European Online Travel
Agencies:
Success Strategies for Today and
Tomorrow
Sponsored by:
Written by Carroll Rheem
Edited by Lorraine Sileo
P
M
European Online Travel Agencies: Success Strategies for Today and Tomorrow
Author: Carroll Rheem
Editor: Lorraine Sileo
Carroll Rheem
Director, Research
PhoCusWright, Inc.
Ms. Rheem contributes in-depth market reports, survey
findings, and analysis for PhoCusWright’s Global
and European Edition Research Subscription, Special
Reports and custom client needs in her role as director,
research. As the author of PhoCusWright’s Consumer
Travel Report and Going Green: The Business Impact of
Environmental Awareness onTravel, one of her core areas
of focus is consumer research. Carroll also leverages
her experience in hotel distribution for publications
including PhoCusWright’s U.S. Online Travel Overview,
and oversees content for the PhoCusWright Research
Subscription: European Edition. Prior to joining the team,
Carroll spent six years working for Starwood Hotels and
Resorts Worldwide in various positions encompassing
hotel operations, sales and global online distribution.
She holds a Master of Management in Hospitality from
Cornell University and a BA in Economics from New York
University.
June 2009
Philip C. Wolf
President and CEO
Carol Hutzelman
Senior Vice President
Christine Lent
Vice President, Finance
and Administration
Bruce Rosard
Vice President, Sales
and Marketing
Lorraine Sileo
Vice President, Research
All PhoCusWright Inc. publications are protected by copyright. It is illegal under U.S. federal law
(17USC101 et seq.) to copy, fax or electronically distribute copyrighted material beyond the parameters
of the Licence or outside of your organisation without explicit permission.
©2009 PhoCusWright Inc. All Rights Reserved
2
European Online Travel Agencies: Success Strategies for Today and Tomorrow
June 2009
Table of Contents
Contents
Section One: (Italian)
Key Findings, Overview
and Methodology
Section Two:
European Market
Overview Section Three:
Travel Component
Dynamics Section Four:
Shopping and Purchase
Channel Trends
Section Five:
Marketing Trends
Conclusion:
Strategies Shaping the
Future Success of
Online Travel Agencies
©2009 PhoCusWright Inc. All Rights Reserved
List of Figures
4
6
9
13
17
19
Figure 1
Online Travel Agency and Supplier Web Site Share of
Online Leisure/Unmanaged Business Travel Market Gross
Bookings, 2008*
6
Figure 2
Top Five Pan-European Online Travel Agencies,
Market Shares, 2007
7
Figure 2a
European Online Travel Agencies Estimated Gross
Bookings and Share (€M), 2006-2007
8
Figure 3
Share of Total Leisure Travel Expenditure by Component
9
Figure 4
Leisure Travel Destination Regional Distribution,
by Country
10
Figure 5
Usual Shopping and Purchase Methods
13
Figure 6
Primary Reason for Choosing Usual Purchase Channel
14
Figure 7
Incidence of Shopping for Travel from an Online Travel
Agency but Purchasing Elsewhere, by Country
15
Figure 8
Social Media
17
Figure 9
Social Media
18
3
European Online Travel Agencies: Success Strategies for Today and Tomorrow
June 2009
Sezione 1: Risultati, Sintesi e Metodologia della Ricerca
Risultati della Ricerca
• Si stima che nel 2008 le agenzie di
viaggi online (OTA) abbiano prodotto
prenotazioni lorde per un importo pari a
21 miliardi di euro, che rappresentano il
31% del mercato dei viaggi leisure e del
business travel non gestito.
• Le agenzie OTA si stanno concentrando
sui prezzi per dei buoni motivi. Alla
domanda posta ai consumatori sul
perchè scegliessero un canale di acquisto
piuttosto che un altro, per il 40% dei casi
la risposta è stata: il prezzo.
• Per le OTA europee, uno dei problemi
principali da affrontare nelle strategie
del prodotto ‘Voli’, è l’accesso ai
contenuti. Molte agenzie OTA applicano
una strategia basata sull’utilizzo di
più fonti di informazione, al fine di
arginare uno dei maggiori rischi a cui
sono esposte, cioè quello di lavorare
con più content provider e aggregator
o di dover utilizzare un’interfaccia XML
per incorporare i prodotti relativi ai voli
charter. Molte agenzie OTA introducono
prodotti aggiuntivi (quali attività a
destinazione, pacchetti leisure e opzioni
di servizi assicurativi) per arricchire la
loro offerta di contenuti.
• Molte agenzie OTA stanno attualmente
testando prodotti multimediali con
l’obiettivo di incrementare i profitti.
Pur restando incerta la sopravvivenza
dei vari programmi multimediali, nei
prossimi anni l’industria assisterà ad
un gran numero di sperimentazioni,
alimentate dalla volontà delle agenzia
OTA di ottimizzare i profitti del loro
traffico.
