The Online Travel Industry: Investing Essentials

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The Online Travel Industry: Investing EssentialsBy Asit Sharma | More Articles August 25, 2014 | Comments 0Barajas Airport, Madrid. Source: Jean-Pierre Dalbera under Creative Commons license.The speed at which the Internet evolves can make milestones from 10 or 15 years ago seem worthy of encasement in a glass museum display. Take this quote from Priceline Group’s first annual report after its 1999 IPO:

Priceline.com commenced its service with the sale of leisure airline tickets. The number of airlines participating in priceline.com’s airline ticket service has increased to a total of 10 domestic airlines and 20 international airlines.

The online travel industry has grown exponentially since those heady days when Priceline managed to sign up 20 international carriers, not to mention pitchman William Shatner. While traditional travel agencies, especially those that cater to business travelers, haven’t disappeared, most of us now find it second nature to book travel on our desktop computers, laptops, and mobile devices.

What is the online travel industry?

Companies that facilitate purchases of flights, hotel rooms, rental cars, and travel-related activity over the web comprise the online travel industry. The industry includes well known travel services such as ExpediaTravelocityTripAdvisor, and Orbitz Worldwide. It also encompasses newer, smaller companies, often competing on the basis of incremental innovations. For example, travel site Hipmunk.com presents airline query results in a visual format, ranking results not only by price but also by travel length. 

How big is the online travel industry?

The online travel industry is a subset of the global travel and tourism industry, which, according to Statista.com, had a direct impact of $2.2 trillion on global GDP in 2013. U.S. revenues of online travel companies were estimated at $157 billion in 2013. Revenues of the global online travel industry, sometimes referred to as the global “digital travel industry,” are estimated to be between $400 billion-$500 billion annually. With increasing Internet usage worldwide, we can expect this market to continue to expand, especially in developing markets such as Latin America.

How does the online travel industry work?

Corfu, Greece. Source: iwiseguy71 under Creative Commons license.

The online travel industry is divided into three primary categories: suppliers, online travel agencies (or OTAs), and aggregators. Suppliers are the airlines, hotels, and rental car companies offering their services to businesses and individuals. Suppliers sell services directly to consumers via their own websites, but also widely utilize OTAs and aggregators to market their inventories. OTAs provide suppliers’ pricing to consumers and fulfill online orders. Aggregators provide a means for web users to compare prices of OTAs and suppliers for specific travel queries, routing users to back to these organizations for purchases.

In recent years, major OTAs like Priceline and TripAdvisor have extended their revenue base by purchasing aggregators, blurring the line between the two business models. Priceline owns aggregators Kayak.com and Booking.com. TripAdvisor counts Airfarewatchdog.comand BookingBuddy.com among its properties.

OTAs and aggregators rely on both organic and paid search (i.e., searches for travel sites on search engines like Google) as well as other advertising spends to capture customers. Priceline and Expedia are by far the largest digital advertisers; according to e-commerce research organization eMarketer, Priceline’s 2013 global spend of $1.8 billion was equal to over half of all digital travel advertising spend in the U.S.

What are the drivers of the online travel industry?

Several trends and financial factors drive the online travel industry. Most prominent is global economic growth. As you might expect, rising discretionary incomes play an important role in the industry. However, as OTAs receive commissions on sales, the direction of hotel room rates and airline rates also affects revenues. Rising average daily hotel room rates since the recession of 2009, for example, have benefited OTAs’ top-line revenue.

Meta-search, the process by which an online travel site includes results of several different OTAs on a single page for easy comparison, also drives this industry. The convenience of meta-search results has propelled the rise of aggregators and is partially responsible for the recent popularity of aggregators as acquisition targets by traditional OTAs.

Perhaps the most noticeable trend driving the online travel industry is the shift from desktop computing to mobile phones and tablets. The general tilt in the population toward “mobile” usage is having a marked impact on the online travel industry. According to industry research group PhoCusWright, mobile phones and tablets made up 20% of online travel spending in 2013. As this share of the total industry rises, OTAs and aggregators will invest significant resources to optimize their interfaces for mobile devices.

