Which BIG airline just pulled out of three booking sites?

by Tom Johansmeyer on

As you’ve read here on Gadling, the battle between airlines and online travel agencies is poised to heat up. For the past few years, a dismal economy has sent many bargain-hunters to online travel sites with the hopes of finding fantastic deals and minimizing the pain in their wallets. Yet, with the travel market and the broader economy showing signs of recovery, airlines‘ brand power will gain momentum, and customers with more cash at their disposal will favor convenience and recognition over saving a couple of dollars. A battle for your money and your loyalty is brewing.

And, it’s just intensified.

Last month, American Airlines and Orbitz tangled over fees and the booking process, with the airline threatening to yank its inventory from the travel site, a threat on which it made good. After a temporary restraining order was issued, a judge ruled yesterday that American could pull its inventory from the online travel agency and ordered Orbitz to stop selling American Airlines tickets and displaying its fares.

Now, Delta‘s getting in on the action.

The airline has yanked its inventory from a handful of smaller online travel agencies, Aviation Week reports, including CheapOair, OneTravel and Bookit as of last Friday. So, if you’re hunting for cheap tickets on these sites, you won’t run into Delta any more. Aviation Week observes that it appears to be “part of a partial shift in its distribution strategy,” and notes that it seems different from American’s move with Orbitz.For Delta, the decision looks like it’s part of an effort to consolidate around larger online travel agencies, while American is targeting agencies directly, rather than using an intermediary to reach another intermediary.

While the means may be different, the objective appears to be the same. With a shift in the economy, airlines have a bolstered position in the marketplace, and this is likely to give them a bit more weight in dealing with online travel agencies and in reaching consumers directly. For American, it seems like a play to reduce costs and increase efficiency – as it is for Delta (though through different means). Ultimately, however, Delta wants more direct action from consumers, which reduces its sales costs and increases profits, which is what differentiates its decision from that of American.

According to a statement by Delta in Aviation Week, “Delta is being more selective in our use of online travel sites in the future as we continually work to improve our online distribution strategy.” The company adds, “We continue to make significant investments in delta.com to make it an industry-leading travel site, and we believe that delta.com will become the preferred online site to book travel on Delta.”

A representative from CheapOair was not available for comment.

I asked Douglas Quinby, Sr. Director, Research, at travel industry research firm PhoCusWright, his thoughts on Delta’s decision, and his reply was pretty striaghtforward: “The only surprising thing about this move is that it has taken this long.” He explained, “U.S. airlines have impressively restrained their appetite for growth (i.e. capacity) on the back of a (more or less) recovering economy. With clear control of their inventory, airlines have already started rationalizing distribution, and the weakest links are first to get snipped. American may have jumped the gun a bit with Orbitz, but believe me – we ain’t see nothin’ yet!”

So, what’s the net effect of all this? Do the actions of Delta and American suggest that we’ll be paying higher fares in the future because of behavior that doesn’t benefit the consumer? My bet is that the average fare buyer won’t see a whole lot of difference, especially given the share of sales already owned by the airlines via their own websites. The infrequent leisure traveler, especially, is losing an alternative … though it’s one that won’t be as important in a recovering economy.

[photo by boeingdreamscape]

Brand Wars: The Airline Booking Battle Will Be Televised

by Tom Johansmeyer on

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]

Top 10 country brands in the world, Canada hits #1

by Tom Johansmeyer on

Remember when you could make all those “two thirds” jokes about Canada? Based on the currency, there were so many ways we could tweak our northern neighbors. Then, the U.S. dollar plunged. I remember being in Quebec and seeing parity between the two dollars for the first time in October 2007. Well, the momentum has continued, and it’s not just about money. It seems as though Canada’s brand is stronger than ours now.

According to FutureBrand’s Country Brand Index, the United States isn’t looking so good these days. From 2009, we fell down to the #4 spot, from the #1 position. Meanwhile, Canada worked its way from #2 last year to the top of the heap in 2010.

USA Today reports that the United States reached #1 last year because of the “Obama effect,” with the prospect of “hope” and “change” making us look promising. A year later, the prospect doesn’t burn as bright, and it’s reflected in the FutureBrand rankings.

It could have been worse: we could’ve wound up joining Zimbabwe, Iran and Pakistan at the bottom of the heap.