• Le agenzie OTA rappresentano con il
15%, il quarto canale di shopping più
popolare, secondo quanto rilevato dallo
studio di PhoCusWright sulle tendenze
dei travel consumer in Europa. Molte
di esse si sono adattate alla mentalità
multicanale dei viaggiatori europei,
offrendo ai propri clienti diverse modalità
di interazione e fornendo, in alcuni casi,
addirittura una sede fisica.
©2009 PhoCusWright Inc. All Rights Reserved
• Le agenzie online in Europa stanno
attualmente adottando una vasta
gamma di strategie per meglio
posizionarsi nel mercato. Tali strategie
includono la diversificazione dei punti
vendita, lo sviluppo di applicazioni
mobili, l’espansione di mercato e nuove
partnership con aziende di metaricerca.
4
European Online Travel Agencies: Success Strategies for Today and Tomorrow
Sintesi della Ricerca
Metodologia
Sono trascorsi 10 anni da quando le
aziende in Europa iniziavano a sfruttare il
potere di Internet per la vendita di viaggi.
Sono cambiate molte cose da allora, ma le
sfide sono le stesse. Le agenzie online in
Europa sono spinte ad introdurre sempre
nuovi prodotti e funzionalità per offrire ai
clienti nuove modalità di programmazione
e di acquisto di viaggi. Nel frattempo, esse
devono esplorare nuove possibilità per
competere con i network di distribuzione
tradizionali, quali grandi agenzie al dettaglio
e tour operator, e di fronteggiare gli sforzi di
disintermediazione di fornitori e di aziende
di metaricerca emergenti.
PA maggio di quest’anno, PhoCusWright ha
condotto una serie di interviste con diversi
dirigenti di alcune tra le più grandi agenzie di
viaggi online in Europa, tra agenzie globali,
regionali e locali. Ai dirigenti sono state
poste domande sugli obiettivi aziendali,
le strategie, i punti di debolezza e gli
investimenti. Per la ricerca, PhoCusWright
ha unito i risultati ottenuti con quelli della
quarta e della quinta edizione (risultati
preliminari) dello Studio sul travel online
in Europa, che offrono una panoramica
generale sull’industria del travel online, per
singolo mercato.
Lo studio dal titolo Le agenzie online in
Europa: strategie di successo per il mercato
di oggi e domani, prende in esame alcune
tra le più importanti tendenze delle agenzie
online in Europa, analizzando le modalità
con cui esse riescono ad affermarsi in un
mercato altamente competitivo. Non tutte
le agenzie OTA seguono le stesse regole,
e nemmeno dovrebbero. Esigenze locali di
mercato, un bacino di utenza fortemente
differenziato e una grande varietà di
prodotti richiedono tutti una strategia
univoca. Basandosi su alcune interviste con
alti dirigenti europei, PhoCusWright prende
in esame una serie di strategie di successo
adottate da piccole e grandi agenzie online,
offrendo una panoramica completa su ciò
che esse riescono a fare per differenziarsi
sul mercato di oggi e di domani.
©2009 PhoCusWright Inc. All Rights Reserved
June 2009
Per fornire una visione completa del
consumatore,
PhocusWright ha inoltre
incluso nella ricerca anche i risultati del
Sondaggio sulle tendenze del travel
consumer nel mercato dei viaggi. Il
sondaggio è stato condotto nel primo
trimestre del 2008 da FieldWorks, con la
partecipazione di un gruppo di esperti di
Research Now, in quattro paesi europei,
Gran Bretagna, Francia, Germania e Spagna,
con una rappresentanza paritaria di 1.630
agenzie online.
I partecipanti al sondaggio hanno inviato
la loro risposta online; ciò dimostra che
essi sono tutti in possesso di un accesso
Internet. Per poter partecipare al sondaggio,
i partecipanti dovevano aver compiuto 18
anni, aver effettuato un viaggio business
o leisure negli ultimi 12 mesi con una
compagnia aerea commerciale, un volo
charter o un’azienda ferroviaria (esclusi i
trasferimenti di routine) e infine dovevano
aver pernottato in un hotel/motel o altra
sistemazione a pagamento (ad es. B&B)
per viaggi leisure effettuati negli ultimi 12
mesi. La durata del sondaggio era di circa 15
minuti; il sondaggio è stato condotto nelle
lingue dei mercati in cui è stato proposto.
iI margine di errore del campione totale è
stato +/- 2.5% (+/- 4.8% per paese).
5
European Online Travel Agencies: Success Strategies for Today and Tomorrow
June 2009
Section Two: European Market Overview
European nations are experiencing the
effects of the global recession at varying
levels. Certain markets were affected quickly
upon the first triggers of the downturn, while
other countries like France and Germany
appear to be on a 3-6 month lag. Preliminary
estimates from PhoCusWright’s European
Online Travel Overview Fifth Edition predict
a decline of 6-9% for 2009 annual gross
bookings for the total European market.
Online channels, however, are expected to
be more resilient in comparison to offline
channels and online penetration is therefore
expected to accelerate slightly in the near
term. Mature online marketplaces like the
U.K. will likely see declines in online travel
for the first time in 2009.
