Thursday, May 7, 2009

Legacy OTAs: The Sequel -- Expedia Empire Strikes Back

Expedia, in essence, kicked off the remarkable commentary on this blog from Travel's Best and Brightest, when the company mentioned in an SEC filing that "legacy online travel agency companies" face a hardball competitive environment and are hard-pressed to differentiate.

In blog comments, luminaries in the online travel business criticized the OTAs for just that -- lack of differentiation and innovation. They hit the OTAs for going after the "low-hanging fruit," picking off consumers where the most money is, and neglecting the inspiration phase of the trip lifecycle.

And, yesterday on the Dennis Schaal Blog, near the bottom of the comment thread, Expedia spokeswoman Katie Deines left a comment on the debate.

I republished it here because it is newsy, given the fact that Expedia unwittingly touched off the debate because of its "legacy" statement, which I initially cited here on May 1.

Deines commented: "This discussion suggests that tangible developments to the consumer shopping paradigm are the only form of innovation, but that's only one side (albeit critical) of the travel distribution equation."

"As Expedia builds the most intelligent online travel marketplace in the world, we're certainly hard at work developing new tools and resources to aid travelers in finding the right trips at the best value," Deines continued. "Underlying that are our efforts behind the scenes innovating how we match our partners' supply with complementary consumer demand and vice versa."

Deines added: "(And for the record, does offer the ability to shop by theme in prominent places all over the site, including home page ["Explore by Trip Type"], and Vacation Packages and Hotels tabs ["Vacations by theme," "Hotels by theme"] ...)"

It is true that Expedia has been an innovator in some regards through its deft acquisition of TripAdvisor and the building of Expedia's advertising and media business.

In addition, Expedia indeed has been a leader in creating new types of business models for hotel partners, which I wrote about in Travel Weekly.

Still, those are very valuable and vital business-model innovations, but their behind-the-scenes nature makes these twists fairly impenetrable to consumer consciousness.

And, how soon will it be before Expedia's peers catch up in the media and hotel-model spheres?

The following comments in the Travel's Best and Brightest post reflected some of the common suppositions about the OTAs and Expedia.

Scott of TripIt said: "Yet you go to Expedia and you can't just search for air to 'Hawaii' and you can't even search for hotel that way. Why do we make it so hard for the consumer? I don't really care if it's the big island, Oaho, Maui... I just want warm and tropical with pineapple drinks and ocean waves."

Elliott Ng of the Up Take Travel Industry Blog criticized the OTAs' channel mentality, but supported Expedia's acquisition tear.

Ng said: "This difficulty of Web segmentation is then further reinforced by OTAs embracing a "channel" or "distribution" mentality. Developed in part through being successful and selling seats and rooms to people that most want them, it becomes extremely difficult to think more broadly about providing "content" to people who are not decided on their destination, for example. Take Expedia or Travelocity. I would contend that the skills sets (and technology platforms) at TripAdvisor or IgoUgo are very different from those at the OTAs themselves."

Ng added: "If I were an OTA, I would try to imitate Expedia's strategy -- buy up a bunch of content businesses, run them separately, and use them as a strategic asset to drive traffic to my booking businesses."

And, Douglas Quinby of PhoCusWright put an historical perspective on the debate.

Quinby said: "When it comes to innovation, travel intermediaries have a pretty mixed (that's being generous) track record, especially when they are under threat -- think travel agents, tour operators and wholesalers, GDSs. Some have done well, most have not."

Quinby added: It is hard "to remember those days when OTAs were thought of as young, nimble, innovative companies, more tech than travel... Now barely 10 years old and they're already supposedly the lumbering giants in travel distribution.

Quinby concluded, regarding the Travel's Best and Brightest comments: "This is truly an amazing thread with input from some amazing people. It highlights that online travel distribution will continue to be no less riveting in 2009."

Hey, Douglas. It's only the beginning of May.

1 comment:

Joe Buhler said...

Totally agree with Douglas on the innovation comment. Reading the claim that Expedia "builds the most intelligent online travel marketplace in the world", I can only say I have my doubts. Surely, they are hard at work to defend their leading position in the travel marketplace and with their high brand recognition it is easier for them to succeed at that than other brands.

What I don't think they do to defend it, is being the most innovative company in the travel space but by throwing more "best deal" messages out there and judging from what lands in my inbox from the OTAs these are far from innovative but just more of the same.

The real innovative solutions to address the increasing frustration level consumers express in every research study will likely continue to come from new, nimble start-ups. The question remains, whether they can get the market penetration necessary to stay in business as independents or get acquired by a major player. In the latter case, let's hope they won't then be stifled in their innovation but become the catalyst for improvements at the acquirer.