Intent Media, sponsor of the 2015 Travolution Innovation Report, hosted senior executives at a round-table event to discuss how travel is coping with channel proliferation in the big data age.
The increasing cost of online customer acquisition in travel has seen firms place an emphasis on driving greater efficiency in their marketing budgets.
What one panellist dubbed the ‘Google tax’ – the unavoidable requirement to keep up with rising paid search costs – was an issue shared by all travel retailers on the panel.
Diversifying from Google
Industry sources estimate some firms are spending as much as 70% of their margin on Google advertising, which was 20% more expensive this January than in the same month last year
Google figures show that globally $2.4 billion of the travel sector’s wealth went to the dominant search engine in 2011.
Panellists agreed there was a requirement to innovate to find new cost-effective sources of leads, although Google would remain dominant.
Chris Roche, former Travel Republic commercial director, likened Google Search Engine Results Pages to real estate to explain why costs have been rising so dramatically.
“Google’s an auction and the landing page is like real estate because there’s a finite amount of space on page one and no one wants to go to page two,” he said.
“Over the years Google has brought in its own products, which has reduced advertising space, so if demand stays the same but land’s being taken away the price of the remaining land goes up and that’s what everyone is seeing.
“What that means is Google goes up and up and up and you’ve seen search engines built on top of Google – Kayak and Trivago etc – but eventually they become saturated so you need to find another solution for search because you’ve got to mitigate that cost.”
Roche argued there is a question mark about search as a channel in general and warned against an over-reliance on Google.
“Does it really build brand and retention? My argument is no, I think you have to do a lot more than advertise on Google to build brands.”
Mark Meredith, product and commercial director of Travel Junction, a new Dubai and UK-based OTA that is currently in beta development, said: “We are a very young business in our lifecycle, so for us it’s about knowing where you can compete and where you can’t.
“There’s no point us going head-to-head with the likes of lastminute.com bidding on New York – we just can’t afford to do it. We need to pick our battles. We might go after secondary cities and develop a buying strategy that suits our budget.
“We compete where we know we can, but at the same time we are realistic about where that is.”
Meredith said driving repeat business and loyalty online was a challenge for all retailers.
“I don’t think many OTAs have necessarily cracked the whole loyalty thing,” he said. “It’s a very tough thing to crack because everyone has the same prices and the same product.
“Can someone in the OTA space develop something that differentiates them and so their acquisition costs go down because there’s less reliance on Google? Can we develop our own loyalty programme which facilitates that? It is something we are thinking about.”
Although lastminute.com is arguably one of the better-known brands in online travel, particularly in the UK, chief commercial officer Matt Klein said enticing customers to return was a constant battle.
“The same issue for all of us is how we figure out how to mix all these different acquisition channels together: where do we spend and what do we invest in? Search engine optimisation is constantly evolving and you can invest in that all the time and still need to do more because everyone else is trying to do more.
“For us it’s about getting the right mix and understanding where we offer great [differentiated] product. We do like to think we have relationships with hoteliers and we do source deals you can’t necessarily get elsewhere
“But when we are not specifically selling uniquely sourced deals, then we have the same issues as everyone else: how do we effectively and efficiently get customers back.”
Leading UK online agent Travel Republic has built its brand over the last 10 years largely on Google and by having modern in-house technology that has kept it ahead of the pack.
Neale Chinery, managing director of operations, said mobile has compounded the problem of which channel to focus on, as well as the restriction of real estate for search results.
Travel Republic’s most recent advertising campaigns have pushed its price proposition, encouraging holidaymakers at the bottom of the purchase funnel to make it the ‘last click’.
“You hear everyone saying today that visits are dominated by mobile as opposed to desktop,” Chinery said. “There’s probably a higher propensity to book on desktop so you have to get the mix of the two together and you’ve got to recognise the journey of the customer is across both.
“I don’t think there will ever be a world without Google. The change in [online] ‘real estate’ will only continue. If you’re in mobile you have to be in position one or two. On desktop you need to be in the top three, whereas two or three years ago four or five was fine.
“As a relatively well-known brand the question is how you get the customer to come back without using Google. When they want to come back they type Travel Republic in Google and click through, so even when you’ve got them you’ve got to pay for them.
“How can you disrupt that? We are going through a whole strategic shift around how we rebalance that traffic. The customer will go to multiple sites, so we are trying to get over a value proposition that says we know you are going to go on a journey but don’t forget to come to us.”
Milking leads to optimise conversion
With conversion rates in travel in the low single figures, one way of improving the return on investment of marketing budgets is to improve conversion rates.