Online travel agencies are estimated to
have reached €21 billion in 2008 gross
bookings through European points of
sale, reflecting 31% share of the online
leisure and unmanaged business travel
market (see Figure 1). The remaining 69% is
generated from supplier branded Web sites.
This relatively high share for supplier Web
sites is driven by the air segment, and lowcost carriers (LCCs) in particular. The OTA/
supplier site dynamic is very different for
hotels – OTAs have a higher share than hotel
Web sites, but due to the low overall online
penetration it has little effect on overall OTA
market share.
Figure 1
Online Travel Agency and Supplier Web Site Share of Online Leisure/Unmanaged Business Travel Market
Gross Bookings, 2008*
31%
Online Travel Agency
Supplier Web sites
69%
*Preliminary estimate
Source: PhoCusWright’s European Online Travel Overview Fifth Edition
©2009 PhoCusWright Inc. All Rights Reserved
6
European Online Travel Agencies: Success Strategies for Today and Tomorrow
As seen in Figure 2a, global and panEuropean OTAs are the market share leaders,
with Priceline’s Booking.com outshining the
growth of its competitors.
Well positioned with its wide selection of
inventory, Booking.com has maintained
an impressive growth trajectory with its
hotel focus despite its competitors’ best
efforts. Expedia’s purchase of Venere in 2008
indicates the online giant is well aware of
the importance of diverse hotel inventory.
Its recently announced incorporation of a
commission model is a clear reflection of its
intent to take Booking.com head on.
June 2009
In 2007 (the most recent year of full actual
results), the top five companies – Expedia,
lastminute.com,
Booking.com,
Opodo
and eBookers – controlled 53% of OTA
bookings. The economies of scale driven by
consolidation are attractive in a fragmented
distribution environment and over time,
leading companies – not necessarily limited
to just these top 5 brands - are expected to
control greater market share. While local
OTAs will continue to operate successfully,
the efficiencies derived from shared
overhead will likely push a good number of
them toward mergers and acquisitions in
the long term.
Given the large number of small players
across Europe, an overall trend toward
consolidation is likely as markets mature
and consumers choose their favourites.
Some younger markets are actually seeing
more players enter the arena, and in some
countries such as France and Italy there are
more than 10 significant OTA players vying
for the customer’s attention.
Figure 2
Top Five Pan-European Online Travel Agencies, Market Shares, 2007
10%
14%
32%
Expedia
Lastminute.com
Booking.com
Opodo
Ebookers
21%
23%
Source: PhoCusWright’s European Online Travel Overview Fourth Edition
©2009 PhoCusWright Inc. All Rights Reserved
7
European Online Travel Agencies: Success Strategies for Today and Tomorrow
June 2009
Figure 2a
European Online Travel Agencies Estimated Gross Bookings and Share (€M), 2006-2007
Brand
Country
Expedia
Gross Bookings (€M)
Market Share (%)
2006
2007
2006
2007
U.S.
2,391
3,085
17.4%
17.2%
Travelocity / lastminute.com
U.S./U.K.
2,107
2,204
15.3%
12.3%
Priceline / Booking.com
U.S./U.K.
1,068
1,973
7.7%
11.0%
Opodo
Spain
1,195
1,300
8.7%
7.3%
Ebookers / Rates to go / HotelClub
U.S./U.K.
773
912
5.6%
5.1%
Go Voyages
France
400
460
2.9%
2.6%
Edreams
Spain
315
407
2.3%
2.3%
Rumbo
Spain
259
320
1.9%
1.8%
HRS
Germany
208
296
1.5%
1.7%
Travel Republic
U.K.
158
292
1.1%
1.6%
Seat24 / SRG (ETI)
Scandinavia
218
280
1.6%
1.6%
Voyage-sncf.fr (excl. rail)
France
220
260
1.6%
1.5%
Venere (Expedia purchased in 2008)
Italy
204
229
1.5%
1.3%
Ab-in-den-Urlaub.de
Germany
120
200
0.9%
1.1%
PartirPasCher (Karavel purchased in 2009)
France
160
180
1.2%
1.0%
Terminal A
Spain
125
176
0.9%
1.0%
Viajar.com
Spain
120
140
0.9%
0.8%
Atrapalo
Spain
100
136
0.7%
0.8%
L'tur
Germany
111
127
0.8%
0.7%
Muchoviaje
Spain
70
98
0.5%
0.5%
VIA Travel (gotogate/zolong/flybillet)
Scandinavia
75
95
0.5%
0.5%
hotel.de
Germany
63
92
0.5%
0.5%
weg.de
Germany
30
91
0.2%
0.5%
Travelchannel
Germany
71
80
0.5%
0.4%
Viajes ECI
Spain
70
80
0.5%
0.4%
Marsans.com
Spain
30
70
0.2%
0.4%
Travelstart
Scandinavia
44
66
0.3%
0.4%
Travelpartner
Scandinavia
38
42
0.3%
0.2%
7,533
9,474
54.7%
52.9%
10,744
13,690
78.1%
76.4%
3,018
4,229
21.9%
23.6%
13,761
17,920
100.0%
100.0%
Pan-European Brands
Total (Brands)
Others
Total
Source: PhoCusWright’s European Online Travel Overview Fourth Edition
©2009 PhoCusWright Inc. All Rights Reserved
8
European Online Travel Agencies: Success Strategies for Today and Tomorrow
June 2009
Section 3: Travel Component Dynamics
European OTAs are characterised by a broad
array of product sets, and many successful
OTAs do not follow the full service formula
of pan-European players like Expedia and
lastminute.com. This section describes the
trends shaping the online distribution of
each of these products, and what types of
initiatives OTAs are focusing on in an effort
to enhance their products and consumer
propositions.