The growing tendency for digital apps to foster consumer-to consumer transactions will also influence the online travel industry in the near future. Home sharing site airbnb.com raised nearly $500 million of private venture capital investment in 2014, at an impressive valuation of more than $10 billion. The interest of Silicon Valley in pioneers of the sharing economy like airbnb indicates that new breeds of travel sites — bypassing both suppliers and OTAs — have the potential to unsettle the business model of this still-young industry.

Finally, long-term capacity trends in the airline industry will drive online travel opportunities for years to come. Expansion in the online industry has occurred in tandem with the falling cost per mile of air travel to consumers, as airlines have revamped their fleets with lighter, more fuel-efficient aircraft and focused on lowering fixed costs and increasing profitability. Air travel is vital to the online travel industry, as healthy aviation traffic drives not only sales of flights, but hotel stays and rental car bookings as well.

via The Online Travel Industry: Investing Essentials.

Airbnb roll out a new brand identity centered on “belonging anywhere in the sharing economy”

Airbnb have recently announced and launched a complete overhaul of its brand identity. 

Airbnb is a community marketplace for people to list, discover and book unique spaces around the world through mobile phones or the internet. Airbnb connects people to unique travel experiences at any price point, with over 800,000 listings in 34,000 cities and 190 countries.  It has found accommodation solutions for over 15 million customers.

airbnb old logo

Old Logo

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New logo

The launch is not without controversy with a number of industry commentators poking fun at the suggestive nature of the logo in addition to claims of plagiarism.

We like it….and have taken an extract from their blog written by Brian Chesky one of the co-founders that provides insights to the thinking behind the new brand identity.

“In the end, nothing can express our identity more profoundly than the stories of people who make up this community. When we started Airbnb, I had no idea about the people we would meet, or the friendships I would make. Then I met Amol, one of the first guests, who later invited me to his wedding in India. I met Sebastian, who was trapped in his house in the middle of the London Riots in 2011. Before his own mother had a chance to check that he was okay, seven of his former guests did. And I met Shell, who saw the devastation wrought by Hurricane Sandy, and listed her home for free to those who were displaced. 100415a-HQ28-007 NATO Headquarters Brussels. These people, along with millions of others, have their own unique backgrounds and life experiences. We all come from vastly different cultures and places. And yet, no matter how many miles may separate us, we are united by the universal, powerful, human desire to connect, to understand, and to belong. So together, with this new identity, I look forward to starting the next chapter of this improbable journey with the idea that first set it in motion—the belief that belonging can take us anywhere”. — Brian Chesky airbnb_logo_4things

Read more on the drivers behind the new brand positioning at:

http://blog.airbnb.com/belong-anywhere/

MediaPost Publications TripAdvisor, Hotwire Top Travel Site Ads, Study Shows 04/15/2014

by Laurie Sullivan, 14th April 2015, 2:35 PM

Phoenix Marketing International will release findings this week from an online travel audit analyzing consumer sentiment about the most popular travel industry ads on TV.

The study, “Online Travel Audit,” fielded in mid-March, analyzed 50 television ads from more than 30 travel search and reservation Web sites. It also looked at travel-related

Español: Logotipo de trivago

Español: Logotipo de trivago (Photo credit: Wikipedia)

advertisers, such as hotel and car rental, including American Airlines, Hotwire, Priceline, Trivago, Enterprise Rent-a-Car, Southwest, United and Hilton. The study compiled more than 3,500 responses.

Josh Berger, research director at Phoenix Marketing International, gave MediaDailyNews a first look at results. He said researchers also tested ads from American Airlines, Southwest, Delta, and United, as well as travel destinations like Orlando and Texas. “Ads can succeed several ways, whether they engage through a relevant message or empathy,” he said. “A straightforward approach as to what makes Trivago different than other search travel sites seems to work for the site.”