Manish Gajria, senior director of product management at Expedia Affiliate Network, said travel could learn from the controversial payday loans sector.
“We are all paying the ‘Google tax’ to acquire the same customer. The challenge we are all dealing with is how we stop that repeat ‘tax’ being paid for the one customer.
“I was involved in a project in the payday loans industry and they milk every referral to the last drop. One person will pay the acquisition costs; if it doesn’t work for them they will refer them down to the next band, which has a higher discount, and then down to the next one and so on.
“They are not going back to Google to pay the ‘tax’ again. Apps clearly are a very good way of getting the stickiness but it has to be coupled with something else.
“The other fundamental thing is people have lost trust that they can get a good price in a specific place online.
“They have been trained by Google and the other players to look and look and look because there will always be a lower price to be found somewhere.
“We all know in the industry that prices don’t vary that much so how do we get people to stop thinking I have to go to 15 places to find the best price? Perhaps you can reverse it out and say if you book with us and you find a cheaper price we will match it.
“If we all use price as that ‘something extra’ then we are in a race to the bottom.”
Mobile and the ‘aha moment’
Mobile might be the big trend for all online retailers but the panel heard the acquisition cost of getting customers to download your app and keep using it is another big issue.
Damon Tassone, Intent Media’s chief revenue officer, said: “Total information awareness has been the paradigm that’s driven desktop. But is that the paradigm that wins in mobile? Or is it going to be curated experiences, not about total information transparency.”
Gajria said firms need to compel customers to stick with their mobile app “otherwise it just takes two clicks to get rid of it.”
“It is an expensive proposition so it has to be a really slick experience,” he said “There’s always that ‘Aha!’ moment. If your app can deliver that at whatever point that customer’s journey is at, even post-transaction, you’ll get brand recall.
“As travel businesses we have a very strong customer service proposition because we are selling a very interactive product.
“It’s really up to us to keep that experience as watertight as possible and to take responsibility for it. If you do that customers will always be loyal to you.”
Jon Pickles, global director of 360 engagement at the Travel Corporation, said : “From an app perspective and mobile it’s all about the user experience and how quickly you can book.
“I probably use four or five travel apps. They are the ones I keep going back to like Uber or Hailo. I use them because they are really convenient and the experience is so easy.
“If you can get people to come to your app and use it time and again that’s how you get loyalty.”
However, Gajria said not all app users are after instant bookability: “The mobile device plays two very different distinct roles in different points in time. In some cases they are a launchpad for a very rich experience the customer wants in the future, perhaps on desktop, and in others they want something right now.
“I believe the travel experience starts when people start looking for travel. If the customer is in that bucket they are likely to just want to browse around, and apps have to be smart enough to understand and take people down that path, perhaps not by guessing but by offering very simple initial experiences which can go one way or the other.”
The call centre continues to thrive
Harry Hastings, director at Ocean Holidays, made the point that success in travel retailing isn’t all about online sales.
Ocean Holidays, a Florida specialist based in Essex, is run by directors who previously founded Como Street Travel and its web discount brand Beatthebrochure.com; however, they have recently switched to become a destination specialist.
Hastings said: “When we first started in January 2004 with a few people in a room and some pages on Teletext, we crossed our fingers and hoped for the phones to ring.
“Two or three years later you needed a website and a PPC budget, and that PPC budget has grown and grown, and year after year cost-per-click has gone up.
“Now we have a niche in a destination we sell. Our competitors try to treat PPC as Teletext once was, but to establish a brand in a market by chucking some PPC at it is very, very difficult.
“Hastings said the firm does not offer online bookings because it sees better return from doing business over the phone as well as improved customer relationship management.
“It’s not because we haven’t got the technology to make that available, but in terms of offering that personal service on the phone we find that our conversion and margins are much greater.”
He said “If you look at our website you’d think we’re not a very tech company, but not if you walked into our call centre and we took you though the CRM we have built in-house.
“It keeps lead generation within the company. From the moment someone comes off a Google ad we are generating data from that lead. A phone call converts about three times better than a web lead.”
Hastings said although there are some notable success stories in the UK travel industry of firms that have focused on online bookings, there are many less-talked-about failures.
He cited DialAFlight, Flight Centre and Trailfinders as examples of companies that have seen huge success in offline conversion.
“There are huge success stories among British companies and tour operators who book packages using call centres and in actually speaking to people. Travel companies in the UK should not be scared of call centres if they can get that customer service right,” said Hastings.