Air Travel
Air Travel Consumer Trends
The majority of European online travel
agencies have incorporated multiple
products into their offering, but some
successful brands have a single product
focus. More commonly, these product
specialists (e.g., Booking.com) focus on
hotel, but some concentrate on air.
While these OTAs have been able to
successfully establish their business model,
the long term outlook of an air only brand is
relatively disadvantaged compared to multiproduct brands.
Figure 3 displays the average amount
spent on various travel components for
a single trip that was randomly selected
by the respondent. Airfare as a single
component represents only 13% of total trip
expenditure – therefore air-only OTAs miss
significant opportunity to capitalise on the
vast majority of consumer expenditure, and
put themselves at risk to lose share to multiproduct competitors.
Figure 3
Share of Total Leisure Travel Expenditure by Component
(Summary of Randomly Selected Individual Trips in 2007)
% of Total
Tour package
34
All other vacation expenses
21
Accommodations / lodging
18
Airfare
13
Other activities, excursions and attractions
9
Car rental / private car hire
3
Cruise
3
Total
101
(N)
1,578
Question: Still thinking about the same pleasure or personal trip you took in 2007, how much did you
spend on (insert)?
Base: Online travellers who have taken at least one holiday or vacation trip in 2007
Note: Totals may not equal 100% due to rounding. British consumer expenditure converted at a rate of
€1.32 = £1.00
Source: The PhoCusWright European Consumer Travel Trends Survey
©2009 PhoCusWright Inc. All Rights Reserved
9
European Online Travel Agencies: Success Strategies for Today and Tomorrow
There are important differences in the
destinations chosen by travellers in various
European countries, which have significant
impact on air travel. As would be expected,
countries with warm weather resort areas
like Spain and France have a higher incidence
of domestic leisure travel (see Figure 4).
English travellers have the highest incidence
of intra-European and extra-European travel,
suggesting that a wide breath of continental
and long haul air product is very important
for OTAs operating in the U.K. It also helps
to explain why global brands have been able
to better establish themselves in the U.K. in
comparison to other European countries beyond any cultural similarities to the U.S.,
global reach provides an advantage.
June 2009
Spanish travellers represent the opposite
end of the spectrum, having the lowest
incidence of extra-European travel and
the highest incidence of domestic travel.
This suggests that short haul offerings are
relatively more important for Spanish OTAs
and an air only focus would be more risky
due to drive/rail alternatives.
Figure 4
Leisure Travel Destination Regional Distribution, by Country
Total
Great
Britain
France
Germany
Spain
Domestic
66%
56%
69%
56%
83%
Intra-European
62%
74%
49%
70%
54%
Extra-European
33%
42%
38%
31%
22%
1,578
394
400
397
387
(N)
Question: In the last 12 months, how many of those total holiday or vacation trips did you take domestically?
Within Europe, but not in the country where you live? Internationally or outside of Europe?
Base: Online travellers who have taken at least one holiday or vacation trip in 2007
Source: The PhoCusWright European Consumer Travel Trends Survey
©2009 PhoCusWright Inc. All Rights Reserved
10
European Online Travel Agencies: Success Strategies for Today and Tomorrow
Air Travel Distribution Strategies
One of the most important industry issues
shaping European OTA air product strategy
is access to content. As major carriers like
Lufthansa exercise their market muscle to
push consumers toward their direct channels,
certain carriers blatantly shun intermediaries
altogether. Since unpublished air product
maintains a sizable portion of air inventory,
European content management continues
to be challenging for OTAs. Every OTA
executive interviewed expressed some level
of concern regarding access to inventory in
the future, and GDSs are considered vitally
important to maintaining the widest access
to content possible.
Unbundling of air services like checked
baggage was largely not indicated as a
concern. Many OTAs look to a multi-source
strategy to mitigate the risk of content
becoming unavailable at one source, such
as working with multiple content providers
or building XML feeds to incorporate
charter air product. Some go a step further
to purchase their own seats through charter
airlines.
One of the challenges created by using a
multi-source strategy is back-end integration.
While most had automated a majority of
their back-end processes, few had achieved
a completely “touchless” process. From
a booking engine perspective, most of
the larger players invested in proprietary
custom solutions, while some mid-size and
smaller OTAs utilise third party solutions
rather than building their own.
Ultimately the main priority found
consistently across all types of OTAs was
being able to provide the best priced option
to their shoppers.
