The rules of the game are changing…..

Posted on August 8, 2005. Filed under: Uncategorized |

Expedia spinoff comes at tough time for sector.

The online travel game got harder. Especially for Expedia. Not only is the company under pressure by airlines and hotels to lower its fees, it is also loosing market share to Travelocity and Priceline as it cuts advertising expenses to maintain profitability.

Looks very much like the low hanging fruit has been picked! Online travel intermediaries will have to add much more value if they want to compete against the resurging suppliers who add more and more features to their own websites, including selling their brand loyal customers the entire trip package with the components complementing their own, all on their sites. Added value and customer service will be essential features, rather than just the lowest price for individual components that are by and large commodities. The darlings of the online travel talking heads – meta search companies – have had the effect of bringing total transparency much to the regret of many players. A lead is useful sure, but is it useful if the transaction results in a loss?

So, it’s back to the issue of how to maintain a margin and pricing integrity.

The next step will most likely be in the area of truly customer focused, dynamic packaging. Offering an often frustrated online travel shopper a compelling, user friendly one-stop shopping experience will be worth a certain premium to a growing number of such savvy travelers. For this convenience they’ll be willing to make that trade off. At last, online travel will be about more than price only. It will resemble more the off-line world where a large number of travelers depended on travel agents and tour operators. Combining some of those skills with smart new technology will be the future. I think it will be an exciting one, with profits to be made for the added value and service providers in the market.

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