Business and leisure travelers identified Trivago for its advertisement The Perfect Hotel as the overall top-performing message. More than 55% of leisure and 50% of business travelers said they would recommend the site to others. The newcomer’s message tells consumers the site can compare hotel prices from more than 100 Web sites, adjusting the price depending on the budget.

Image representing TripAdvisor as depicted in ...

TripAdvisor via CrunchBase

Berger said Google did not rank within the first five sites. Other sites like TripAdvisor and Hotwire maintain a category lead. “We really think that as the survey product gets built up over time, it will give us a better understanding of trends and the growth of Google, as well as sites like Trivago,” he said.

Overall, Hotwire took the No. 2 and No. 3 spot among leisure travelers, with its ad From New York to Texas ranking No. 1 with the highest recall at 81%, followed by its Florida to Seattle ad with 79%. Expedia and Priceline rounded out the top five overall spots for leisure travelers, respectively.

While many leisure travelers are more concerned with saving money, business travelers look for conveniences. Business travelers ranked Hotwire No. 2 and Hotels.com, No. 3, with Kayak and Expedia following in that order. Hotels.com, The Obvious Choice & Captain Obvious, had the highest recall among business travelers.

Enterprise Rent-A-Car’s 50 Million Tree Pledge took the most buzzworthy ad in the category, with 30% of travelers saying they would likely speak positively about the advertisement to others. The ad improves the consumer’s impression of the car rental company by tapping into charitable effort. After seeing the ad, 60% of people feel better overall about the company compared to a travel average of 36%.

via MediaPost Publications TripAdvisor, Hotwire Top Travel Site Ads, Study Shows 04/15/2014.

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World’s first Arabic iOS travel metasearch app launched by Wego

World's first Arabic iOS travel metasearch app launched by WegoSingapore, 25 March, 2014 – Wego, the leading travel metasearch site in the Asia Pacific and Middle East, today launched the world’s first dedicated flights and hotels travel metasearch mobile app in Arabic for iOS.

“The response from GCC countries to Wego’s fully Arabised site has been overwhelming,” said Mohamad Ibrahim Masri, Managing Director, Wego Middle East and North Africa.“This is particularly true of mobile and tablet users, so it made complete sense to invest in a fully localised version of our mobile app, especially where experts predict an almost 14-fold increase in MENA mobile data traffic by 2018.”“

The app for iOS comes complete with right to left language support Arabic RTL support for android coming soon, for comfortable navigation of Wego’s extensive global metasearch platform, available in multiple currencies, displaying both local and global air services and accommodation options.”“Wego was the first comprehensive travel metasearch site to be launched in the Middle East, also in Arabic, at http://www.wego.ae in 2012,” added Masri. “We continue to build valuable partnerships with local travel tourism businesses in the region including Emirates, Qatar Airways, Etihad Airways, GulfAir, Musafir, ArabRooms and more to be announced shortly.

”Tourism businesses can now also use their own branded version of Wego’s metasearch platform on mobile in Arabic, using Wego’s APIs available through the Wego Affiliate Network http://www.wan.travel.Wego’s free travel metasearch app was recently launched in the company’s core markets and is rapidly gaining traction; ranking number one new travel app in Singapore, China and Thailand, number two in India, and in the top 100 travel apps in 20 countries

.“We’ve had very positive reviews of the application so far and the download momentum is continuing to accelerate,” said Matthew Varley, Wego’s Chief Operating Officer.“There were a number of challenges that we faced in developing an authentic user experience in Arabic that would meet the expectations of the local market,” Varley continued. “We spent a great deal of time consulting our Arabic speaking colleagues so that every minute detail was reviewed and verified. We paid careful attention to numbers, calendars, currencies and labels and the complexities of tools required for right to left translation, screen transition directions and swipe gestures were all a huge challenge.”“We’re very proud of our product team, made up of mostly English speakers, who, in conjunction with our MENA colleagues, were able to produce such a high quality app in Arabic which is one of the most challenging languages in the world in terms of translation.”“Wego has now be

via World’s first Arabic iOS travel metasearch app launched by Wego.

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