©2009 PhoCusWright Inc. All Rights Reserved
June 2009
Hotel, Packaging and Other Products
Hotels and Lodging
As the most lucrative of travel products
available for travellers to purchase (in terms
of agent margin/commission) there has
been a great deal of focus on hotel product
in recent years. The large portion of small,
independent properties in Europe presents
both benefits and challenges for OTAs.
On the one hand, it drives the demand for
aggregators because it is simply difficult to
investigate options otherwise – finding and
getting a quote from individual hotels would
be a time consuming (and undoubtedly
frustrating) process. But it also creates
complexities for OTAs that wish to offer a
wide breadth of hotels because there are
so many individual property relationships
to manage. Accordingly, the use of “bed
banks” is common among OTAs that wish to
offer hotel product, or supplement directly
obtained inventory.
Packages
Packaged products have evolved very
differently in Europe in comparison to
the U.S, where dynamic packaging is
overwhelmingly dominant online. Prepackaged holidays remain an extremely
important product in Europe, and tour
operators still generate more than double
the bookings of OTAs. Dynamic packaging is
continuing to grow its share however, both
through the efforts of OTAs as well as tour
operators, who recognise the importance
of offering consumers control over package
components. All OTAs that are not product
specialists indicated they are looking to
grow their mix of dynamic packages –
not surprising given their relatively high
transaction value and yield flexibility.
11
European Online Travel Agencies: Success Strategies for Today and Tomorrow
June 2009
Other products
Car hire, destination activities (i.e., show
tickets, attractions), and insurance are
additional products commonly offered by
OTAs, and most non-specialist brands are
continuing to develop and enhance these
products. Destination activities represent a
product where there is a notable difference
in approach by various brands. Some
OTAs viewed their destination products
as strategically important due to their
experiential nature and support of the brand
positioning.
©2009 PhoCusWright Inc. All Rights Reserved
Additionally, it creates an opportunity to
engage with consumers at another point
in their travel process, post purchase.
These companies indicated that consumers
typically do not make destination activity
purchases at the time of travel booking, and
think about these activities much closer to
the date of travel. This allows companies
to enhance their consumer engagement
and draw out their interaction with
travellers. Other, generally small, OTAs view
destination activities as a “nice to have,” and
prefer to focus on other products. This is
not necessarily a short-sighted view, given
that consumers can often be overwhelmed
by too many products and some prefer a
pared down offering.
12
European Online Travel Agencies: Success Strategies for Today and Tomorrow
June 2009
Section Four: Shopping and Purchase Channel Trends
Consumers often use a mix of channels
in their travel planning process, and this
section analyses trends in the methods
people use to shop for and book travel
products and what motivates them to use
specific channels.
Shopping and Purchase Channels
As Figure 5 shows, no one method dominates
travel shopping or purchasing. For shopping,
general search engines were selected by the
largest portion of travellers (22%), followed
by tour operators at 20%. OTAs rank as
the fourth most popular shopping channel
3
at 15%. This trend is in sharp contrast to
the U.S., where OTAs are the most popular
shopping channel by a wide margin.
Many European OTAs have adapted to the
European traveller’s multi-channel mentality
by offering their customers several ways
of interacting with them, with some even
incorporating physical locations.
The most sophisticated players have
invested in centralised systems that integrate
multiple outlets so that a single profile can
be adjusted across Web sites and brick and
mortar locations.
By and large, brick and mortar retail outlets
are not the norm for OTAs, and due to the
relatively high cost of maintaining physical
locations, it is not expected to grow
significantly as a trend. Major “traditional”
tour operators are investing significantly
in their Web sites to compete with OTAs
however, and therefore integration between
online and offline outlets is likely to continue
more from the traditional retail side rather
than the OTA side.
Figure 5
Usual Shopping and Purchase Methods
2%
12%
17%
6%
11%
2%
20%
15%
15%
19%
22%
21%
19%
15%
Online Travel Agency
Supplier
General Search Engine
Tour Operator
Destination Web Site
Retail Travel Agency
Other / Not sure
Question: What is your usual way of shopping for/purchasing your holiday travel?
Base: Online travellers who have taken at least one holiday or vacation trip in 2007
Note: Totals may not equal 100% due to rounding
Source: The PhoCusWright European Consumer Travel Trends Survey
3 Respondents may have used search engines to get the OTA url
©2009 PhoCusWright Inc. All Rights Reserved
13
European Online Travel Agencies: Success Strategies for Today and Tomorrow
Call centres are treated quite differently
between the various OTAs that were
interviewed. Package focused OTAs view
having reservations agents as being
strategically important for them to help
consumers who had questions or wanted to
converse with someone about their options.
Consumers often look for assurance when
spending large lump sums of money
for packaged products and OTAs often
process 25-30% of their bookings for resort
destinations through call centres. Offering
deposits and staggered payment options
have been found to alleviate some of
consumers’ reluctance to make a booking.
In contrast, air specialists often do not make
offline reservation options available due to
the tight margin of air product, and only
maintain call centres to handle customer
service issues. Consumers have largely
June 2009
been primed to expect this when purchasing
air travel products from airlines, particularly
LCCs, and therefore this efficiency-driven
approach is feasible to maintain without
creating a significant negative impact on
consumer perceptions.
