Archive for February, 2006
It is really no surprise that Web travel bookings cut out middlemen. After all the web is all about reducing friction and making markets more transparent. The online travel agencies were the first to offer web based purchasing options for travel services, way before suppliers even had websites. This was followed by what can now be considered an unusual period of after the collapse of the dot.com bubble and 9/11 when travel declined. This made suppliers even more reliant on the online travel agency intermediaries to produce large amounts of business for them. This is when the merchant model was predominant. In the meantime the pendulum has shifted back to more supplier power.
This shift, combined with technologies that enable suppliers to sell complementary services to their own, i.e. airlines selling hotel rooms, hotels selling airline tickets and both selling car rentals, lead to the market share decline by intermediaries selling those same services.
The way forward, and this runs like a thread throughout many of these postings, requires intermediaries to offer added value and a move away from selling commodity products to bundled offerings at competitive prices. Only a true one-stop shopping experience for the entire vacation product will keep them profitably in the game.Read Full Post | Make a Comment ( None so far )
This makes a lot of sense in view of my previous posting today. An improved planning and purchasing experience can only be achieved by a better website performance which will require investment in new technology, especially for true dynamic packaging. This in turn will allow online travel agencies to improve their margins.Read Full Post | Make a Comment ( None so far )
Piper Jaffray cut the price target on the online travel agency to $23 from $26.
To anyone who has followed the online travel market for a few years this is not a surprising development. As I’ve commented previously, Expedia and it’s online agency competitors are intermediaries in the industry, an industry that has becom increasingly transparent ever since these companies revolutionized the way travel – primarily airline tickets – are sold to the public. Selling these components in large volume has been the low hanging fruit, especially in the post bubble and 9/11 world when travel suppliers depended on this new channel to a great extent to produce business, any business, even at less profit.
Now things have changed, especially in the past year or so, with the introduction of meta search companies that speed up the commoditization trend. What has been even more of a threat, however, is the supplier efforts to sell their own products directly and not only their own but complementary services as simple packages.
Today the market has shifted and every supplier can be his own packager. The technology exists and brand loyal customers, who treasure the perks they receive from their favorite suppliers are increasingly inclined to buy from these suppliers, especially if these perks are no longer extended if the customer buys the same service from an intermediary.
How to keep those customers from deserting, online travel intermediaries have to move from a pure price focus to market added value and a compelling, easy one stop travel shopping experience. This will have to go beyond today’s mostly still pre-packaged products to true tailor made ones, self-assembled by an increasingly savvy traveler. To achieve this, the customer shopping experience has to improve vastly over the one still prevalent today. The technology investments will be sizeable and the challenges to overcome considerable but there seems to exist no viable alternative. The overseas expansion into Europe and Asia can only be a stop gap measure, until the same developments as are happening in North America will happen there a few years down the road.
How’s that old song title again "Only the strong survive" – and in the online travel world you might add "smart" and "nimble" as well. There will be winners, the question remains, who will they be, today’s major online players, the recently awakened traditional operators who are rapidly moving online, at least in Europe, or even some new unheard of players.Read Full Post | Make a Comment ( None so far )
Long-haul tour operator Kuoni has unveiled the first stage of a dynamic packaging function on its website, covering USA and Canada, with other regions expected to follow in the coming weeks.
Great to see a leading tour operator starting this effort and embrace the idea of giving customers control over their total trip planning, beyond just picking different flights and maybe an add-on sightseeing or dinner, but truly let customers design their trip.
It will be interesting to see how this initiative develops and how high the market acceptance will be. My guess is that more and more companies will introduce this type of true dynamic packaging in future.Read Full Post | Make a Comment ( 1 so far )