23 Musings

I've blogged a couple of times recently (here and here) about declining levels of customer satisfaction with online travel websites. Now another survey reports their declining further.

Detail is here at Hotelmarketing.com but in a nutshell this seems to suggest that the old model of 'booking engine only' websites is losing favour as users want a richer, more immersive and customer focused experience rather than simply a one size fits all approach to buying travel online.

The online travel industry has dropped 1.3% as a whole, Expedia lost 3.8% and now scores 75 (the highest).

The next generation of travel websites can't be far away, hopefully the advances in technology will allow customer satisfaction to be dramatically improved through the use of advanced usability techniques, customer profiling and tools which enable rather than just sell, sell, sell.

News here from ZDNet that some of the largest online travel agencies in the U.S. may shift their focus abroad in order to keep growing their business. Chief execs at Priceline, Orbitz and Expedia all said at a summit this week that they would be focusing on emerging markets in an aim to capture as much of those markets as possible.

Asia-Pacific seems to be the particular focus but there is still work to be done in Europe by some of these large players. Orbitz, Priceline and others such as Travelocity do not have the profile in Europe that Expedia have built up. I'd expect to see some more aggressive tactics over here from companies like them.

This could make it an even tougher year from domestic players especially with the economic climate in the U.S If the Americans stop spending I'd expect them to put their efforts into regions which are not so economically challenged.

Good article from Reuters here talking to Expedia CEO Dara Khosrowshahi about the prospects the current economic climate presents to the online travel agent.

It's yet to show whether it will bite in the UK. Apparently more people than ever have booked their holidays in January (here and here from Travel Weekly). They believe 16% of people who plan to travel this year will have already booked in January. The fear among travel companies must be that if the economic conditions really bite we may not see all the rest of the 84% book as their plans may change as they reign in spending.

Time for some innovative marketing and aggressive pricing policies to make as much of the profits as you can before anything worsens perhaps?

Reuters have been holding a Travel & Leisure Summit in Los Angeles and this was one of the topics of conversation. The main answer seemed to be that deals will be key!

While consumers may tighten their belts, hoteliers may give better rates to online travel agencies as they will be more eager to fill their rooms. This should really benefit the large online agents such as Priceline, Expedia, Orbitz etc.

While a recession could erode demand generally it can also have the opposite effect in the activity of bargain and deal hunters as more people hunt for something affordable. This could benefit not just the big players but also the price comparison websites as they have access to so many rates they are the obvious place for any bargain hunter to start their search.

Another factor of economic weakness could be airlines who cannot fill all their seats, this should push them to offload unsold stock to online travel agents and may mean that there are some better deals than usual available.

Of course this is all conjecture, at the moment we have no idea how bad an economic downturn could get (wait for the commercial property market to show it's weakness) or how long it could last.

My tip for this year is price comparison websites. They are positioned well as far as price goes for a year of weaker demand and this has to be the year that they finally improve their user experience to a point where they are so easy to find deals that they start to erode market share of slower moving websites (remember, a lot of price comparison sites are technology companies rather than travel). Looking forward to seeing how Kayak, Mobissimo, Travel Supermarket etc get on in this economic climate!

CNN is reporting that some U.S. online travel stocks have been downgraded and as a result many more have dropped in value. Priceline, Orbitz and Expedia have been downgraded by analysts and Travelzoo have underperformed.

It's interesting, makes me wonder if there is more about this than economic shocks in the U.S. I'd hazard a guess that they are beginning to suffer to price comparison sites and more technologically adept traditional players.

The growth these online agents experienced a few years ago had to slow eventually and it looks like the market is displeased. Expect Expedia to do best as they now have the media angle with Tripadvisor advertising revenues to take into account.

According to the latest J D Power survey anyway...

The industry as a whole has slipped in their rankings from a score of 810 out of 1000 down to 802. Not a massive slip but in these days of advanced internet applications we should be trying to raise that figure significantly.

Hotwire, Travelocity and Expedia have all done very well. Other findings include:

• The accuracy of reservations made on independent travel websites has improved slightly since 2006. In 2007, 95% of reservations were reported as error-free, compared with 94% in the previous year.
• The study also finds that nearly one-half (49%) of all travel-related reservations in 2007 were booked on the web, an increase from 46% in 2005.
• Across the industry, independent travel websites overall receive their lowest marks for appearance/design of website.
• Generation X and Y travelers are more likely to book a reservation on price-focused websites, such as Priceline.com and Hotwire.com, compared with Baby Boomers and Pre-Boomers.
  

Here's the list of results:

What this says to me is that:

1. Consumers expect a much better experience than travel sites can provide currently. Their expectations are advancing quicker than we can develop new online experiences for them.
2. OTA's are spending so much on advertising and product that they are not advancing technically at the rates they used to be. OTA's used to be some of the most advanced websites around, no more I'm afraid.
3. Usability is not being embraced by the travel industry. This needs to happen and fast!

