If you’re accustomed to bidding for hotels, flights and rental cars on Priceline, you may have noticed that in recent months the bidding process has become more cumbersome and time consuming. When your bid is rejected, you need to change some element of your offer before bidding again – the dates, the geographic area, the vehicle class for car rentals or the star level for hotels – in order to bid again. Or you wait 24 hours to submit the same bid.
In the past, if your bid was rejected for say a full size SUV, you could try again for a mid-size SUV, and if you were rejected again, you could keep going right on down the line to full-size, standard, intermediate, compact, economy and so on (same concept for hotels but with stars and geographic zones). But recently Priceline appears to be making a concerted effort to prevent bidders from making more than a couple bids in quick succession.I’ve noticed that while bidding for cars and hotels recently that after my bid is rejected, the system will often try to sell me on an “exclusive offer” (none of which have ever been remotely tempting) or it will tell me I can bid again without changing any parameters at a higher price. For rental cars, the system now only allows one to bid twice before it fails to allow you change parameters and bid again.
For example, while bidding on a rental car for an upcoming trip to San Francisco, after having bids on two car categories rejected, the system gave me two choices: an “exclusive offer” of a mid-size car rental for a ridiculous $523 per week (double the lowest price I saw online) or a “limited time offer” of $26 per day, not including taxes and fees. I didn’t want either one, and there was no link to simply re-bid for a different type of car. But take a look in the upper right corner of your screen and there is a very small, almost hidden link that says, “Update itinerary.” All you have to do is click that, adjust your pick up or drop off time by 30 minutes and then you can bid again. (Don’t worry; the rental car company isn’t going to hold you to an exact arrival time.)
But in some cases, especially with hotels, that link isn’t even there, so you have to go back to the home page, re-enter all your information, adjust your bid and try again. This is extremely time consuming but it also beats the alternative. I use Priceline all the time and have found that whatever price the Priceline system allows you to rebid at isn’t usually the lowest price you can get. For example, if they allow you to rebid without changing any criteria for a car at say $20 a day, or a hotel zone at $100, you can probably get the car for $17-18, and the hotel for around $80, so it’s worth it to return to the home page and simply start from scratch, rather than following their prompts.
Remember, the more money you spend, the more they make, so Priceline has no incentive to get you the best price. For more on how to game Priceline’s system click here and for more on how Priceline sets their hotel star ratings click here.
American Airlines isn’t giving up. Despite having pulled out of Orbitz and been booted by Expedia, the company says it’s still talking to the two online travel agencies and is hopeful for a resolution. According to Dow Jones, these are “active discussions” and that American Airlines is “comfortable” with booking results.
“Ultimately we will see all travel agency volume going through Direct Connect,” Garner said, referring to the American distribution system at the heart of its dispute with parts of the industry. That would include the GDS providers, whose contracts with American are due to expire later this year.
What makes this interesting is the fact that American isn’t backing away from its primary reason for pulling out of Orbitz … which triggered the defensive move by Expedia. So, the words strike me as vapid, since the major issue isn’t being addressed (at least not in public).
There is a rumor that Priceline has signed on for Direct Connect, but all involved are keeping their lips sealed.
Online travel agencies have had a solid run over the past two years. They picked up some market share as would-be travelers were willing to poke around a little more to score cheap tickets. High rates of unemployment and under-employment and general economic uncertainty, of course, were enough to make consumers value every dollar a little more. This opened an opportunity for online travel agencies to advance in the marketplace, and chip away at the dominance of their suppliers (i.e., the airlines) on the web.
Yet, the market is turning. Next year is expected to be a strong one for the air travel industry relative to 2010, and 2010 was a vast improvement over 2009. For online travel agencies, this provides some benefit as a rising tide, but it’s likely to favor their suppliers, as customers are more likely to go with what they know over putting in some effort to find the largest discounts.
Online travel agencies will have to overcome this tendency by investing smartly and substantially in their own brands. This is what we’re seeing in the latest move by CheapOair, the one of the 10 largest online travel agencies in the sector, in its recent announcement of a marketing mix change, which teases a broader strategic shift given changing market conditions.
A Changing Travel Market
From 2008 to 2010, online travel agencies were able to chip away at the online market share of their suppliers, reducing the suppliers from owning 62 percent of the online business in 2008 to 59 percent in 2010, according to travel industry research firm PhoCusWright. Bargain hunters drove the market, which eroded the importance of brand loyalty.
From 2009 to 2010, PhoCusWright notes a “strong countercyclical performance for the OTA category.” In 2009, sales fell only 1 percent for the sector, compared to 5 percent for the total online leisure/unmanaged business travel market. And, online travel agencies have posted double-digit gains in 2010.
Stronger industry conditions, however, are better for the suppliers, and PhoCusWright observes, “With the rebound continuing, supplier websites will likely regain momentum as the OTA fight to hold on to their share gains.”
