy Philips in a review on of the book "Priceless" by William Poundstone ran an interesting quote that summarises the prediction here. As Robert Crandall, a former CEO of American Airlines, has said: "If I have 2,000 customers on a given route and 400 different prices, I'm obviously short 1,600.";
  2. Year of the app: mobile may finally be here as a force in online travel but in 2010 the action will be in "apps" not phones. By app, I mean a piece of software designed to perform a function where the function is stand alone but can only exist as part of an operational eco-system. I am not thinking just iPhone here. Though the numbers are extraordinary. On March 27 2008 Apple launched its SDK to the public. Just eighteen months later (Nov 4) they announced more than 100,000 apps available for the iPhone and more than 2 billion downloads. But this is only part of the app story. On May 24 2007 Facebook opened up its platform for third party application development. On their stats page (checked 3 Jan 2010) they are claiming 500,000 apps. It does not stop at smart phones and social networks- HP have launched a printer with an interface and app store. The easy part of this prediction is to say that app numbers will grow again both in number (they will more than double in 2010) and in platform (more sites and more phones launching more of them). The real prediction is that I think the app trend equals a change in how web services are accessed. While not the death of the browser, the rise of the app is a sign that the browser is no longer an essential part of the Internet experience. Further proof that we have left the Web 1 era that defined web success through website stickiness and are well into the Web 2 world of syndication being the success measure. That confining your internet viewership plans to the computer and browser is a doomed strategy;
  3. New marketing measurement metrics will emerge: The very mature online media and advertising world has settled into a comfortable metric duopoly of clicks and page views. Measuring audience reach and advertiser value by either the number of clicks generated or pages views. I predict for 2010 that we will see a new metric emerge. Not sure what it will be but it is clear to me that the market is looking for a measure of engagement rather than traffic. A way of showing marketers that consumers have taken in a brand message not just clicked on a link or maybe glanced at a flashing 468x60. The portals have had behavioural targeting technology for more than two years (Yahoo! has Blue Lithium, AOL has Tacoda) and Google is looking for the Next Big Thing to be video advertising (read more in interview with Rob Torres of Google reported on Tnooz). These are clear indicators of the need for a new metric;
  4. Consolidation in the sector (surely!). This is a left over prediction from 2009. The conditions in the year of the GFC seemed perfect for consolidation. Stock prices were depressed, cost cutting acceptable and appetite for organically funded expansion low. But we saw virtually nothing that could be called a “big deal”. There was deal activity but at the lower end such as through regional tuck-ins (ie Travelocity buying Travelguru, and Ctrip buying EZtravel), small local deals (ie Wotif buying GoDo) and constant content site acquisition by TripAdvisor. With bankers chasing bonuses and companies chasing growth in 2010, I expect to see some consolidation in the big end of online travel town (from Tnooz post); and
  5. Recommendations as the future of online travel: Search – as a means for customers finding what they want in online travel – is no longer as effective in 2009 as it was in 2005. Two causes – the explosion of content through the UGC revolution and consumers desire to seek answers to open ended questions (ie where should I go next) that are not easily answered by a search model based on taking you to one site. 2010 will see even more investment by start ups and established companies on different ways of searching and on methodologies for recommending. The long term future is the ability to generate a recommendation of one based on the individuals unique combination of desires, needs and interests of an individual at a particular point in time (EveryYou). The 2010 future is increased profiling, increased data collection and even more start up activity around search and discovery (from Tnooz post).
Close the door, buckle up, it is time to push back and take off. It is 2010 and the BOOT is back.

If you are interested - check out my 2009 predictions

thanks to pfala for the photo via flickr


Steve Sherlock said...

welcome back Tim

thought provoking points.

taking up your 2nd point. yeah it will be interesting to see how app.versions grow versus mobile.version. with app.versions seems to be some problems for some models.

for example; kayak has a pretty cool app.version however they link off to web.versions of their advertisers’ sites. i.e. a hotel search took me to agoda, hotelclub etc web versions.

i’d only book travel on a web.version using an iphone if it was an emergency. So kayak app in this case only supports 50% of the journey. Even the likes of the app only links to their web version, from what i could see.

am very impressed with the site. they’ve gone for mobile instead of the app (at this stage), and have done a fine job on execution. even if i type in it picks up that im on an iphone and serves mobile.version. tried the same with and it just serves up the web.version.

from what i can see there are pros and cons between mobile.version and app.version. 2010 will be interesting to see how well the industry interprets these.

I suspect mobile.versions will be the biggest generators of bookings for travel in 2010, given travel companies can actively market the instead of relying on being found via an app store.

ps. one think that won’t change – is spamming of blogs like from Roedy (above)

Tom Clark said...

Hi Tim

I wanted to make a comment on your 3rd point where you mentioned search is no longer as effective now compared to what it was in 2005. Firstly, if you look at Google trends , and focus on some of the high volume search terms out of Australia, the trendline since 2005 is only slightly down. In fact, I am noticing some significant upward swing coming into the back-end of 2009 which brings the trendline, in some cases, above the 2005 levels. This to me indicates that search is still just as effective in capturing customers as it were in 2005.

Secondly, in Australia, the percentage of accommodation booked online is set to almost double over the coming years, based on Euromonitor statistics. Now, this could be a combination of current online bookers booking more online PLUS completely new users coming to the online space to book for the first time. If the majority of this growth is however driven via new users, I would expect these consumers to be naturally more closely aligned to traditional search methods i.e. Goolge as they grow in this space and become more comfortable with online platforms and methodology’s.

I think search patterns will change for sophisticated online lookers and bookers but only as technology and new search models mature and become more usable. I have still not seen a single model that demands mass take-up beyond the OTA and Metasearch models. OTA in my opinion is still king and will always be the dominant driver of online revenue as long as they adapt and integrate into new technology platforms, the next being mobile.

Just my opinion.