Airlines must come to terms with a new distribution technology: sophisticated web searchers that trawl through many travel sites to find the much-sought after lowest fare
The 1990s proliferation of travel websites, while a boon to internet shoppers, also gave airlines a competitive opening, luring customers with a promise of the cheapest fares. Now a new generation of search engines that simultaneously mine dozens of travel-seller sites for the lowest fare presents a new challenge.
Meta-search engines, once more commonly known as web crawlers, rest on the virtue of simplicity: one-stop shopping not limited to a single source. They search out sellers then scour dozens of internet sites at once, searching airlines, hotels, resorts, rental car firms and others for any offering that meets the user’s search demands. The engines then filter out the results for relevance and display the prices with links to the seller’s site. Typically the consumer pays nothing for the search, though the agency that books the travel may charge a fee. If the meta-search sites make a profit, it is through referral fees accrued when a user clicks through to the site that actually sells the aircraft seat, hotel room or car.
Although meta-searchers’ market share is only some 2% of travel bookings and dwarfed by giants such as Travelocity or Expedia, their rapid growth and the developing interest from internet powerhouses such as Yahoo may force airlines to take these sophisticated searchers seriously. This comes as major airlines strive to refine their distribution strategies so they can connect more directly with their customers.
The Google model
The emergence of meta-search could represent the convergence of search engines and travel. Just as the Google search engine transformed the way many users find information and news on the web, meta-search engines stand to transform the way travel is bought and sold, especially now that some big name brands are getting in on the act. Internet portal Yahoo bought Farechase last July; AOL, part of the Time Warner media empire, bought a stake in Kayak.com before it went live in February and Expedia owns Ask Jeeves. These moves are evidence that Cendant’s landmark purchase of Orbitz last year continues to reverberate through the distribution world. Cendant is the parent of the Galileo global distribution system, UK site ebookers.com and CheapTickets.com.
The buzz about meta-search comes as US travel buying turns a corner. This year, more US travel dollars will be spent on-line than off-line, not counting corporate travel. And in 2006, with corporate travel in the mix, travel dollars spent in the USA on the web will have eclipsed those spent offline. In the USA, some $66 billion, or 58%, of leisure and unmanaged business travel will be purchased online in 2005, according to the PhoCusWright consultancy, and in 2006 that figure will climb to $78.5 billion or 66% of the market.
Indeed, Forrester Research travel analyst Henry Harteveldt, although a sceptic about meta-search, says: “Farechase doesn’t matter in itself but matters because it has a Yahoo link, just as Kayak matters because of its AOL linkage.” Harteveldt notes that AOL’s decision to use Kayak to power a new travel service called Pinpoint by AOL puts it in direct competition with AOL’s other travel offering, powered by Travelocity. Harteveldt says “AOL’s Pinpoint will disrupt the status quo, triggering a shake-up of the web travel landscape.”
This trend is having a direct on-line effect: over the last six months, visits or discrete clicks at four of the major travel meta-search engines increased by 304%, according to Hitwise, an Australian Internet-measuring firm. Bill Tancer, vice president of research for Hitwise, says that of the meta-searchers, one of the newest, Kayak.com, showed the largest increase in market share. At Kayak, visits rose 6,019% in the six months ending in April. Other travel engines are gaining significant ground as well: Yahoo! Farechase was up 659%, and Mobissimo up 350%, Hitwise says. Tancer stresses that these increases come from relatively limited bases and may be driven by links and affiliations. “An enormous percentage of travel meta-search traffic comes from other travel sites, 33% compared to about 25% for autos, and the users tend to be affluent and often older consumers,” he says.
Some liken the rise of comparison engines to the advent of cable television, although Businesstravelbeat.com editor Jay Campbell believes such comparisons are as much media hype as reality. A search engine is only as good as its sources of information he says and, without exception, these travel sites have inventory limitations. Sites such as Travelocity withhold their content and chief executive Michelle Peluso says the Sabre-owned company wants to move away from the ‘commoditisation’ that a comparison shopping site brings to travel with its emphasis on price over value. Eventually, Peluso says, consumers cease to distinguish between one carrier and another. As she implies, airlines also face the challenge of overcoming the mistrust that motivates some comparison shoppers who believe that airlines are hiding their lowest fares.
Harteveldt notes that many use the phrase ‘screen-scrapers’ to denigrate the searchers because of the robotic search engines they use to gather data from other sites, often causing a slowdown in the functioning of the site being searched. David Cush, sales director at American Airlines, says, “They can become a technical burden when they are scraping your screens. They slow you down.” His airline raised issues of electronic trespass and sued several screen-scrapers in a case that was settled in 2003. But Harteveldt draws a distinction between the new entrants and the decade-old aggregators because the older sites often present search results in a set of featured sales or in newsletters; among these he lists SmarterTravel.com’s BookingBuddy. TravelZoo, like SmarterTravel.com, appears as a customised newsletter while other aggregators, such as Qixo, charge a fee to the consumer and some rely on advertising.