OTAs are focusing on price for good reason.
When travellers were asked why they prefer
their usual purchase channel, price was
the most common response at 40% (see
Figure 6). Broadness of selection was the
next most common choice at 24%, again
confirming that OTAs are largely centring
on what matters most to consumers. Brand
trust and customer service both reached
13%, and while these motivations are
significantly behind price and selection, they
are considered the most important factor by
sizable groups of consumers.
Figure 6
Primary Reason for Choosing Usual Purchase Channel
Offers the lowest prices
Offers a broader selection
I trust the brand
13%
Offers the best customer service
13%
Offer more loyalty miles / points
Offers environmentally friendly travel
2%
Ease / simplicity / convenience
1%
Other
40%
24%
3%
4%
Question: What is the primary reason why you USUALLY PURCHASE your Holiday travel through this
method?
Base: Online travellers
Source: The PhoCusWright European Consumer Travel Trends Survey
©2009 PhoCusWright Inc. All Rights Reserved
14
European Online Travel Agencies: Success Strategies for Today and Tomorrow
OTA Shopping-to-Purchase Defection
A chronic issue for all OTAs is the consumer
habit of using them as makeshift metasearch
engines – a tool to make a decision, but not
a transaction. Figure 7 shows the incidence
of defection from OTAs to various channels
by country. Supplier Web sites are not
surprisingly the most common benefactor
of OTA deserters, but a sizable portion also
turned to retail travel agencies and tour
operators.
June 2009
Defection is significantly higher in Spain
compared to the other countries surveyed.
This suggests that conversion may be
tougher for Spanish OTAs to achieve,
and that rather than trying to combat
switching, they may want to try monetising
it as many European OTAs are currently
contemplating.
Figure 7
Incidence of Shopping for Travel from an Online Travel Agency but Purchasing Elsewhere, by Country
Total
Great
Britain
France
Germany
Spain
Supplier Web site
56%
55%
57%
50%
75%
Supplier via phone
29%
26%
29%
23%
36%
Office retail travel agency or tour operator
34%
26%
38%
34%
46%
(N)
1,111
296
273
273
269
Question: Have you ever shopped for travel from an online travel agency but purchased that travel
from…?
Base: Online travellers who usually use some online method for shopping for holiday or vacation travel.
Source: The PhoCusWright European Consumer Travel Trends Survey
©2009 PhoCusWright Inc. All Rights Reserved
15
European Online Travel Agencies: Success Strategies for Today and Tomorrow
The incorporation of a media offering to
drive new advertising revenue is a strategy
that has met with mixed success in the U.S.
In 2008, Orbitz experimented with displaying
sponsored links in its booking path, only to
pull them off the site after the testing period
was over. The economics were simply not
found to work in Orbitz’s favor. Travelocity
has been displaying ads for its IgoUgo
brand continually for quite some time, but
IgoUgo is a referral site, versus a booking
site, and is a sister brand. While the ads are
directing consumers outside of Travelocity’s
domain, they still remain under the larger
company umbrella until the user clicks off
the site. Expedia’s approach has become
more focused on creating its own advertising
network with its PassportAds product,
which serves behaviourally targeted ads to
consumers on other Web sites.
©2009 PhoCusWright Inc. All Rights Reserved
June 2009
Many European OTAs are in the midst of
testing media products to try their hand at
adding additional revenue. The challenge
is, of course, to sell downstream traffic
without eroding conversion. Some may
even consider a hybrid OTA/metasearch
model that attempts to capture the best of
both worlds. Not all OTAs agree that media
models that enable consumers to click out
of their Web sites will work, and some are
resolved to maintain their “walled garden”
approach – trying to keep visitors locked in
the domain of their Web sites. While much
uncertainty remains about the viability of
various media programmes, the industry
will witness a great deal of experimentation
over the next several years as OTAs try to
better monetise their traffic, and devise
creative solutions that fit their market
positioning.
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European Online Travel Agencies: Success Strategies for Today and Tomorrow
June 2009
Section Five: Marketing Trends
While online advertising provides detailed
metrics that OTAs have come to rely on,
many are continuing and even increasing
their offline marketing efforts. Particularly
in less developed online markets, offline
channels provide the opportunity to reach
travellers who don’t spend much time
online, and may help to convince offline
purchasers to switch. While search and
display advertising remain the critical bulk
of overall marketing budgets, many OTAs
are using a multimedia advertising approach
incorporating print, radio, television as well
as affiliate marketing to broaden their reach,
enrich branding and diversify tactics to get
noticed.
Social media and the overwhelming buzz
that accompanies it are being received
with mixed enthusiasm by OTAs. Many are
actively managing their brand presence
on social networking sites like Facebook
and microblogs like Twitter, dedicating staff
to monitor and engage with consumers
on behalf of their brands. Unlike email
messages that required deletion and
therefore some degree of effort, Twitter
messages (“tweets”) are not as intrusive
– the feed format does not necessitate
interaction with every message even for
those who are “following” a company.
