Ahead of what some believe will be one of the toughest years in the travel sector for at least a decade, Travolution asked a cross-section of executives and commentators for their predictions for 2009.
Here for the first time senior executives and bloggers stare into their crystal balls to second-guess the events which will shape the industry over the course of the next 12 months.
Graham Donoghue, Travelsupermarket:
* We can definitely expect to see more consolidation in the market in 2009. As companies struggle we will see a surge of companies up for sale or mergers
* There will be fewer holidays available next year, as capacity has been cut by the key players in the package holiday market. I would predict this will drive up prices. Overall I think we can expect to see the overseas leisure market down 12 percent in 2009, year on year.
* I think we can expect to see an aggressive push from OTAs in 2009 as the likes of Priceline, Expedia and Travolocity all fight for market share
* Customers will be more promiscuous. Whereas they may have looked at four websites before making a decision on their holiday in 2008, they will be looking at probably at least eight in 2009.
* We can expect to see a resurgence of the big brand/well known package holiday companies. The likes of Thomson and Thomas Cook are likely to do well in 2009
* There will be more media spend online in 2009. We will see less research and development, while the focus will be on ruthless efficiency and the measurement of ROI. Social media and other experimentation that is unproven and untested will suffer.
* Tripadvisor will make a significant number of acquisitions
* Google will start to use their search wiki testing in their algorithm
Troy Thompson, blogger at Travel2Dot0:
* Companies will get smarter about social media marketing.
* Hotels, CVBs, airlines, etc., will continue to adopt social media marketing into their interactive marketing strategy. However, unlike recent examples, organizations will begin to focus social media marketing efforts on relevant channels which will in-turn produce more qualified and actionable opportunities.
* Fewer ‘Travel 2.0’ start-ups will exist at the end of 2009. Numerous factors including the global economy and content overlap will cause several ‘Travel 2.0’ companies…such as travel review or blog sites…to either fold or acquired by established online travel brands.
* Technological advancements will progress at an increased pace. Several ongoing technology advancements, including mobile, social profile portability and synchronization tools, will require that companies within the travel industry become better prepared to adapt to this progression.
Kenny Picken, Traveltek:
* The biggest topic has to be the much talked about credit crunch which will see several more agencies and some smaller tour operators going to the wall very early in 2009 as the “crunch” deepens. All this whilst the industry generally comes round with a small but meaningful revival – but will it be enough? Yesa, just enough to generate some market confidence but life in travel won’t be easy for anyone in 2009.
* The second most talked about topic has to be the ATOL bonding situation where we have seen at last some action from the CAA. I say at last because in my view the CAA have created all the uncertainty due to a complete lack of leadership leading to this terrible lack of clarity in our industry at a time when it really needed it most. Sadly however, they have preyed upon a great company in Travel Republic and whilst I applaud Kane Pirie and his team for being strong enough to challenge the CAA, I fear that 2009 will still see no final decision and when it does come, what will be left of this fantastically innovative online award winning business? One has to fear for them. Why can’t the travel industry just -insure its risk like any other industry?
* 2008 has seen some major consolidation and this trend will continue as the predators continue to buy up the new kids on the block and maximise the profit potential of the acquired businesses through cost stripping. A major advantage in today’s climate as the strong get a whole lot stronger and the weaker companies face very difficult times. Its the same in all industries at present and very much the theme for 2009 in travel with bed banks disappearing one way or another with some regulalrity in the first 6 months. What it will do is what the chancellor wants to see which is create some stimulation in the market and perhaps start the economies heart beating once more! Job losses will no doubt be significant.
Ian Brooks, Puregenie.com:
* Contraction of travel companies whose source of business is over reliant on paid search
* Failure of travel companies who have neither scale nor a niche
* Continued demand for talented managers in ecommerce
Matt Cheevers, Teletext Holidays:
* Co-op – The Co-op will become an even bigger force in 2009. Consumers will be attracted to the brand and wide range of products that they will increasingly offer going forward. They will face a challenge to blend their own and 3rd party product together but I believe they will achieve this by the end of 2009. They will also become a bigger force online with their new web products and really challenge the current big players in this area.
* Business failures – there will be a level of company failures in Q1 of 2009 that has never been seen before in our industry. The credit crunch and the delayed financial impact of the XL collapse will of course be the main factors. This will have a huge impact on consumer confidence and will in turn ensure that the ATOL debate rages on all year. Market conditions will pick up towards the end of the summer but this may be too late for several ogranisations.