Chinery added: “The best example [of the value of telephone] is probably cruise. How many people can sell cruise online? Hardly anybody, because it’s a more intimate booking and there are so many options. Cruise agents are highly successful but only on the phone”
Giles Parnwell, commercial director at Distribute Travel, said: “Price comparison sites are very online conversion focused, which is quite frustrating because there’s only a certain number of players that do really well on those sites.
“There’s not a publisher out there that has a dual offering for somebody that looks online and wants to call.”
A television renaissance?
Trivago and Kayak were cited as two companies that have poured money into TV very successfully. But can TV be a measurable acquisition channel in the same way as search? Roche said: “I adore TV and I do think it’s one of the great ways to reach customers.
“But as great as it is, that landscape is also going through fundamental change with the digital channel fragmentation.
“I speak to my cousins who are 18 and 19 and they don’t watch TV in the sense that I watch it. It’s all on demand half the time, without adverts, and they engage an incredible amount with the YouTube stars who have TV shows.”
Hastings said: “At the end of last year we made the decision to invest in television but not to do a ‘cut and shut’ ad just to get the phones ringing.
“We chose to invest instead in the production and the quality and we are using that to reach out to tourist board and even hoteliers to get a better deal because we are doing something that’s really showcasing the destination.
“We are not saying we’ve got a three-week run and that’s going to pay for it; it’s about what are we going to do with social, with YouTube, how are we going to incorporate it with our PPC, how can we put it out everywhere.
“The thing is it’s immeasurable, so if you are looking to replace Google it’s a finger in the air.”
Gajria said: “Your TV strategy needs to be very well integrated with your brand and the experience people have on your social channel. The brand experience in the ad itself, the production values, should be one experience – it shouldn’t feel disjointed. You can’t just have a TV strategy which says we hope people will come to our site for free.
“You have businesses out there that don’t touch TV with a barge poll because they don’t have a strategy to create a strong brand; their strategy is to be absolutely watertight on customer acquisition, efficiencies of that acquisition, conversion, repeat etc.
“Their strategy is not so much to recall brand, it’s to be in the right place at the right time and move on. It is an expensive strategy but if you get it right it works.
“Of those that have very heavily relied on TV, like Trivago, I don’t know how much they spend on Google, perhaps less, but their strategy is let’s dump all this money in TV and get brand recall so we don’t have to pay the ‘Google tax’.
“The people who are in the middle have an issue; you’ve got to be in one camp or the other.”
The role of data and personalisation
Klein said: “There’s a difference between just trying to report on data and using data in a predictive modelling fashion.
“Going to a big data company to get them to help you understand your data is different to how you use the data to monetise off your investment.
“It starts with understanding your data because you can’t get to the second part if you don’t. Most people just think understanding your data is the end when, in reality, it’s just the beginning.”
Parnwell said: “There’s a lot of data out there and I don’t think travel as a vertical has got to grips with it, not only utilising it but distributing it for a better customer experience.
“We work with all retargeting companies and they are all good, it works very well, but it could work so much better. It’s a very one-size-fits-all approach.
“They approach retail exactly as they approach travel but travel has so many different permutations. They’re very good at saying ‘you’ve seen this, I’m going to show it to you again’, but it’s not date specific, board specific or passenger-type specific. There’s massive room for improvement in that area because it’s quite primitive at the moment.
“We see building a travel-specific retargeting platform as a massive opportunity. The key to personalisation is showing consumers intelligent recommendations based on what they’ve seen.”
Gajria added: “Collecting data isn’t an issue today. It’s whether you look at your data and say ‘now I’m going to do something with it’, or whether you go back to your problem statements and say ‘what’s my data telling me?’
“I’m not sure the industry is ready yet to outsource this data stuff. A lot of people feel this is their crown jewels and that’s where the answers lie and they want to find the answers themselves and do something clever before anyone else does it.
“I wonder how much the industry is ready to say ‘let’s open the floodgates and make it open source and figure this out together.’ I reckon there’s still going to be a lot of this closed-door work, for a while at least.
“It would be better for all of us if the whole world had everyone’s data – I’m sure the answers would come much faster. But we all feel we have enough and some of the answers are in there.
“I’m not suggesting let’s flood each other with each other’s data. It can be a double-edged sword. You have a customer and say ‘do you want us to personalise your experience?’ They say ‘yes’, but then you do and they flip out.”
Roche said: “Personalisation is not good in any industry and definitely not in travel because how do you cluster people? It’s very difficult. There’s not anywhere near enough insight into customers’ data to have real personalisation.
“Broad-brush averages don’t work, so the problem is to find out how to cluster customers, and some of the best brains in the world haven’t got there yet.”