Tag Archive | "Expedia"

Innovation in Online Travel

Posted on 10 August 2009 by Norm Rose

The general media is a buzz with stories about the lack of innovation of the major OTAs. A recent Forrester Report which shows consumers’ frustration with online travel planning and booking is cited. The report stated that many consumers are fed up with the complicated process of planning and booking travel online. Part of this frustration concerns added fees, what we like to label in the travel industry as ancillary revenue. The article points to a resurgence of bookings through traditional travel agents.
From a different angle a recent VentureWire report states that VCs are funding start-up travel sites such as Oyster and LeiusreLink. This article further reinforced the concept that there is a lack of innovation from the four large OTAs (Expedia, Travelocity, Orbitz and Priceline).
Both media articles site lack of innovation, but both draw different conclusions. The Forrester research is being cast in the light of a return to traditional travel agents while the VentureWire WSJ blog points to an opportunity of new start-ups. So what is happening with online travel? Are the OTAs on a path to their own demise? Is online travel going to die based on the resurgence of traditional travel agencies?
In this era of sensational news reporting, dramatic statements forewarning the death of popular OTAs through renewed competition from traditional travel agents or new travel niche brands help sell papers (or in this day and ag, electronic articles). A key point missing in both these articles is a realization that the online travel market is at a mature level. Traditional, Crossing the Chasm analysis, points to multiple adopter segments.
By definition the late majority are conservatives. This market is naturally skeptical and thus resistant to change. The online travel market has reached the mainstream and thus includes many infrequent travelers who are not comfortable with booking travel online. Even the cliche quote by Henry Harteveldt ” Could your mother-in-law use your Web site without having to call you for help?’ The answer is always no” is somewhat blind to the fact that my mother-in-law is an infrequent traveler, part of the late majority (actually she is more of a laggard) and thus has characteristics that are different from frequent travelers (who are often innovators, early adopters, and early pragmatists) who have grown accustomed to the online travel process.
Despite the generalities of these articles I do believe that greater innovation is needed from the OTAs to maintain their market position. Most of the start-up competition comes from niche plays such as Oyster (hotel reviews) or LeiusreLink (vacation rental). Innovation in travel planning is the focus of sites such as Uptake and Triporati. Whether it is true technology innovation or business innovation, carving out pieces of the all encompassing OTAs is a natural market evolution. OTAs will react to these niche start-ups if and when they see a direct correlation to revenue loss. For example when Expedia, Inc. recognized the importance of user generated hotel reviews it purchased TripAdvisor. Movement to traditional travel agents may be occurring, but it may be limited to specific segments and does not mean the death of OTAs. In various research I have conducted over the past few years interviewing traditional travel agents, all agents recognize that the OTAs are their direct competitors and customers often quote OTA prices during the selling conversation. As a result, agents use tools such as Agentware to search the Web for competitive fares.
I agree that OTAs are not a replacement for human beings (that is why each has deployed a call center for support), but for routine trips they do perform well. Quoting the appropriate ancillary fees is an industry problem that is being worked on by ARC, the GDS and the airlines to simplify the online quote process. No the OTAs are not in danger of extinction by niche players or traditional travel agents as all will co-exist with the consumer making the ultimate decision based on their comfort with technology and experience with the online process.

Innovation in Online Travel

Posted on 31 March 2009 by Norm Rose

I am working with Bob Offutt this year screening applicants for the PhoCusWright Innovation Summit in November. This effort has triggered some thoughts about how innovation comes to the market as well as the danger to companies that lack innovation.

From 1989-1995 I worked at Sun Microsystems. Part of management training at Sun was reading the book The Paradigm-Shift-Promise-Information-Technology . While I was at Sun I was able to secure funds to implement an early corporate booking tool from a now defunct company called TravelNet. Why not look internally to develop this application? Even though at that time Sun was far ahead of other companies in talking about “the Network is the Computer” foretelling the current hype around Cloud Computing, I could not get any internal IT support for this self-booking effort. I even had a Senior VP of Purchasing tell me that “we do not like to be early adopters of new technology”. Yes this was a Sun VP acting as a Luddite about emerging technology. Despite the paradigm shift training, Sun’s demise can be traced to its slow reaction to open source software. Hopefully, IBM will purchase Sun and put it our of its misery.

Another interesting paradox regarding innovation concerns online travel. Conventional wisdom may make you believe the current online travel heavyweights came from venture funding. Though each of the major OTAs has received venture funding over the years, Microsoft birthed Expedia, Sabre created Travelocity, the major airlines created Orbitz. Only Priceline has true venture capital roots, but was literally reborn under Jeffrey Boyd’s leadership after the company went bust trying to promote “the name your own price” strategy to other non travel segments. Jeffrey successfully transformed Priceline from a opaque distribution channel to a full blown OTA and expanded the company’s global reach with acquisition of Booking.com. The point here is that Venture Capital is often not the source of new innovation.

So where is tomorrow’s innovation in the travel space? We need not look any farther than the emerging mobile platform. Our sponsors for the PhoCusWright Mobile Special Report represented some of the travel industry’s largest companies (Starwood, Hilton, Carlson Hotels, Travelport, Amadeus and Abacus, IBM and Teradata to name just a few), but few showed true mobile innovation. Many sponsors are simply taking their Web content and reformatting for the mobile browser. This strategy misses the value of the new mobile platform and cannot access location a key component of succesful mobile applicaitons.