One of the very first comparison sites, SideStep.com, initially required consumers to download a programme into their PC to access its comparison shopper but it has recently introduced a web-based tool. Phil Carpenter, SideStep’s vice-president for corporate marketing, says: “We view this as online travel 2.0”. He stresses: “We are trying to work with the airlines as partners and in a respectful manner. Ours is a consent-based model. You won’t see lawsuits or the like in our relationships.” SideStep, was founded in late 1999, with $17 million in private funding, and has been profitable every year since, except 2004.
Carpenter says: “Online travel agents democratised the process by shifting the power from the little green screen on a travel agent’s desk to the consumer’s computer screen. Travel search is the next logical step.”
Norm Rose of TravelTech Consulting says the bottom line success of meta-search “depends on the tool’s ability to access full content and deliver comparative shopping that is comprehensive enough that they look no further”.
Brand equity
Still, Tancer says: “The travel meta-search engines are on the way to inserting themselves into the travel shopping chain. Over time, they will build brand equity.” As he points out, one of the newest, Kayak, showed the largest increase in market share. In a category in which word of mouth is all important, Kayak is catching on in part because of its association with the New York Times newspaper. Kayak’s deal with about.com, a New York City consumer site that was recently acquired by the Times, gives it potential access to 22 million monthly visitors. Founded by veterans of Orbitz, Expedia and Travelocity, Kayak chose its name, according to vice-president Keith Melnick, for business development “because when we began we had an empty shell. We intentionally chose away from a name like ‘travel’ as we move to build something. Sure we want to be the ‘Google of travel’. Everyone in travel search does because meta-search is very similar to what Google does.”
Another meta-search site, Mobissimo, has gained a following among those who like its deeper access to non-US carriers. Its founders include Svetlozar Nestorov, who collaborated with Google’s founders on advancing search technology while in graduate school. It has found favour with Time magazine, which named it one of the “50 coolest sites”. Other sites such as cheapflights.com, a UK-based search firm that has expanded into the USA, specialises in harder to find carriers. Some are behind the scenes, such as AgentWare or Dolphin systems.
According to Melnick, Kayak - and other sites such as Mobissimo - avoid screen-scraping by searching in three ways: a faring engine (such as ITA); an XML direct link and the so-called screen-scraping or ‘spidering,’ which Melnick calls “our least preferred way”.
The conflict between carriers and searchers that SideStep’s Carpenter downplays could become a defining element of relationships within the industry. Search engines may develop into another intermediary between carrier and traveller just as many airline’s strategic goals are to connect directly with the buyer and cut out the expense of a distributor. Harteveldt says airlines will counter meta-search growth with “digital desktop-marketing to forge direct customer relationships” adding that airline motivation to co-operate with meta-search is “driven largely by their fear that they will lose traffic but the meta-search engines may grow into monsters. Now they are giving it away but they may not forever.”
Melnick insists meta-search operators are not inevitably bound for conflict with the airlines. He explains: “The plan was to break search away from fulfilment and leave fulfilment to the airline. So what we are doing is developing qualified leads and sending them to the supplier.” Harteveldt says this gives travel companies the opportunity to use search engines not only as lead generators but “as effective tools to capture more cross-channel customers”. This will be the test of an airline’s own website and lowest-price guarantees but meta-search executives concede that airlines could easily take the kind of dramatic steps that hotels have taken in limiting access to their inventory. The InterContinental chain started this last year by barring sites that do not meet its standards. In June, the Hilton group moved to keep travel sites from selling its rooms unless they complete an accreditation process.
Primary audience
As long as meta-search is largely confined to leisure travel, this conflict may remain only a possibility. And certainly the primary meta-search audience so far is leisure travellers, says SideStep’s Carpenter. He adds, though: “We have a small percentage of business travellers who tend to be small firms and entrepreneurs, a group with a similar psychographic.” TravelTech consultant Rose says that business traveller adoption of meta-search will be the key test. Rose, who also consults for PhoCusWright, predicts that when corporate bookers “use meta-search to compare prices against corporate self-booking tools and find better prices, this will cause some static”.
Until the battle lines for a clash between airline and meta-search operators are more clearly drawn though, even the most pointed critics are adopting a policy of more-or-less peaceful coexistence: American’s Cush says the carrier has signed a deal with Mobissimo, the only meta-search in its distribution arsenal. He adds: “Distribution strategy has to have many tools – and engines.”
DAVID FIELD WASHINGTON
Source: Airline Business