Many companies are using Twitter as
a customer service tool as well as a
promotional vehicle to run contests and
extend their brand interaction with travellers
even when they are not actively planning a
trip (see Figures 8 and 9).
The most advanced OTAs are building
applications on existing social network
platforms to enable consumers to share their
travel plans and facilitate group planning
and input. Some OTAs, however, remain
somewhat skeptical about social media’s
importance and ultimate impact on business,
viewing it as something to watch rather than
something important to actively engage in
with. Some of even Europe’s largest brands
have yet to build their presence on social
networks and microblogs.
In contrast, user generated reviews have
become ubiquitous among brands that
offer hotel products. Smaller OTAs that do
not have the user base to effectively build
their own cache of reviews often work with
third parties like TripAdvisor to ensure they
have enough coverage. In the U.S., OTA
user reviews have become the most widely
influential Web site feature, beating out
professional reviews and even photography.
User reviews are continuing to gain influence
among European travellers.
Figure 8
©2009 PhoCusWright Inc. All Rights Reserved
17
European Online Travel Agencies: Success Strategies for Today and Tomorrow
June 2009
Figure 9
Customisation
For the vast majority of OTAs, the content
displayed is the same for every traveller
that visits their Web sites. Many full service
OTAs are investing in technology to change
this by using information collected about
the user to customise their experience.
Through the use of a mix of observed
behaviour like searches and product clickthroughs (i.e., looking at 4 star hotels) as well
as gathered information like trip motivation
(i.e., relaxation, adventure) several strive
to make tailored recommendations rather
than just listing deals. Most customisation
efforts are focused around merchandising/
advertising rather than within search results,
particularly for air products where lowest
fare still reigns supreme.
©2009 PhoCusWright Inc. All Rights Reserved
Not surprisingly, air specialists are not as
focused on customisation, often preferring to
keep their products as simple as possible.
One major challenge to customisation is
building the right logic to make relevant
recommendations based on more than just
price. A consumer who is looking for a quick
getaway would be better served by a display
of weekend deals in Paris, even if the rates
are not exceptional, rather than huge holiday
discounts in Sharm-el-Sheikh. Accordingly,
OTAs are largely more focused on crafting
display algorithms that drive relevancy
rather than yield. The Amazon model of
additional product recommendations is
often looked to as inspiration.
18
European Online Travel Agencies: Success Strategies for Today and Tomorrow
June 2009
Conclusion:
Strategies Shaping the Future Success of Online Travel Agencies
As European online travel matures,
competition will only intensify. Growth
will no longer be a given, and companies
seeking to expand will have to wrest
market share away from their competitors.
To prepare themselves for the next decade
of online travel, OTAs are investing in a
range of strategies that align their brands
to weather the challenges ahead and gain a
competitive edge.
Diversification of Content Sources
With so much potential volatility in sourcing
inventory, OTAs that are focused on their
long term outlook are diversifying their
sources of content. Many of the OTAs that
were interviewed are maintaining multiple
GDS connections as well as direct links
to charter air consolidators. Some larger
OTAs and brands that are part of tour
operator entities invest in their own air
inventory through charter airlines – enabling
control over price and easing reliance on
commercial airlines. GDSs offer the widest
product range of all providers and can help
OTAs secure broad access to content and
competitive offerings.
Driving Relevancy
All OTAs are striving for consumer
relevancy, but are utilising different
methods to achieve it. Air specialists are
focused on clean, simplified interfaces with
little merchandising and a strong pricedriven proposition. Full service OTAs aim
to provide a rich experience that engages
the consumer across multiple phases in the
travel planning process - from the earliest
phases of destination selection through the
post-booking period when consumers are
deciding what to do at the destination
©2009 PhoCusWright Inc. All Rights Reserved
By tailoring user experiences to what is
most important for the individual consumer,
OTAs can build immunity against the threat
of commoditisation. Customisation will play
a critical role in enhancing relevancy for
OTAs that are striving to become more of
a trusted source for ideas rather than just a
listing of prices. Rich customer profiles will
play a pivotal role in enabling customised
content by storing valuable information in a
central record.
Managing Metasearch
The theoretical proposition of metasearch is
extremely well suited for European markets.
The ability to consolidate products as well
as booking channels solves a problem for
travellers who may not even be aware of
all the options available in the fragmented
marketplace. Most OTAs view metasearch
brands as both competitors and partners,
and with good reason. Metasearch truly
reduces the OTA proposition down to price
and puts pressure on fees, but can also be
an important source of referrals. While it
was once presumed that supplier branded
Web sites would receive the vast majority
of referrals, metasearch brands in the U.S.
found that this is not the case.
While metasearch is still in the early
phases of European consumer adoption,
a number of them are gaining traction,
particularly in mature online markets.
European metasearch brands are likely
to evolve somewhat differently from U.S.
brands by being simpler, and having fewer
options for search result manipulation.
The micromanagement preferred by many
U.S. travellers is often not as appealing to
European travellers.