* All Inclusive market – this area of the market will continue to flourish as consumers seek better insight into the total cost of their holiday. More companies will embrace this demand with new and targeted products to ensure that the customer experience is improved. The industry must guard against over-selling existing products as more than ever consumers will be seeking quality at a good price.
Roberto de Re, Dolphin Dynamics:
* Changes to the GDS commercial model: the distribution strategies pursued, for example, by easyJet and Lufthansa, could herald a shift to intermediaries increasingly absorbing the cost of indirect channels of distribution. This could result in a fundamental change in the GDS commercial model – with agent booking incentives, which historically have been largely funded by fees applied to travel suppliers connected to these systems, quite rapidly disappearing.
* More travel companies offering a mix of business: for example travel agents will increasingly embrace self-branded dynamic packaging services and become niche tour operators in their own right in order to generate new sources of revenue. This development will drive an upsurge in the number of ATOL holders or ATOL bonded sales. Meanwhile tour operators will increasingly resell other operator’s products, as intermediaries, in order to provide a complete travel service to customers.
* Increase in ‘on resort/while travelling’ type services: there will be an increased in travel-related services delivered via a traveller’s mobile device. Not just booking information but added-value services such as local weather forecasts, entertainment opportunities and recommended restaurants, along with emergency contact numbers. As the guardians of booking information, it will be a natural step for travel companies to increasingly facilitate this service in order to make the information provided both relevant and timely.
Francesca Ecsery, Cheapflights UK:
* People will be more prepared to shop around for a good deal. Price will play a vital role in securing consumers in 2009. As the world’s economic position continues to dominate the news, people will think smarter about where their money goes and will be prepared to take the time to find a good deal. Consumers are expected to cut back spending on items such as clothing, new home furnishings and cares, however recent reports show holidays are the one thing consumers will resist giving up in a recession.
* Experimentation will be out… We are less likely to find new airlines bringing new routes to the market in 2009 because of the current economic situation. However, those willing to be daring and improve their service or offer a new route could flourish as travellers continue to want the discovery of the unknown and unfamiliar.
* Consolidation could be in… The talk of possible mergers between major airlines will only increase in 2009 as flagship carriers continue to look at ways of increasing profits and maintaining their market share. Whether or not the ‘Big Boys’ take the leap from talking to consolidation remains to be seen but by this time next year, we could be looking at a handful of airline groups and fewer smaller airlines. Routes will also be consolidated with less frequent flights scheduled so planes are more likely to fly with maximum passenger loads.
* Extra services will appear at no extra cost. Airlines are realising they need to fight harder to win over consumers, who are increasingly savvy about travel. Whether it be increased luggage limits; complimentary inflight meals and accommodation or pre-departure assistance, some airlines will need to raise the bar and improve their customer experience to ensure return business. The services will be cost effective for the airlines but the recognition that the consumer has power will see a return of pleasure to flights.
* Differentiation will be essential. Airlines will reinvent themselves through creative, cost effective segmentation of their aircraft which will be sectioned off to include areas specific for singles; families; mobile phones and pets. ‘Green’ credentials will continue to be scrutinised by travellers and how a company offsets its carbon footprint will also help set it apart from competitors.
* 2009 will see an increase in demand from consumers for personalised information. We’re already seeing an increase in airlines and tour operators crafting their information to suit the individual consumer and this will only be more in demand in the coming year. Technology will play a key role, whether it be through SMS itineraries or travel guides to their mobile phone.
* Discover a new destination. As a result of the weakening Pound, the industry is likely to see a shift in travel patterns with current popular destinations changing and new ones emerging. This shift is already underway with newcomers like Muscat and Beirut offering hip-hotels, delectable cuisine, historic sights and luxury for half the price of traditional destinations.
* Stand up and be counted. In a bid to accommodate more passengers on the same flight, the upcoming year could see the introduction of the first standing room only plane which will allow travellers to stand upright and stretch out comfortably in a vertical chair. As well as helping airlines maximise their profit per flight, this could even help alleviate incidences of DVT among travellers.
Guy Parsons, Travelodge:
“It is not surprising, given the shocks experienced in the global economy during September, that people chose to cut back on their travel both into and out of the UK.
“Moving forward to 2009, the collapse in the value of sterling gives the Government an excellent opportunity to market the UK overseas as a great value holiday destination. For international travellers, the UK has not been this competitively priced for a generation, with London particularly well positioned as an affordable break –something we have considered New York to be in recent years.
“To capitalise, the government needs to recognise the importance of tourism to the economy and be smart with how it invests its limited marketing spend.”