True innovation in the mobile space is likely to come from small companies such as Intelligent Spacial Technologies who have a unique point and click application that takes advantage of location, context and broadband wireless communication. Last year’s winner of the Innovation Award was another small mobile advertising comany called Interactive Mobile @dvertising,

Can innovation continue in a down economy? Absolutely, though funding is tight, true innovation is a game changer and will continue to emerge from small companies. Even though hugely successful, the four major OTAs may miss the next “paradigm shift”(which I believe is mobile) and a new small entity may emerge with disruptive technology for travel applications on the mobile platform. No company of any size can simply ignore emerging technology trends such as mobile or risk becoming victims of shifts in market dynamics caused by innovation.

Expedia connects into Micros Fidelio

Posted on 21 February 2008 by Norm Rose

The Micros Fidelio and Expedia announcement today regarding a new direct connection capability is a significant development for the hospitality industry. A challenge for all hoteliers has always been the distributed nature of property based systems (PMS). Hotel general managers control inventory and pricing through their PMS where they evaluate room occupancy and rates in effort to maximize RevPAR (the revenue generating effectiveness of a hotel property that is calculated by multiplying the average daily room rate (ADR) by the occupancy rate). This connection opens the door for more dynamic hotel pricing online where the general manager can go to their internal system adjust pricing and deliver it electronically to the OTA. This property level connectivity was the original approach of Newtrade Technologies, a Canadian company purchased by Expedia way back in 2002. After the acquisition the focus shifted from property based connectivity to central reservation (CRS) connectivity. This has worked well for large chains such as Hilton, but did not help smaller European chains such Sunstar Hotels. The majority of hotels outside the US are small chains or boutique properties. Micros Fidelio is the leading provider of property based technology and thus this new connectivity promises to provide more control over price and inventory for smaller property as they work to distribute their inventory through Expedia.

What do the Expedia PPC agreement and the Kayak acquistion of Sidestep have in common?

Posted on 23 January 2008 by Norm Rose

Two stories from late 2007 and early 2008 signal a shift in the online travel model. In November 2007 at the PhoCusWright conference in Orlando, Expedia announced a new agreement with IHG that included a pay per click (PPC) compensation model. The acquisition of SideStep by Kayak this month is another significant development. How are these two announcements related? The Kayak/Sidestep merger is a clear validation of the referral model, but also demonstrates the need for scale to be an online travel player globally. The Expedia PPC contract element reflects the simple fact that many people shop OTAs and end up buying at supplier sites a phenomenon that has been validated by PhoCusWright and Forrester research. For Expedia, being paid for referrals represents a new and important revenue stream. You then add Travel 2.0 players such as Farecast, Kango and the Nile Guide, and the value of search and travel planning tools represents a major growth area for online travel here in the US and globally. As the economy softens the value of the referral model is likely to increase as suppliers scramble to fill airline seats and hotel beds.

PhoCusWright – Expedia CEO part II

Posted on 15 November 2007 by Norm Rose

During his closing speech at PhoCusWright, Dara mentioned briefly an effort at Expedia to re-platform their technology infrastructure. So what does re-platform mean? Often the plumbing aspects of travel technology are not a common topic at any show including PhoCusWright, but here the re-platform initiative has a direct bearing on how Expedia works with suppliers. It concerns re-engineering their middleware to better match customer needs with supplier content. In today’s online world, OTAs need to provide more flexibility to all their suppliers to manage the delivery of dynamic pricing based on different customer segments. Dara talked about this in relationship to hotels, but airlines are also are demanding a better way to showcase and target their services to specific travelers. This includes selling premium seat assignment or other amenities that can help differentiate their products. A great example is Virgin Atlantic’s upper class which provides unique seating and amenities at a lower price point. Traditionally Expedia will show Virgin Atlantic the same as other airlines. Expedia’s re-platforming initiative will help suppliers better target customers and use differentiated services to influence the sale at the time of booking.

PhoCusWright – Expedia CEO

Posted on 15 November 2007 by Norm Rose

Dara began with a nod to the new media based deal with IHG. He said Expedia’s focus is to change the traditional impersonal relationship with consumers to be more individualized. Three areas of focus: (1) email (2) Segmentation (3) Search experience – lodging search experience to the next level.
(1) Email – described Amazon’s email follow-up after search. Booking window, length of stay, impacting next visit at Expedia. Email as upsell opportunity. Purchase behavior impacts the type of email message generated. Occasion or event triggers for emails are more effect – 20X as effective. Air search with permission send email – 30X conversion rates
(2) Segmentation – demographic mailings. Unique content based on segmentation – Expedia Elite Group – premium service levels – no cancellation or change fees and other services
(3) Personalization – Optimization of lodging sort. Previously anyone would get the same sort. Built an algorithm sorting hotels with goal sending hotel partners more likely to convert and enjoy that hotel. Personalized predictions based on conversion – 30 attributes – kids, which site, length of stay, adding factors for partners inventory levels. Customer reviews

Summary – Long Tail – world is flat. One to one relationship with every traveler.

My comments – All this is not new, but does show a new level of maturity for Expedia in order to better target customer segments verses a vanilla approach traditionally followed by Expedia.

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