Gathering Europe's top travel company CEOs before their peers, The PhoCusWright Executive Conference Europe in Paris 26-27 September sparked a two-day conversation on the next generation of online travel.
Whether from the corporate, leisure or distribution spheres, conference presenters touched on themes of innovation and diversity, and declarations of supplier friendliness were universal. Through questions from the floor and PhoCusWright's trademark talkbackers, a dialog developed among the speakers themselves as well as with attendees about coming developments in the online travel industry in Europe.
Innovate
Innovation sits at the heart of lastminute.com CEO Brent Hoberman's vision for the future of online travel: travel must invent its own Skype, its own iPod, he said. David Soskin, CEO of Cheapflights, concurred, touting innovation so advanced that its benefits must be explained to customers. He cited three fabulously successful retail brands that, as concepts, would have appeared to have been stretches, to say the least: no frills, no reserved seats airliner Southwest; assembly-required and remotely located Ikea; and pricey and complicated Starbucks.
Such radical innovation, Soskin insisted, is necessary to create a brand that is not overly reliant on search and ad monoliths such as Google. "If you look for an auction site, you do not google 'auction,' you type 'ebay,'" he noted, also citing Amazon.com and other brands that have transcended Google. Hoberman cited a host of next step applications that will help the effort to attract customers directly, including voice recognition, mobile applications and sophisticated personalization.
Is the Old Boss the New Boss?
European tour operators and the GDSs, known more as the fading status quo than the future of online travel, were very much in mind, as was the future of the low-cost airline segment as it matures. Amadeus Global Travel Distribution executive vice president, Commercial, David Jones insisted that Amadeus sees the GDS as a growth center, citing opportunities in emerging markets. However, he noted that Amadeus needs to get the major low-cost carriers into the GDS - "we need to put that right." This will happen because as budget carriers mature, it will be necessary for them to distribute through all channels, Jones said. EasyGroup chairman Stelios Haji-Ioannou, after his enumeration of the areas of self-sufficient potential for his company, responded to Jones' declaration with his own invitation of sorts: "Make me an offer I can't refuse."
Also envisioning a maturing budget air segment was Ronen Stauber, president and CEO, Consumer Travel and GTA Hotels, International Markets, Cendant TDS. He predicted low-cost carrier alliances within five years, as budget carriers expand ancillary sales and flag carriers adjust to the new market realities. And Opodo CEO Simon Vincent stressed that wits and imagination could compete with marketing brawn in Europe. He noted that while Opodo has boosted its non-air sales and dynamic packaging is the rage, "there's no question that money can be made on air," and he declared that the packaged holiday "is alive and kicking." Market specific "guerrilla marketing" can help the last native European online travel agency outwit, if not outgun, the U.S. competitors, he said.
Even those with the budget for marketing and technology investments, however, are not immune to doubt. Sol Melia's vice chairman and CEO Sebastian Escarrer spoke of worrying two years ago that his €100 million investment in the Internet was overspent, but the returns have been robust in the past two years. He noted that Web distribution helps to enable knowledge of the customer and ownership of the guest, two crucial aspects of securing return business.
It's Good to Be the Milkman
Following the lead of PhoCusWright CEO Philip Wolf, whose opening remarks paralleled the decline of the American milkman with the transformation of travel distribution, Marc Hildebrand, president & CEO of TUI's TQ3 Travel, said being the milkman is not so bad. TUI's content ownership and global reach effectively put it in the dual role of supplier and intermediary. Hildebrand emphasized that while 50-60% of all travel may end up online, the rest will remain offline, a candidate for high end back office automation, but offline nevertheless.
After a slow start, Europe's tour operators are finding their place in the online market. Simon Breakwell, Expedia's president for EMEA, envisioned a coming convergence of the large European tour operators and online travel agencies, noting that agencies don't know the tour operator business that well but are figuring out an asset-light approach, while tour operators are aggressively entering the online arena after some false starts. "They'll figure it out and we'll figure it out and we'll probably be in the same space in 10-15 years," he said.
Search Tool Blues
This convergence of tour operators and online travel agencies may be spurred by the need for online travel agencies to avoid becoming distributors of leads and referrals rather than of travel products. Breakwell lamented the concept of investing "hundreds of millions in marketing and technology" only to have a metasearch site scrape his site for the information: "It sucks," he sighed with furrowed brow. Noting that consumers already use online travel agency sites to search for travel and then book elsewhere, he allowed that "maybe I am willing the tide away," though he added, "I don't think so."
PhoCusWright analyst Susan Steinbrink presented new consumer research that supports the vital role of search in the travel planning process and the propensity of consumers to search online travel agencies and book elsewhere. Among the most often cited sources of information for vacation planners, online travel agencies saw the largest drop off from researchers to buyers, from 44% to 37%. In addition to this evidence that some consumers may see online travel agency sites as search tools, search is clearly important for travel research - three-fifths of online travelers cited search engines as resources to research their vacations.
Value vs. Cost vs. Service
A running theme among those who deal with corporate clients was the value-cost relationship. Richard G. Lovell, COO for EMEA at Carlson Wagonlit Travel, noted that the transaction business is effectively commoditized, but cultural advice, VIP services and security are emphatically not. Charles Petruccelli, president, Global Travel Services, American Express, said that corporate travel companies must innovate on the product, the approach and the processes. However, customers no longer see value. "I think you don't need to be a very strong marketer to sell for ten dollars a ticket point to point." He said those ten dollar tickets "pollute" the customer, blurring the distinction between pricing a product for value and competing on price.
BTI CEO David Radcliffe offered his own pithy and unvarnished opinions, keying on what he saw as his competitors' focus on cost. He wondered why his American Express colleague worries about ten dollar air tickets, and declared that all travel management companies are not the same. "We genuinely don't care how much of our business is online or offline," he said, noting that many of his company's clients are paid much more than his employees serving them, so it made little sense to shift the booking work to the client. According to Radcliffe, unlike his competitors, "we are not in the business to make money on the transaction."
The debate over value and price was recurrent and not confined to the corporate space. Andrew Phillipps, CEO of Priceline Europe, insisted that although surveys keep showing that consumers cite quality and content when asked to list their concerns, when the single most important factor is requested, price comes to the top. At the same time, focus on cost and profitability can inhibit a company's development. In a one-on-one session with PhoCusWright's Philip Wolf, Jean-Marc Espalioux, chairman and CEO of Accor, made the case for diversity of product, noting that when a company concentrates only on where it is most profitable, it will inevitably neglect other strengths and opportunities.
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