The travel aggregator landscape

By Hugo Burge, Vice Chairman, Cheapflights.com

Do you get the feeling that the Internet is BACK? There’s talk in the industry about ‘a goldrush’, ‘a revolution’ and that the Internet, surprisingly, is still the new ‘new thing’. It’s like the sequel of a movie we went to see five years ago - “Internet Goldrush II: No more fools gold” and “Internet: This time it’s back and grown up.”
Clearly something is going on online. Within the travel industry there has been a wave of excitement over the last year about travel search, meta-search, the travel vertical or whatever buzz term is currently being used. This renewed interest has been generated by a number of things.

Firstly, travel companies are taking advantage of the transparency to measure return on investment and optimize advertising spend (suppliers have the bonus of the benefits of selling direct). Secondly, when big names like AOL (investor in Kayak), Yahoo (purchaser of Farechase), IAC (purchaser of TripAdvisor) and Sabre (purchaser of IgoUgo) get involved everyone sits up and take notice. Thirdly, TravelZoo woke up the investment community by being the best performing stock on the NASDAQ in 2004 and Sidestep jumped on the bandwagon by announcing their intention to go public.

A whole new raft of names has cropped up, like Kayak, Sidestep, CheapAccommodation and TripAdvisor and with them, a great deal of confusion about what these new websites actually do and how they differ from each other.

Internet advertising is not just fashionable again, this time it is a serious business. There are a growing number of travel sites offering hotel and accommodation suppliers the opportunity to sell product direct to the consumer in ways which are more transparent, more controllable and better value than ever before. In order to best be aware of the different opportunities available to suppliers and re-sellers of hotel product, it is essential to understand the terminology, the market players and what is available to you.

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Travel sites that don’t sell product but generate booking or leads are referred to as travel aggregators rather than travel search. Some of these sites do a lot more than just search. The current travel aggregator landscape can loosely be divided into three categories: Deals Publishers, Live Availability Search and Destination Aggregators.

i) Deals Publishers

These websites were born out of the newspaper classified advertising tradition. Arguably this is the sector I understand best because Cheapflights developed from this background back in 1996 through John Hatt, who had been Travel Editor at Harpers and Queen for ten years. His simple idea was to turn classified advertising on its head and make it into a useful consumer service by publishing deals by destination. He felt that if he could arrange travel deals in a simple, fast and transparent format with really great prices from different companies, it would be useful to consumers. He was right and today Cheapflights serves over 900 travel brands to over four million unique users a month.

Other well known Deals Publishers in the US market are TravelZoo, Smarter Travel, USA Today and Shermans Travel. Interestingly all of these companies come from a journalistic or media based background.

More than any other travel aggregators, these sites allow the supplier to dictate what product is sold, so they are often seen as supplier friendly. Like all internet advertising there is complete transparency in terms of the bookings generated and therefore make the return on investment calculation simple. So, whilst these sites can be seen as an alternative distribution channel, they can equally be used for advertising purposes.

ii) Live Availability Searches

Comparison shopping sites were the first to use spiders to perform multiple searches to allow consumers to compare prices in real time. These sites tend to come from a technical background and are in pursuit of the consumers’ ‘magic wand’ to locate the very best deals available. Initially a number of travel sites joined in, but issues of scalability and supplier friendliness held back these sites for a number of years. Some relied upon download software and others depended on not being found out by suppliers. However, over the last year or so, this sector has had an enormous amount of attention as Yahoo and AOL invested in websites that focused on live availability.

The idea is simple; one site scours multiple sites and generates qualified leads for partners who will take the bookings. This is particularly attractive for suppliers who own inventory because it is a means of bypassing central reservation systems and re-sellers to compete on a level playing field.

This is a rapidly evolving landscape with very different approaches. Many will allow positioning in results to be improved by bidding. These sites, whilst predominantly Pay-Per-Click are also known for adopting the CPA (cost per acquisition) model as the format is more slanted towards a form of distribution rather than advertising.

The user experience of these websites is seen as very similar to OTA websites and some have been wary of the competition they create for these players. As a result some OTA’s have pulled off the Live

Availability search capabilities, making the opportunity even more attractive for direct suppliers. Several of these sites are now also looking to publish deals as a way of diversifying their business model, adding content and servicing their suppliers.

iii) Destination Aggregators

Guide books have long been a staple of the consumer when researching new destinations and searching for the ideal hotel to stay in.

Many guide books have gone online and offer a range of advertising opportunities for accommodation suppliers. There are the usual names: Frommer’s, Fodors, Lonely Planet and Let’s Go. Embracing the Internet has allowed consumers to interact and offer opinions and feedback, making the traditional guidebook model even more powerful.

However, a range of sites have also built a new generation of Internet based guidebooks that rely solely on consumer interaction. TripAdvisor, MyTravelGuide and IgoUgo all focus on reviews and user feedback. More importantly, what these sites have in common is their ability to help generate accommodation sales.

TripAdvisor has proved so effective at selling rooms that IAC purchased the website. Similarly IgoUgo was purchased by Sabre as part of its broader internet strategy. It hardly comes as a surprise therefore to find out that MyTravelGuide was bought by Priceline. However, all of these sites remain independent and will work with hotel chains and accommodation suppliers.

As with all simplifications, this model of the travel aggregator landscape can be criticized and challenged. What is certain is that the landscape is changing fast with websites taking on the best of each of the sectors. I believe that it remains useful to be able to see where the main players in the landscape have come from in order to understand possible opportunities and to see where individual sites are headed.

All travel aggregators do a great job in helping the consumer research their trip and arguably focus on different parts of the research process. As a result of the various approaches taken by these websites, the results for suppliers will be very diverse and will suit individual partners. In this rapidly evolving landscape there are opportunities for the bold suppliers to test several models and establish what works best for their inventory. As in all emerging industries, there are deals to be had but moreover, there is fierce competition for marketing dollars. To my mind, this can only be good news for consumers and suppliers alike.

Hugo Burge is Vice Chairman of Cheapflights. Prior to investing in and joining Cheapflights in March 2000 Hugo was an entrepreneur with a background in property investment. During 1999 he co-founded a web design venture and started investment companies, one of which included funding for Internet start-ups. Hugo graduated from Cambridge University with a Degree in Geography. In his years after graduation he worked in the consultancy and property investment industry before qualifying as a Company Secretary with ICSA. He is a member of the Royal Geographical Society and has travelled extensively in Africa, from Namibia to Zaire, Europe, Mexico and Guatemala. In May 2003 Hugo set up the Boston office and launched the Cheapflights USA operation www.cheapflights.com. He now spends the majority of his time based in the USA. Mr. Burge can be contacted at +44 207 034 4143.
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