Brand Wars: The Airline Booking Battle Will Be Televised

Brand Wars: The Airline Booking Battle Will Be Televised

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!

[photo by Do u remember via Flickr]

The Travelocity Roaming Gnome becomes a real retail celebrity

When I travel, I always expect to run into someone I never thought I’d see at my destination. But to travel, and run into not one, but three of the Travelocity Roaming Gnomes took me completely by surprise. Sadly, the little fellow wasn’t there to make sure my trip was going as planned (I had not booked through his company).

Apparently, the chubby little gnome has become quite a retail sensation, and is now on store shelves selling himself for just $34.99. Now, I’m not sure if this means you should bring your own gnome to take care of customer service issues, or whether he’s just a cute garden decoration, but I couldn’t resist and picked one up.

You want one of your own? Amazon is selling them for just $24.99. Want to take things to the next level? Order the $42 adult Travelocity Roaming Gnome outfit. I’m ordering one of these for our own Melanie Nayer for her next hotel review. I consider it the ultimate in hotel reviewer gear.

New TripAdvisor iPhone app makes finding reviews on the go a lot easier

There is no denying that TripAdvisor has become one of the go-to sources of hotel, restaurant and attraction reviews. So, if you have an iPhone (or iPod), check out the newest TripAdvisor app and get your reviews on the go.

The app is very easy to use, and makes finding reviews a beeze – based upon your location, or a manually entered location.

Best of all – you can write your own reviews right on your device, which means you no longer have to wait till you get home so post some praise (or a complaint).

Another handy feature inside the new app is a flight finder – obviously not the first on the iPhone, but I am always happy to see an app go beyond its main purpose. Flight information comes from a variety of sources – including Travelocity, Expedia and Vayama, best of all, the booking process stays right inside the TripAdvisor app.

You’ll find the new (free) app in the App store. A similar version is also available for the Palm Pre, and an Android version is “coming soon”.

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Mixed bag for spring break travel

For spring breakers, the news this year is mixed. According to data from Bing Travel and Travelocity, USA Today reports, airfares are up, but hotel rates are down. The result, of course, is a variation on the adage that there’s no free lunch. You may get a deal on one part of your trip, but you’ll inevitably pay elsewhere.

Airfares, on average, are up 9 percent relative to last year, Travelocity found, with the average domestic ticket costing around $351. Hotel prices, on the other hand, are off 3 percent year-over-year, down to $156 a night. According to Bing Travel, the most expensive travel day this spring break season is March 22 – it’s also the costliest travel day between early winter and the end of April. To pick up a deal, go with Tuesday-to-Tuesday or Wednesday-to-Wednesday plans.

Despite the averages, of course, destination does make a difference. Cancun fares are up 23 percent from last year, from $346 to $427. Hotels are cheaper down there, however, falling from $220 a night to $198. The average cost of a trip for two to Cancun for seven nights ticked up slightly from last year, from $2,231 to $2,243.

Five predictions for the European travel market

The end of the year is the time for all kinds of predictions for the next one. Usually, I treat such conjecture as the bullshit that it is, but when PhoCusWright puts out a list of what’ll happen for the travel market, I tend to take it a little much more seriously.

The worldwide recession is still squeezing the European travel market, but the online sector is likely to be the star next year, as it was in 2009. Consumers are turning to the web more and more to book their travel in Europe, and this will have a profound effect on how travel products and services are sold.

1. Up a third: PhoCusWright forecasts that the online segment of the travel market will hit 34 percent of the entire industry in Europe in 2010. Customers will turn to the internet to find better bargains, accelerating the shift from offline to online. At the end of 2008, online accounted for only 28% of European travel sales.

2. Priceline’s the one to beat: Priceline has lagged the three largest online travel agencies – Expedia, Orbitz and Travelocity – for years, but Priceline has seized some serious market share through the travel recession, due in large part to its acquisition of European company Booking.com. Priceline could take the #2 spot next year and will be well-positioned for the future.3. Metasearch arrival: Finally, there will be a solution to the fragmented online travel market! PhoCusWright forecasts the growth of sites that search across sites, which makes sense given that financial concerns are driving travel buyers to the web instead of traditional venues. There’s demand already, and economic conditions will feed the trend.

4. Big in Germany: Germany’s been gaining ground in the European travel market. In 2008, the country was responsible for only 17 percent of the space. Look for it to hit 20 percent by 2011, PhoCusWright says.

5. Look south for sunshine: Online penetration has topped 40 percent in the United Kingdom, and France and Germany are making progress. The easy wins are in the past. So, the travel business is looking toward the emerging travel markets of Europe: in the south and east.

There’s plenty on the agenda for the European travel market next year. Even in what will continue to be a tight economic environment, there’s plenty of room for growth. No doubt, the most important factor will be the recession, which will shape travel company behavior by driving buyers to seek better deals. The perception that online is the place to save will accelerate the push to electrons.