Disintermediation is alive!
These disappointing results prove that there remains a lot of truth in the fact that intermediaries are being squeezed and the only way out is through added value. This maxim remains as true as ever and applies to the mom and pop travel agent as well as for the giants in the online travel space. They have been able to pick the low hanging fruit for quite some time now but that period is rapidly coming to an end and Web 2.0 tools are only accelerating the pace.
Loyalty programs are a short term solution as they will become commoditized themselves when all the players will have one. The key is to move the customer away from focusing on price to focusing on the buying experience and the overall value of the trip.
How do you add value to somebody looking for a cheap deal to Cancun? It’s tough and the margins are razor thin, loyalty nearly non-existant.
There are various ways out of this downward spiral. One, try to become the booking engine for Cancun and be exposed to travelers when they are researching their options. That increasingly happens on DMO websites. I’ve long claimed that they are sitting on a gold mine they’re not exploiting enough.
Another is to invest in technology and move upstream to offer what is so nicely called "complex travel". Complex indeed, try booking a five city trip to Europe or Asia the way you want it put together on one website today – good luck! But that’s where the margins are, at least for the time being. Most of these trips are still booked off-line through travel agents and tour operators.
That’s truly dynamic, customer centric, packaging and it will become a necessity for the online travel intermediaries if they want to stay in business and grow profitably. It’s not in selling single destination packages those can be cobbled together by the online shopper on supplier sites.
The low hanging fruit has been picked, move up the value tree and do it soon……