Monday, August 10, 2009

Innovation in Online Travel

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.

92 comments:

Josh Steinitz said...

Norm, have a look at the new NileGuide---we've come a long way since you saw us in alpha form 2-3 years ago...

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David Janes said...

I can't help but think that the primary innovation the travel industry needs is to adopt many of the UX advances made over the last 8 years. The horrible usability of travel sites is really indicative of a design mindset stuck in the 1990s.

jebworks said...

This post captures the situation very well.

It's really not about whether ones mother in law can figure out and is happy with a particular website but that an increasing number of web savvy users feel the online research and planning experience is a tedious, time consuming process, as opposed to the actual buying of travel components that has been the almost complete focus of the OTAs since day one for obvious commercial reasons.

This criticism goes beyond the fees and add-ons that are frustrating but don't have anything to do with outdated technology.

It seems to me the leading OTAs are not seriously addressing the pre-trip purchase phase, maybe with the exception of the Experience Finder tab on Travelocity, but even that is not very prominently displayed. Their explanation, or rather excuse, is that this is not where the money can be made today and they want to focus on the transaction.

That's OK, but they better start focusing on it by developing their own tools or acquiring one of the new trip planning innovators to move the industry forward in the process of making the overall experience a better one. Someone will make that move sooner rather than later and pose a potential threat to their market leadership.

Henry Harteveldt said...

Our report didn't say that OTAs were failing. What the report states is that travel Web sites, collectively, are not evolving, and thus contributing to travelers' growing frustration.

The comments from @David_Janes and @jebworks articulate the challenge facing the industry: There is a substantial and genuine need to improve the user experience, especially in phases like pre-trip planning.

Almost 10 years ago, I left GetThere (which we'd just rebranded from the Internet Travel Network, ITN.net, one of the first OTAs) to join Forrester. Today's user experience on most travel sites -- supplier and intermediary alike -- is disappointingly similar to what ITN.net offered 10 years ago. The innovation in digital travel comes not from established players, but rather creative start-ups like TravelMuse.com, Youniverse.com, InsideTrip.com, and others.

Nadav Gur said...

Speaking among friends (and most of you are - except for Rozy the online marketing robot...)

I have to agree with both Henry and Norm. The OTAs have built a supermarket where you're led down the aisle to buy a product. But they don't help you with preparing the shopping list to begin with, and the price tags and product details are less-than-clearly marked.
Norm is right that still enough people come to this supermarket with their lists intact and a good knowledge of how to read those tags. So they're not going anywhere. But still - there's a better way of doing this, and travel planning is NOT grocery shopping despite my obvious affection to metaphor.

As you know, we (WorldMate) evolved from the mobile travel niche - and were initially naive enough to expect someone will build great travel planning tools and we'll just connect to them. Five years later, our users are vocally asking us to build that planning tool for them. Heck - this article was sent to me by one who said "please build this!".

So there clearly is a layer missing - the planning tool that sits atop the purchasing silos. I think Kayak are going there, and if they do many others will. We have our own angle and intend to play it soon too.

We'll see this market evolving from a few supermarkets to many specialty stores, I think...

Nadav

Freight Bob said...

Without question, technology is definitely changing the face of travel. Long gone are the days where the High Street travel agencies were the order of the day.

It is great for the consumer the way we cna now check and compare prices online and have such a greater choice.

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Cardiff Freight

Bart said...

I also read those articles and glad you wrote about them. Great to see some discussion as a result.

Is it innovation that is at the root or usability? Clarity appears to be paramount.

Might be interesting to compare and contrast with Facebook and Iphone/touch. For years I have been using webservices to share pictures video and other updates in my life, but in the end it is facebook that makes the interface idiot/novice/ or mother in law accessible to hit the tipping point. (more pictures being shared through FB then through flickr, picassa and kodak combined!)

Similarly I have used palm and windows mobile devices but in the end it is the apple touch interface that mimics the physical world's paper pushing swipes or spinning wheels that hits the sweet spot. In the end it's this device that truly drives the mobile web.

Key point here I believe is that even though we as tech and industry savvy veterans see all kinds of potential through innovation it will need to be as "friendly" as facebook and Apple's touch interface to be successful or even disruptive to the status quo.

John T. Peters / Tripology said...

Since the launch of Tripology, just about two years ago, we've processed over 100,000 detailed trip requests from high-intent travelers. This doesn't include all the people we turn away who are really better off with an OTA.

I make sure I speak to as many consumers as I can each week and what I hear, over and over again, is "there's too much information out there and I'd like to speak with a human being that knows what they're talking about." There's the rub, as we say, "someone who knows what they're talking about."

People want to speak with an expert, a real, live human being who knows the answers. This, in our opinion, is a travel specialist. Not your typical travel agent who is a master gatherer of information. Not some call center person who has, at their disposal, the very same online booking engine and information that didn't help the consumer in the first place. They want a travel professional that specializes in the exact trip they're looking to take.

By the way, adding to consumer frustration is the plethora of deals (half of which are underwhelming) being offered by every supplier on the planet.

Consumers are frazzled and they want someone to make it simple for them. Some will do fine with an OTA and some will not. The folks that won’t do well with an OTA are realizing they’re likely better off with a travel specialist. This is not because the OTA isn’t innovative. This is not because the OTA doesn’t offer a good deal. It is, simply, because they’re the type of consumer that needs human interaction. These are the folks who ask questions at Home Depot of the person in the orange apron about their preference in doorknob. These are the people who call DELL to order a computer instead of simply ordering online without asking a single question. I can be somewhat obnoxious about those people because that’s the type of person I am. I like to make informed decisions. I have questions. I’m happy to order online…once my questions are answered.

As it pertains to travel, I like www.Tripology.com, but hey, I'm biased.

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naresh said...

Norm,

One of the eye for travel event i attended,i saw that some of the OTA are adopting the so called Hybrid approach.That is starting their own offices across their market focus.Thats happening in india and have witnessed the same in vegas too..so OTA has seen a complete turn towards traditional agencies?

Naresh

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Karachi Hotels said...

Thanks for the post and your main heading for the post is innovative but the innovation are required for the online travel which are not seen right now.

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