In regards to the actual travel experience, ostensibly, the airline’s brand matters most. When a passenger books through an online travel agency, the brand associated with the transaction lasts for a few minutes – or a few hours, depending on the diligence of the buyer’s search. Meanwhile, interaction with the airline’s brand starts during the search for a ticket, persists through the flight and ends sometime after the passenger hops into a town car to get to his ultimate destination. To register in the customer consciousness, online travel agencies need to develop the sort of presences that will keep them top of mind.
This runs counter to the traditional online customer acquisition models associated with the online travel agency business, which involve a combination of search engine optimization, online ads, affiliate programs and social media. These are transaction-oriented tactics, which speak directly to the brand-barrenness of big discounting.
More Than the Transaction
The largest online travel agencies have already moved past transaction myopia: everybody knows the Travelocity gnome, Priceline‘s William Shatner and the likes of “Cooper” from Expedia. For all but the top players, however, investments in mass media brand development (such as television) have generally been eschewed in favor of what’s been known to work. Speaking at Business Insider’s IGNITION conference last week, Buddy Media CEO Michael Lazerow noted that Travelocity grew to $4 billion in revenue through online means before it moved to television to get to the next level.
Yet, for the online travel agency sector to hold its ground – and even grow – in 2011, brand has to matter more, and this means casting a wider media net. This, plus the size of CheapOair relative to its competitors, is what caught my attention about its recent media diversification. The company is launching its first television ad campaign, “Get More for Less,” in an aggressive move to get out in front of the imminent online travel market shift.
The move to television is an aggressive one, and it comes a bit ahead of “schedule” for CheapOair, if you use the Travelocity number as a reference point. Expedia pulled in close to $3 billion in revenue last year, for example, and Priceline at $2.3 billion. Travelong/CheapOair generated $825 million in revenue in 2009 and has grown at a year-over-year rate of 45 percent this year, resulting in forecasted 2010 revenues of $1.2 billion.
The company’s CEO, Sam Jain, says, “TV is a new strategy for CheapOair and as we head into our 6th year we believe this is the right time to expand our marketing efforts. TV is a natural evolution from our current digital marketing and will help build awareness among a larger audience and introduce more people to the brand.” The countercyclical tendencies of the online travel agency market relative to travel as a whole reinforce this point.
Pointing to the potential for a virtuous cycle, CheapOair’s Sr. Vice President of Strategic Partnerships, Bill Miller, adds, “This new TV campaign should draw in more customers for us which in turn will bring more value to our supplier partners. Our suppliers — airlines, hotels, car rentals —- want valuable and efficient distribution partners. I believe we are all that and more and this TV campaign is just another example of how we can extend our marketing reach on the behalf of our supplier partners.”
Fashion versus Reality
It’s been fashionable among the digerati to claim the death of other forms of media, and I’m as guilty as the rest. But, the reality is that SEO and online ads (a la Google’s pay-per-click model) are becoming increasingly crowded and competitive. Since they are focused on the transaction rather than the brand, they don’t provide for a relationship with the customer that results in a gradual reduction in cost per revenue over time. It’s strictly “pay by the drink,” and that can get pricey.
With the travel market starting to tip in favor of the travel suppliers over the online travel agencies, the costs associated with traditional online marketing will become even higher, as brand brings customers back to the suppliers and online travel agencies chase a shrinking share of bargain hunters. For online travel agencies to compete effectively, they have to make their own investments in branding – a commitment that lacks the predictability of other forms of marketing.
Strangely, television may become the key to winning on the web in the travel industry in 2011. A better market translates to the amplification of the importance of brand, and commercials are still a critical aspect of this in the consumer world.
A battle of the brands is about to break out. The good news is that it’s for your benefit … and you’ll get to watch it on TV!
It looks like the internet is no longer a fad … at least not in Europe. Forecasts from travel market research firm PhoCusWright put 2010 growth in the European online travel industry at 10 percent, a smile-inducing turn from the 1 percent gain posted last year, not to mention 11 percent decline in 2009 for the entire European travel market (which is up only 2 percent this year, it appears).
“For travelers who may have been hesitant to book online, the recession provided the extra push they needed,” says Carroll Rheem, director, research at PhoCusWright. “Deal seekers turned to the Internet, and online travel agencies in particular, to find affordable options.”
The strength of the online travel agency sector was noted as a reason for last year’s resilience, according to a statement from PhoCusWright, “The buoyancy of the online market is due largely to the strength of the online travel agency channel, which grew in 2009, while supplier websites slipped.”
Rheem adds, “Hotel bookings are fueling online travel agency growth in Europe, with brands like Priceline‘s Booking.com maintaining extraordinarily high growth rates.” Further, it looks like online travel agency action is “on track for strong double-digit growth in 2010.”
Online travel deals just got better. Even though airlines are tacking on extra fees, fares have been plunging for a while now, so it still cuts in favor of travelers. Travel websites have started to get in on the savings, too. Several sites are ditching their booking fees – at least temporarily.
Orbitz, Travelocity and Expedia announced yesterday that they are waiving their booking fees. For Orbitz, this is a permanent move. In the hypercompetitive world of online travel sales, these guys are doing everything they can to get your travel dollars. So, if you’ve been waiting to save even more money on travel – as if the dirt-cheap fares aren’t enough – the deal just got a little better!