I would love to see if satisfaction has improved with other types of online travel players such as hotel brands and tour operators. My gut feel is that this result is another sign of the consumer shift to doing it themselves and away from online travel agents. Also a sign of the increasing sophistication of the historically lacking tour operators.

I blogged yesterday about the PwC report on travel distribution and how suppliers such as airlines and hotels are gaining market share back from the large online travel agencies. I know have a link to the report which I thought I'd share.

Pleasing to me is the fact that the first graph in the report shows tour operators also growing share slightly (as I mentioned yesterday). I believe that share will grow further in the next two years as tour operators play technology catch up and decommission old reservation systems and legacy problems.


The pressures' on for the online travel agencies! Expedia, Opodo watch out! Not that I think aby tour operator is going to seriously compete with them on scale but we could definitely make things difficult for them in some destinations and niche areas.

A PricewaterhouseCoopers report is confirming what I had surmised many months ago. Online travel agencies (the likes of Expedia and Opodo) are beginning to lose business in favour of the customers booking direct with suppliers.

They say that online travel agencies are losing their competitive edge and now that suppliers of travel products are maturing in their use of the internet it's not all going their way anymore.

This has been coming for a while. The agencies have got so powerful that they've let their fingers off the pulse. Airlines and hotel chains are engaging online marketers themselves instead of purely relying on the distribution channels they used to use. They now control their own inventory and therefore their own destiny (and profits).

Loyalty schemes have a lot to do with this. Airline frequent flyer points are a massive draw and encourage direct booking, hotels now have similar schemes and the online travel agents can't replicate these.

This trend is only going to continue unless the aggregators work out new ways to add value for customers.

The other issue which the report doesn't mention is the impact tour operators may be having on the online travel agencies. Tour operators are getting more web savvy too, employing better quality people and better quality tactics to position their offering more effectively online. As tour operators websites improve and product offerings get more dynamic (through the introduction of new reservation systems, something that is going on at many tour ops) the online travel agencies are going to lose further ground.

Compete.com have released some stats listing the top 50 website domains by unique visitors on their blog today. It makes for some interesting reading:
Yahoo is still the biggest domain in terms of unique users. Not surprising given their huge coverage, surely they have to come up with a way to make a success of all these eyeballs? They may lose out in search to Google but with such a vast web real estate finding a way to leverage that is key for them. Google however coming second is amazing considering their core is still search!

Facebook at number 21 is a bit of a surprise, I'd assumed they'd be higher given the buzz but perhaps they'll position much higher next year (if their bubble doesn't burst).

The growth figures in the blog post are most intersting, showing sites such as YouTube, Flickr and Digg as some of the biggest gainers (bigger even than Facebook). This certainly is the time of sharing content, something Facebook has yet to get right (they started off well but it's lately disolved into MySpace'esque profile vanity).

Adult dating still a major growth area it would seem; the person who launches a Facebook for this domain will win big!

Of the losers, most intersting for me is the losses experienced by Expedia. This can only be down to the emergence of much better sites that give users more intuitive ways to search for flight & hotel availability. Online travel is much more competitive in that arena this year and with the move from tour operators to embrace dynamic packaging I can only see Expedia losing more eyeballs if they don't make some significant functionality changes soon.

So online travel is motoring along as ever. Sales are rising and the number of participant websites is growing all the time. However, in the U.S. the word (courtesy the NY Times) is that 9 percent fewer people booked travel online this year than in 2005. This has come from a Forrester research survey of 60,000 U.S. web users. It is the first time since Forrester began tracking Internet spending a decade ago that a category (in this case online travel) has lost shoppers.

Another survey (results coming soon) from PhoCusWright shows that the percentage of travel shoppers booking online has dipped while the percentage booking offline has risen.

Is this something to be concerned about? Maybe. There's a few reasons this could be happening. Perhaps customers are looking to book more and more complex trips, and therefore aren't booking online as they feel the confidence instilled by a travel agent is necessary before parting with money for an adventurous trip. Or perhaps users are beginning to backlash against the standard online travel functionalities that haven't changed much in the last ten years.

Henry Harteveldt, Forrester’s online travel analyst says “Customers are tired of spending two or three hours trying to find the airline or hotel or vacation package that meets their needs.” He says (like I do) that sites need to step away from asking for specifics in order to complete a search. He says “Nowhere can you say, ‘I have this amount of money to spend on a trip. These are my interests. This is where I live. Show me my options,’” he said. “Whereas online retailers have done a much better job of improving the shopping experience in recent years, the travel industry has been standing still.”

The NY Times article goes on to discuss the lack of innovation that is due to outdated reservation systems and mentions the Travelocity Road Trip Wizard I discussed earlier. Yes, lack of functionality in reservation systems is a major issue, also the technological complexity of querying multiple bed banks and GDS' makes user intuitive searching almost impossible to create.

