Ed Whiting – How much would you pay for eSP?

For those of you who may be reading this article following a quick glance at the headline, I’m not aware that scientists have found a way to bottle the ability to acquire information by means other than the known senses of taste, sight, touch, smell, hearing, balance and proprioception.

That is, by extra sensory perception or ESP.

The eSP I’m referring to, as you’d perhaps expect reading this publication, has much more to do with the online travel world. But more about that in a moment. To begin with, here’s a little background information.

Not so long ago, there were widespread predictions that the Internet would ultimately lead to the demise of the travel intermediary.

The thinking was that it would be so easy and cheap for suppliers to reach consumers directly now that the middleman’s services would largely become redundant.

However, what we’ve actually seen is a great deal of vertical integration (e.g. Thomson and Lunn Poly, Airtours and Going Places) creating new powerful online travel brands and, in parallel, the emergence of new specialist travel service and information providers.

Before continuing further, I should provide my definition of an ‘eSP’. In the online world, an ‘eSP’, or ‘eService Provider’, is an intermediary who harnesses the Internet in order to create an online community for travel-related information and services. These include travel review sites (e.g. TripAdvisor), price-comparison sites (e.g. Cheapflights), as well as travel-related services offered by search engines (e.g. Google Earth).

Many of these new intermediaries have now established substantial travel consumer communities, something that has not gone unnoticed among online travel suppliers, agents and technology service providers.

The emergence of eSPs and their community of travel consumers presents an enticing distribution opportunity for organisations looking to develop their online business.

It’s no surprise then that vertical integration has already begun in the online world following the pattern experienced in the ‘traditional’ travel distribution chain (e.g Expedia’s acquisition of TripAdvisor).

As the online travel marketplace becomes increasingly competitive, we will see further acquisition activity as the online suppliers, agents and technology service providers look to secure access to travel consumers.

However, traffic generated via the eSP distribution channel means more than just a new route for travel principals to reach consumers. It fundamentally shifts the way travel services are paid for.

Within the traditional supplier/high-street agent channel, the agent collects the money and sends the supplier what’s left after deducting their commission. Via the eSP channel the principal collects payment and passes the eSP back a commission.

Why is this important? Well, consumers probably consider their closest relationship to be with the organisation they pay. Once you own the relationship, you work more effectively on creating customer loyalty.

So, which eSPs will be the targets of vertical integration activity in the future? The easy part is to identify potential complementary categories within the distribution chain. From there we can add some key players into each segment and leave you, the reader, to speculate.

Ed Whiting is product director for Comtec (Europe)

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