Professor Dimitrios Buhalis, Bournemouth University:
* Technology to assist cutting costs
* Location-based services and geography mash-ups increasing
* Tour operators investing more in bedbanks and repackaging the package further
Rob Barham, ex-Sterling Airlines and blogger at NoJobRob:
* Ryanair to break another deal with another of their ancillary partners expedia style.
* January “peak booking period” for to be worst ever by sales volume.
* 3 destinations that will do well from UK perspective: South Africa (RAND has followed the pound down), Iceland (incredible nature, weaker currency) and Australia (A380 efficiency, ‘low’ oil price)
Neil Mason, Foviance:
“2009 is the year that consumers will demand that the walls come down.
“Holidaymakers will demand simplification when booking their travel online. Reducing the number of steps needed to book and enhancing the search process to more easily access the relevant information needed will be crucial.
“The seamless integration of Web 2.0 content to provide a richer customer experience will also be key in 2009. The multi-channel silos that create the barriers between web, mobile, call centre and high street physical store (for those that are still around!) will no longer be tolerated by consumers and organisations that fail to deliver a consistent customer experience will begin to suffer the consequences.
“Insights and technology that help travel organisations to understand and even control cross channel service delivery will be of increasing importance. In particular, measurement techniques and technologies that allow cross-channel transactions to be attributed correctly will promote joined up working and help organisations to better meet their customer’s needs.”
John McEwan, Advantage Travel Centres:
“Those of a delicate nature may want to cover their ears for a minute because I’m going to break with a travel tradition and be brutally honest about the industry’s prospects – 2009 is going to be really, really tough.
“But we’re still standing and now is not a time to withdraw into our shells and let the general economic gloom settle.
“Instead it is time to be confident, both in what you do and how you do it. Independent retailers across the country have plenty to shout about and should be doing their utmost to make sure they are heard.
“It’s my belief that consumers will still want that all-important holiday this year. The good news for us all is that the majority of people are not in any mood to take a risk with that purchase. Financial security, sound advice, great service and competitive pricing are all high on the agenda and are all things that our members pride themselves on – hence our bullish approach.
“The consortia all make familiar claims about commission levels, technology and marketing. But beyond that, Advantage offers critical services such as business planning and cash-flow management. Cash remains king so paying special attention to this area will be vitally important, especially in the first three-six months of 2009.
“Our advice is to maximise your earnings in as many ways as possible. Operators are keen to get your business with tactical offers and override deals. Keeping on top of all the deals in the market, and choosing the best ones for you and your customers, is more important than ever.”
Stephen Budd, Highland Business Research:
* There will be a rise in importance of fully measuring marketing spend – particularly online. I think this will have to be addressed. Why? Well, if I want to slash half my marketing budget, which half to pick? I will need to measure what is and isn’t working. I think marketing managers (and their financial directors) will be far tougher on unmeasurable ‘brand’ advertising or faddish social media advertising with no clear objective and will instead fall back in love with the concept of marketing return on investment.
Also, mid-level UK travel firms can often lag behind their US counterparts in really exploiting the data that gets left in online customer activity and which is key to better bottom line sales and marketing activity. I think we will see people getting smarter at online data capture, web data analysis and smart remarketing to that data – in order to get more results from less marketing spend.
* The first glimmers of smart phones being used transactionally rather than for ‘just in time’ data. iPhones and their ilk are starting to have pretty complex operating systems within them and so there will be the increased ability (and desire) to buy things through your phone. Our research suggests that phones are increasingly just part of the online mix alongside PCs (and games consoles!).
* The rise of ‘viable alternative’ destinations that are a) closer and b) cheaper. Instead of the Bahamas, think Tunisia or North African Med. Many destinations in this category have been trying to shed their often down-market image and it could be that they are becoming poised to attract travellers trading down looking for an alternative to more expensive (and time expensive) prior choices. However, security and quality will be the ‘hygiene’ factors that some destinations still will need to overcome to reassure waving travellers.
Nancy Brown, blogger at What A Trip:
* Newspaper and magazine print journalists will either embrace on-line media and travel blogging or fade into the sunset. Case in point, Tom Swick, former travel editor of the South Florida Sun-Sentinel for 19 years was recently introduced as a regular contributor at WorldHum.com.
* Luxury travellers will not scale back on travel plans; however they will capitalise on package deals being offered by high-end resorts
Alan Josephs, Ebookers:
* Google algorithms change dramatically to better incorporate relevant content, driving Travolution headlines and causing a big disruption to (and opportunity for) the online industry.
* Someone introduces meaningful video destination content online that captures industry attention and truly helps people plan their trip.
* Chicago announced as the home of the 2016 Summer Olympics.