So, who is going to be in a position to benefit from this trend of user/customer decline? It could be the tour operators. Many of them are in the process of upgrading their systems to new dynamic package capable ones which will interface much better with intelligent search functionality. Also, they don't need to query the bed banks as often as they have contracted bed stock so can cache availability and present it in a much more usability focussed manner than the likes of Expedia with their multi-connections to other suppliers. Of course the only problem is the lack of innovation generally at tour operators and also the desire they seem to have to become the next Expedia. That's not the way forwards anymore. Rather than trying to emulate the online travel agents, tour operators should be trying to become the next big thing.

Travelocity have a new tool in their beta area, the Travelocity ExperienceFinder.

This new way to find a holiday is basically quite similar to the Expedia Inspirator and Inspiriscope tools I took a look at earlier. It allows you to choose a destination and theme and then presents you with ideas that suit your holiday. It's a Flash based app, and looks great. You can add items to your wish list which builds up like a nice shopping basket, only of course it's not a shopping basket...

This is where this type of functionality becomes useless to me. Yes I can make informed decisions on what products to add to my wish list, yes they will help me by segmenting the product by theme and yes it looks pretty funky. But (and it's a big but) what about booking? I can only book each item on it's own, I can't bundle the wish list up and book the lot which is really annoying!

I guess Travelocity don't have true dynamic packaging technology (which amazes me given the Lastminute.com pedigree) otherwise they would allow this bundling. So this still leaves me waiting for my perfect travel inspirer...

I got a bit confused when I hit the Expedia homepage this morning...

I don't visit Expedia very often, I usually find better prices elsewhere and book my flights on industry rates so don't find a great deal of use for the online travel agent. However, it is a great site and one which all in online travel could learn something from. They merchandise products like no-one else and have some great usability features that make it easy to find good prices and products.

Over a year ago they built the Inspirator, a tool which allowed users a more human friendly way to get some inspiration into their holiday research process. It allowed users to choose two themes (eg. romantic, beaches, nightlife) and then choose a desired type of weather (warm, hot or 'I don't mind) and then how far they want to fly and where from. The Inspirator then presents the user with some information on matching destinations along with some relevant offers. It's not the most inspiring piece of functionality and anyone with a good command of a Google search will find they can research better there, but for the majority of web users it serves a good purpose.

Now, Expedia have launched another take on this kind of guided navigation/research, the Inspiroscope. The Inspiroscope is similar but it's basically a homage to Web 2.0, travel style. This is essentially a tag cloud presented in Flash format which users can click on a word from and be presented with five matching destinations. It works, it looks quite nice and again, for someone not proficient in using the internet or really inexperienced at travel it's probably fine. But for anyone more experienced it's really limiting! Google presents far better results if you have any skill in web searching at all, or maybe try Tripadvisor...

Maybe I'm being a little harsh, theses types of functionality serve a purpose for Expedia. They're more engaging than a normal availability search, provide insight into destinations and are a value add for users. They also provide opportunities to build the brand and engage users while acquiring new CRM opportunities. So it's not all bad!

They could be done better though! For example, merge this functionality with Opodo's Escape Map and you make it even more engaging, allow users to explore as well as guiding them and you will engage them further. Link the results to Google Earth to allow users to view the area more closely. Allow users to add in restrictions on price & dates and they become much more valuable. Integrate hotel ratings and allow the process to proceed beyond the destinations to the selection of a property and you will really turn these tools into conversion enhancers (rather than just nice features).

As an aside, it's been brought to my attention that Expedia and Opodo have left some of this functionality rather open. Expedia have left access open to an XML file which contains all the tag words in their Inspiroscope and also contains the number of votes for each word. Great if you want to get an idea of how to tag your own content... Opodo meanwhile have left a backdoor in their Escape Map which allows users to pass a query string which will return XML data of the offers that can be displayed on the map. Great for anybody wanting to scrape a load of offers from their site (or compare prices)...

Edit: To link to Alex Bainbridge's original article...

Or you might end up on Watchdog!

Expedia has just found this out by appearing in the first slot on the BBC's Watchdog consumer issues programme last night. They were being taken to task for poor customer service with a number of damning examples being brought to light.

The excuse? “It’s frequent practice for hotels and airlines to overbook to allow for people not showing up (‘no shows’), cancellations and early departures.” Now that's not the brightest excuse in the world is it? Best to swallow your pride Expedia and apologise and say you will make up for your short comings.

As much as the excuse may be true, it's never a good idea to blame an industry issue for consumer problems. It means nothing to the customer and they believe they should be protected from this by the company they are purchasing from.

It will be interesting to see if this results in some sort of backlash for a short time (lower traffic, conversion or bookings) for Expedia or any of the other online travel agents.