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]

Business travelers want mobile, Expedia picks up Mobiata

by Tom Johansmeyer on

I guess Expedia is watching the market. The online travel agency just snapped up mobile travel application developer Mobiata. Mobiata’s claim to fame is FlightTrack, and the other apps in its portfolio include TripDeck, HotelPal, FlightBoard and FareCompare. For Expedia, it was a no-brainer, as 4 percent of its traffic is coming from devices, a number the company would like to kick a bit higher, according to TechCrunch.

Beyond the fact that it gets more reach and better footing in the mobile space, Expedia’s Mobiata acquisition is interesting in light of a recent Deloitte survey. Business travelers are increasingly turning to their smartphones to research and book travel. The global professional services firm reported that 63 percent of business travelers earning more than $150,000 a year have web-enabled smartphones. Twenty-six percent of survey respondents, Deloitte said, have even downloaded hotel apps to these devices.

Given this trend in business travel, an important market for the travel industry, Expedia’s pickup makes good sense. The big question: who’s next?

[photo by Ed Yourdon via Flickr]

Taxes could make discounted hotels more expensive

by Tom Johansmeyer on

If your next hotel stay is more expensive than you expected, blame the government. State and local governments, still reeling from the recession, are looking for any source of revenue they can grab. And, they’re next target seems to be online travel agencies.

Online booking sites, such as Expedia and Orbitz, negotiate a rate with hotels for available inventory, market it up a bit and pass it along to the travel-buying public. The business model is pretty straightforward. The problem comes down to which room rate should be used to calculate state and local occupancy taxes. At least 40 lawsuits have been filed over the issue, as local governments have rewritten ordinances to try to add a bit more to the coffers.

There’s a lot at stake, according to a USA Today report. Approximately $1 billion a year is perceived to be lost by state and local governments.

Yet, is it really lost? The online travel agencies are paying the hotels, and according to Andrew Weinstein, spokesman for the Interactive Travel Services Association:

“Occupancy taxes are based on the rate the hotel sets and receives,” he says, “not the profits, fees or commissions of its partners. … The facilitation fees are no more part of the hotel rate than the taxi that takes the guest from the airport or the tip they give the bellhop.”

How do you feel about this issue? Leave a comment to let us know if it’s what the hotel gets or what the occupant pays that should matter for tax purposes.

[photo by Howdy, I’m H. Michael Karshis via Flickr]

Online travel research made simple on Wanderfly.com

by McLean Robbins on

With so many travel review sites available, it’s often overwhelming to sort through published material about a property or destination. We’ve recently discovered Wanderfly.com, launched out of beta earlier this week. The site promises to provide travel recommendations targeted to budget, date and interest in as few as five clicks.

“On average, travelers spend 7 weeks visiting 25 sites* before they know exactly what they want, yet there’s no easy way for them to get inspired online,” said Evan Schneyer, CEO and co-founder. “Travel itself is such an inspiration, and we believe the fun should start from the very moment you decide to go.”

Wanderfly’s interface begins just how a person would when planning a trip: how much can I spend, when can I go, and what do I like to do? The site offers themes, from food and culture to eco-friendly and nightlife.

Wanderfly searches over 20+ sites, including Expedia, Foursquare, Yelp and Lonely Planet, to recommend a destination, flight, hotel and activities. Travelers may customize these options and book, or flip to the next suggested trip. They may also connect through Facebook to locate friends in any of the destinations.

One of our favorite features of the site is that specifiying a destination isn’t required – one can search within a specific region and use the type of trip they’d like to take to narrow down a location. The site is relatively easy to use, and the functionality of searching through trusted brands like Lonely Planet makes us feel more comfortable with the booking process.

The site has launched with information abou1,200 global destinations and taps into social networking through Facebook to further increase usablity. The site is currently at work on an iPad app and plans to soon offer concierge packages, restaurant reservations, travel products and event tickets. In addition, Wanderfly plans to add more user-generated content, group-planning tools and a widget for outside travel parties to integrate into their sites.

Wanderfly.com travel-planning site launches in beta

by Meg Nesterov on


A new travel-planning website and booking engine is launching this month in beta, and I was excited to give it a test run, having first heard about the site this spring at a EuroCheapo travel happy hour. Wanderfly.com is a “personalized recommendation engine” that takes your interests, budget, and even social network connections to give you inspiration and help you plan your next vacation. Flights and hotels are pulled from Expedia, with restaurant recommendations, activities, and sightseeing descriptions culled from Lonely Planet, FourSquare, NileGuide, and Yelp.

Let’s say you have a week to travel in early September for Labor Day. Budget is under $1,000 per person for flights and hotels, and you’re interested in culture, beaches, and food. Plug all those into the search engine and you’ll get a series of destinations to review, refine, share, and book. While the site still has a few bugs (budget busters would sneak through the filters, the help feature is not fully enabled), the interface is slick and user-friendly, the features are thoughtful, and the content is reliable.

What’s cool about the site:

  • Since I’m currently based in Turkey, I loved that your point of origin could be pretty much anywhere in the world so I could run searches from New York and Istanbul to get a wide variety of places convenient for different parts of the world.
  • A wide (1,200 and growing) network of destinations gave me some ideas I’d never considered or even heard of (Kalingrad, Russia; Azemmour, Morocco; Krabi, Thailand), as well as some more tried-and-true vacation spots(Sunny Isles Beach, Florida; Mykonos, Greece; Split, Croatia).
  • Weather and news tabs give you an idea of the current climate (could be too hot on that Egyptian beach) and happenings, though you might come up with nothing for more obscure destinations. I also love that many of the news feeds are through Twitter accounts like @visitbritain, giving up-to-the-minute quickie items.

What will be cool about the site:

  • Ability to share trip ideas and plans with friends via email or Facebook is great for planning a trip with multiple people or getting feedback on a destination. Currently, Facebook Connect will tell you who you know in a given place, but I’d probably remember if I had a friend in Lutsk, Ukraine.
  • Festivals and special events come up via Eventful, but on the beta site event dates will pop up well after your search range so don’t plan around that blues festival just yet. There are also plans to add destination reviews, currency converters, and travel tips.
  • After all the searching, sorting, and sharing, you can actually book through the site, though only if you have a US credit card. The booking interface is also easy to use and gives options for frequent flier numbers, seat and meal preferences, and room types.

All in all, Wanderfly is a nifty new tool for dreaming and planning your next trip. If they could find a way to integrate time-sensitive deals, local blogs, and multiple-destination trips, this could be the only travel site you need.