Steve Evans, lastminute.com:
* People start to realise ‘social media’ is just the way you engage with and participate in the web community rather than shout at them (stop using it as some sort of zennith term and realise it has to be integrated into everything you do online if you want to succeed).
* Usability – people are going to start to recognise the massive ROI to be had from making your site and particularly your booking flow usable. Given the economic climate I think we’ll see less ‘ground-breaking’ new functionality and more improvement of what exists to make conversion easier for customers.
* Conversion enhancing tools – when new functionality is added I believe we’re going to see a turn towards trying to makle the customers life easier by adding functionality which is useful and helps them during their visit to your site.
* SEO – it’s going to be the buzz word of the year if CPA’s keep rising on Adwords and banners continue to perform less than admirably. Again the economic climate will help drive this.
* Measurement – again, due to the economic climate it’s going to be more important than ever to be able to measure accurately what works and what doesn’t. I think we’ll also see a lot more last-click-wins systems coming to the fore so conversion commissions aren’t paid to multiple sources/channels.
* Semantic mark-up of travel products – basically adding meaningful data to databases of travel products to allow for searches to be based on a much wider array of facets than just destination/date/duration/party as most are now. Can see travel technology companies like Anite looking to integrate a way to tag products in tour operator systems in the future as now they are still aimed at agents and anything extra has to be done outside the reservation systems which makes for much complexity…
James Dunford Wood, Worldreviewer:
* Short haul city breaks are being severely cut back – no more two-three weekends a year to swanky boutique hotels in Prague, Venice etc.
* Package travel looks like having a mini-renaissance – especially all-inclusive stuff. People want the security of knowing exactly what they will spend on holiday, and don’t want the uncertainty of a mounting extras bill, not to mention meals and eating out. So cruises will do well too, and other all-inclusives.
* High street travel agents will benefit.
* Domestic tourism will do well – a no brainer despite last two years awful summer weather. a) we can’t have a third, surely? b) domestic = no flight hassle and cheaper transport costs
* Domestic B+Bs will boom, as will retro/niche and caravan/camping options.
* Long haul adventure travel will prove resilient, for two reasons – gap year and younger age-group travel has an added incentive to take off – no jobs, lets leave the country until the recession is over. So we’ll see a rise in round the world flight packages as well. Also, there is anecdotal evidence that many middle class – middle/upper income employees facing redundancy will take off for a few months in the same way – though those with kids won’t be able to. Some Vauxhall workers too, contemplating nine months free time on 30% pay, are thinking of relocating to India, Thailand and elsewhere for the nine months, where their 30% pay will actually cover a decent living.
Terry Kane, Jumeirah:
* The economic downturn is the catalyst that speeds up the inevitable shift in spend from traditional media to digital channels for advertising.
* A clear understanding of all aspects of, and the effective pro-active management of analytics will be key for all companies. This in turn will require businesses to be much more dynamic in their management of advertising and to shift spend more rapidly and regularly. PPC will prove to be a winner on all online advertising and understanding how to utilise behavioral targeting via keywords, site usage and through implicit and explicit recommendations will be key.
* For hospitality revenue, providing the best possible booking experience (including mobile) through the most cost effective channels i.e. direct, will provide the guest with the best offers and the company with greatest ROI, quite critical for 2009.
Sam Daams, Travellerspoint:
* Easy prediction is that we should finally see a few less ‘trip’ domains. The ones already out there will struggle and new ones will hopefully choose more original names.
* More semantic web apps. The stuff out there at the moment is only starting to scratch the surface. Hard to even find 10 decent sites doing it. Uptake is an example in the travel area. Dapper.net is a great non travel one.
* Traditional publishers becoming increasingly web savvy and exploring new and exciting ways of getting their content online.
Alex Bainbridge, Tour CMS:
* Brand name bidding on Google will end up in court
* OTAs will be forced to consolidate (due to the rise in media model sites). However they won’t be able to consolidate due to legal issues with ATOLs – and their unresolved legal test cases. Hence weak OTAs (or those without strong legal positions) will go the way of the dodo.
* The industry will wake up and realise what we have been building at TourCMS over the last few years!
Lewis Lenssen, Netizen Digital:
* Companies refocusing budget on website conversion rather than maximizing PPC spend.
* The buying cycle will become longer and more complex as consumers hunt for the perfect product.
* UK holidays will grow in popularity.
Mel Carson, Microsoft AdCenter:
* Data will define the successful online strategies of 2009 – diving deep into the numbers and figuring out what really works instead of a slap-stick budget allocation will be key to achieving business goals.