See the full top 10 list below:
1. Canada
2. Australia
3. New Zealand
4. United States
5. Switzerland
6. Japan
7. France
8. Finland
9. United Kingdom
10. Sweden

The brand rankings are based on a survey of 3,400 business and leisure travelers from five continents, not to mention “expert focus groups, on their image associations of various countries in five categories, including tourism appeal, quality of life and value systems,” USA Today reports.

[photo by ankakay via Flickr]

Istanbul’s Grand Bazaar to undergo $100 million renovation

by Meg Nesterov on


One of Istanbul‘s most popular tourist destinations is getting a long-overdue makeover. The 550-year old Grand Bazaar is about to be infused with 140 million Turkish Lira (about $100 million USD) to renovate and update the covered market. Once plans are approved next month, work will begin at night to avoid disrupting day trade. The Grand Bazaar is over 45,000 square meters with nearly 3,600 shops selling everything from handmade rugs to gold jewelry to Turkish water pipes and was last renovated in 1894 after a major earthquake.

In addition to restoring the original features of the market, modernizing electrical work, the refurbishment aims to bring in more high-end Turkish and international brands to appeal to more local shoppers. While the bazaar currently sees about 500,000 visitors daily, only about 30% are local and name brands may attract more locals than tourist souvenir stalls. According to local newspaper Hurriyet Daily News, interested retailers include luxury goods label Vakko and supermarket chain Migros. With the Council of Monuments reviewing and approving plans, it is hoped that the Grand Bazaar will retain its heritage and avoid becoming another generic shopping mall. Regardless of new additions, locals and visitors can agree that cutting down on the large amount of stalls selling Made-in-China swag and “genuine” fake Gucci bags to make room for more traditional artisans could help preserve the unique landmark.

SkyMall Monday: Branding Irons

by Mike Barish on

I lost my meat today. It’s gone. Don’t mourn its loss. No, this is no time for sorrow. When a man’s meat is pilfered by a no-good poacher, well, that there’s a time for revenge. Time spent cryin’ is time spent dyin’. That’s what my grandpappy used to say. He was shot in the head while cryin’. Damn shame. But back to my meat. I reckon my neighbor done gone and pilfered it. I can’t be having meat just up and disappearin’ from the SkyMall Monday headquarters ranch. I’m gonna up and get me a posse and we’re gonna show that varmint a thing or two about manners. You can’t take a man’s meat and not expect consequences. He has my meat and that meat will be my meat again by sundown tomorrow. He’ll see that when you mess with a man’s meat, you mess with his biggest organ. I’m talking, of course, about his soul. That’s the heart of a man’s meat. Wait, what was I talking about? Oh, right, my missing meat. Yeah, I can’t have my neighbor thinking he can just take my meat and claim it as his meat. So, from now on, I’m going to make sure that every man, woman and child knows that my meat belongs to me and me alone. How am I gonna do that? Ha, I’m a rascally cowpoke. I went down to the general store SkyMall catalog and purchased me one of them there customized Branding Irons.You see, if you don’t put your name on your meat, then any man can go ahead and call it his meat. That’s meat anarchy. My pa moved the family out here when I was just a wee one so that we could have a better life. If he knew that people were just snatchin’ up meat like it was a whore at the saloon, well, he’d probably just up and get himself a whore at the saloon. And then he’d brand her with these branding irons. And then he’d eat a steak. I miss pappy.

And if you think that I’m just some crazy fella who’s ramblin’ on about meat and whores, well, then you have another thing comin’. You see, those rootin’ tootin’ snake oil salesmen over at that there SkyMall catalog have a thing or two to say about these branding irons. Go on and take a look-see:

Create a personalized iron to brand your steaks, chicken and burgers and show your guests the pride you take in being a great chef!

Pride. That’s a word my grandpappy’s pappy took seriously. He used to brand everything he owned. And he was damned proud of it. I know because my grandpappy had a brand on his backside that says, “My pappy’s proud of me.” And my pappy has a brand on his keister that reads, “Proud Parent of a Vanderbilt Elementary School Honor Student.” Yeah, I was real good at the book learnin’. I’m proud of that. That’s why I branded my Trapper Keeper.

Well, I reckon I best be moseying along now. I have some meat to brand and some whores errands to do. But you remember what I said today, partner: Keep your damn hands off my meat!

Check out all of the previous SkyMall Monday posts HERE.