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European Online Travel Agencies: Success Strategies for Today and Tomorrow
Driving Engagement through Social
Media
While some OTAs may remain skeptical
about the ability to use social media to
drive transaction revenues, maintaining
and monitoring a brand presence wherever
consumers choose to discuss travel has
important value. Word of mouth has
tremendous power in consumer travel
decisions and social media applications
like Twitter allow companies to essentially
“eavesdrop” on conversations and interact
with consumers directly. The value of social
networks for public relations and customer
service are, at the very least, reason enough
to build a branded presence in popular
networks.
Interaction with consumers outside of a Web
site adds a new facet to brand identity so that
companies become more than just a URLdriving new touch points and higher levels
of engagement. Many start-up companies
are focused on developing applications
that help consumers plan and share their
travel experiences both inside and outside
of existing social networks. OTAs are not
all standing idly by, and some are widening
their focus beyond the transaction to build
their own branded applications.
Developing a Value Proposition Beyond
Price
While price is undoubtedly a vitally important
element of an OTA’s consumer proposition,
as better and wider distribution networks
develop, prices will become more consistent
across channels. A consumer proposition
that touts just price and selection has a
limited lifespan, particularly if all the players
are claiming to have the best prices. As
online markets mature, OTAs must look to
enhance their brands with something more
– a means of differentiation.
©2009 PhoCusWright Inc. All Rights Reserved
June 2009
For some OTAs it might be simplicity, for
others it might be high service levels, another
might choose environmental friendliness.
Breadth of content and comprehensive
offerings are also important to consumers
– even niche providers can be successful
if they provide deep content and choice.
Whatever the positioning, it will become
increasingly important for OTAs to strike a
chord with consumers at some other level
beyond price.
Mobile Applications
The advancements in mobile technology
are opening new worlds of possibilities
for travel companies. While early efforts
by travel companies are often miniaturised
versions of Web sites, consumers look
for a different experience on their mobile
“screens” than they do on their computer
screens. And while consumers are not likely
to book holidays on their mobile devices,
they will book, re-book and change travel
reservations as plans change. Being able to
service consumers through the twists and
turns of travel is a powerful proposition.
Beyond travel product transactions, a
significant bulk of travel expenditure occurs
at the destination.
OTAs have not been able to tap into this
very effectively because consumers do not
usually think about destination activities
at time of purchase. Mobile applications
provide an ideal vehicle for travel companies
to reach consumers when they are in the
destination, when they are actively thinking
about which sightseeing tour they want to
take tomorrow and which restaurant they’d
like to try.
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European Online Travel Agencies: Success Strategies for Today and Tomorrow
Monetising Media Assets
Market Expansion
While many OTAs plan to maintain a
“walled garden” approach, there are
many opportunities to monetise traffic
that do not involve sending consumers
to competitors. Travellers represent an
attractive demographic for advertisers, and
selling advertising space to complimentary
non-travel products (i.e., cameras, luggage)
can offer new revenue streams without
decimating conversion. Working with
advertising networks presents an efficient
alternative for smaller OTAs that may not
have the resources to manage ad space
directly. Testing and experimentation with
various media models will be common in the
next few years as companies craft the right
advertising programmes their products.
While growth is a major a priority for
local and regional OTAs, many are being
cautious about expanding too quickly into
other markets. For many local players, the
first priority is to become well established
in their home markets before looking at any
sort of expansion. The local perspective is
often viewed as an important asset when
competing with larger European and global
brands that are positioned for mass appeal.
In contrast, global OTAs are continually
focused on developing new markets like
Eastern Europe and Asia as they relentlessly
append them to their inbound/outbound
networks. Regional OTAs are largely
concentrating on expanding within the
Europe before targeting new areas such
Asia.
Product Diversification
While some air specialists plan to continue
their narrow focus, most online travel
agencies look to widen the breadth of their
product offering through products such
as hotels, car hire, dynamic packaging,
prepackaged holidays, vacation rental,
insurance
and
destination
activities.
Dynamic packaging in particular represents
an important area of development for OTAs
who seek to provide an alternative to the
traditional prepackaged holiday with new
levels of flexibility and choice.
A full service approach encourages
travellers to turn to OTAs for all their travel
needs and maximises the opportunity to
capture transactions from visitors. Even
the largest players build partnerships with
third party providers to enable new product
offerings without significant investment.
But companies that strive to create such a
wide product selection must take care to
design their user experience so that the
process flows intuitively. Interfaces must
balance product breadth with simplicity, so
that visitors do not get overwhelmed.
©2009 PhoCusWright Inc. All Rights Reserved
June 2009
Process Efficiency and Automation
One of the greatest challenges for travel
agencies is building the end-to-end processes
into a seamless flow – from availability and
pricing, booking and ticketing, and postbooking and service delivery. Building
an efficient, cost-minimising operation
necessitates the automation of manual
processes, such as centralised accounting,
fulfilment and customer service on the
back-end, and a single view of inventory
and other relevant content through the
Graphical User Interface (GUI) on the front
end. Outsourced automation solutions often
offer a favourable alternative to building
custom systems that consume technical
resources, time and capital internally.
21