By Steve Endacott, non-executive chairman, Zen3 Group
High Google acquisition costs have forced all major OTAs to invest heavily in above the line advertising mediums such as TV, in order to generate brand awareness.
This results in more customers visiting sites directly, or searching using brand terms, at a much lower Google cost.
Few OTAs now make money from advertising on generic travel terms because of the highly competitive nature of PPC.
High click costs and sub 1% conversion levels are making more OTAs encourage phone-to-book or online chat session methods.
This may increase cost, but the human contact dramatically increases conversion levels and often increased up-sell revenue covers this cost.
Hence, we are seeing the merging of online booking and call centre fulfilment, with relatively seamless interchange between the two media these days.
We are also seeing high street retailers like Hays Travel successfully supporting their shops network with websites, which pass phone call leads back to their shops for booking completion.
It is therefore a surprise to me that major OTAs like Travel Republic and On the Beach have not acquired a network of retail shops.
These shops would dramatically improve their brand visibility and provide physical locations, to add to their online brand presence.
Logically, by offering a shop, click or call booking model, they could make their TV campaigns more cost-effective and at the same time increase customer convenience.
However, the UK Dnata group which already owns the required assets (high street shop in the Global Travel Group, the OTA Travel Republic and the Sunmaster call centre business) has not yet made any moves to introduce common branding.
I suspect a major reason is that their retail network is a franchised model, rather than an owned shop network. The key problem here is how do you motivate all the parties to work together and share bookings?
Online marketing progressed when sophisticated attribution models were introduced.
These allocate the commission from a booking across its online route, rather than a last click model, and recognise early stage marketing activities.
In the future we may need to adopt similar attribution models to allocate benefit to shop networks; not just for the customer leads that start via a shop, then concluded online, but also for the brand benefit they provide.
The implementation of the European Travel Directive in 2017, assuming the UK does not vote for Brexit on June 23, may also provide a motivator for a combined online and shop network.
There are clear financial benefits in basing a dynamic packaging tour operation outside of European boundaries – avoiding the threat of an estimated £20 per passenger Tour Operator Margin Scheme VAT charge, for one.
This may tempt many retailers to stop dynamically packaging holidays within their shops and use a central offshore tour operation.
Logically, these tour operations should also have an online presence, supported by an offshore call centre, to complete customer choice.
I still believe the most sustainable distribution models, are homeworker networks like Travel Counsellors, who have built localised community brand recognition through exceptionally high customer service levels.
High repeat customer levels, combined with minimal marketing costs, make this a highly profitable and sustainable model.
To me the ultimate distribution network is a shop network staffed by homeworkers, working in the shop on a rotational basis and using it as an office to support their own localised customer networks.
Boost this with a centralised call centre, online bookable website and offshore centralised tour operation in order to create a future-proofed, highly profitable travel model fit for the 21st Century, that could really maximise the benefit of TV advertising.
However, unless somebody is willing to write some very large cheques, this ultimate distribution platform is likely to remain a work of fiction in blogs like these.