* More brands will be getting into social media, and I don’t just mean Facebook and Twitter, but understanding and valuing online feedback from blogs and forums and acting on it will pay dividends.
* Those companies that start to experiment and gain the knowledge to scale quickly in mobile, in-gaming and other emerging digital media will be the ones to blossom in great shape from the economic downturn.
Richard Carrick, Hoseasons:
* Every travel cloud has a silver lining for someone – this time it will be UK holidays (I hope)
* CRM will come of age, as travel companies are forced by the economic climate to focus on getting as much business as possible for their existing customer base; mobile will play an ever increasing role here.
* Metasearch will thrive as consumers search for value
Justin Cooke, Fortune Cookie:
* The shift of marketing and communication spend towards digital will gain even more momentum and by 2009 the smart travel companies will be spending at least 50% of their entire marketing budgets online.
* Smart companies will evolve their KPIs from tracking online conversion rates to what it is really all about – profit.
* 2009 will be the year when retention strategies and activities come into their own.
* Natural search budgets will exceed paid search.
* There will be an ever bigger push to secure direct relationships and affiliates will see margins squeezed.
* Rail and car rental companies will evolve their digital platforms to become far more experience led.
* We will see an explosion of useful, relevant, contextual mobile web applications.
* User experience budgets will double as companies realise that experience is everything.
* Continuous monitoring, analysis and optimisation, segmentation and behavioural targeting will become the standard.
* We will start to interact with web content by touching it.
Ed Whiting, co-founder, Travelbeen.com:
* Plethera of tour operating companies will close, mainly mid-tailor made companies. There will be an increase in look to bookers online – i.e. a lot more looking and not so much booking.
Jonathan Boston, Strange Corp:
* Keyword inflation will continue – the need for advertisers to improve the effectiveness and measurability of their advertising spend will become more acute. As more budget moves to digital, the marketplace will become increasingly crowded, with the extra demand pushing up paid search costs. Keyword inflation, also called cost-per-click (CPC) inflation, is running at 20% for 2008 across all markets (according to Jupiter Research), and we believe the figure for 2009 will remain high despite the downturn. Since increased click-costs will affect cost per acquisition (CPA), advertisers will need to concentrate on improving conversion rates to offset keyword inflation.
* Conversion optimisation will be key – assuming the current level of keyword inflation, conversion rates will need to improve to keep CPA at the same level. The pressure will be on for advertisers to find solutions that can really improve their return on investment (ROI) by offering end-to-end optimisation for search, display advertising, affiliate marketing and email marketing. Controlled testing is the best way to get results. A/B split tests and Multivariate Testing (evaluating the impact of combinations of changes simultaneously) and click tracking should be defaults within your programme of website improvements. Eye tracking projects could become a necessity rather than a luxury.
* User generated content (UGC) will be King. A Universal McCann study in 2008 found that only 14% of users trust advertising, whereas 78% trust recommendations of other consumers. This highlights something many online marketers have known for a while: user generated content can be very beneficial. Strange view: UGC such as in blog comments, product reviews, video reviews, creative competitions, galleries, and other content has significant benefits: 1.) Brand perception – open, honest, approachable, 2.) Brand engagement – users can contribute and get involved, 3.) Brand dialogue – customers feel important and listened to, 4) Brand trust – your products/services must be good because you let users scrutinise them, 5) Value added – UGC galleries, product reviews and video reviews offer users more immersion and engagement, and 6.) Free content – your users are helping to improve your offering for free.
Peter Matthews, Nucleus:
* Much eating of words – many CEOs will regret saying “consumers will not compromise on their short breaks/two week summer holiday” or “early bookings for 2009 are in line or ahead of projections”
* Carnage in Q1 2009 – for any business loaded with debt; exposed to £/$ or £/€; targeting the ‘masstige’ ‘stick it on the credit card’ market which has disappeared overnight; and online travel business models reliant on ppc to drive traffic (including digital agencies), as quality of clicks has sharply deteriorated, conversion evaporated and ROI increasingly non viable. Some appear to be rather slow at working this out…
* Hope in the niches – hotel and UK specialists, plus online models with strong, differentiated brands, good content, efficient websites and effective SEO (as long as they are not carrying debt), because when consumers do start to book – a lot closer to their departure than ever before – they will be doing all their research online…
Paul Evans, Lowcost Group:
* The relaunched Lowcostholidays will become a top10 website
* Consumers will still travel as winter bites
* Cruise agencies will enjoy a perfect storm with more capacity, higher commissions, more marketing support and lower prices
* Bedbanks will consolidate
* Transport only companies will consolidate
* Manchester United will be the first team for a while to defend and win again the European cup