Ebay and auctions – Bidding for a slice of travel

Ebay’s first forays into the travel market have not lived up to inital expectations. However, with the launch of a dynamic pcakaging option and a change in strategy, all this could be about to change. Tricia Holly Davis reports

Last summer online auctioneer eBay revealed plans to bid for a share of the UK’s £10 billion online travel market.

At the time, Karim Lankarany, eBay’s senior category manager for travel, had said the company would initially focus on selling short breaks and hotels, eventually expanding its offering to flights and other content.

The travel business media jumped on the news with varying degrees of gusto, although it soon transpired that Lankarany’s comments were being dismissed by eBay officials.

One year on, eBay is still dodging questions about its intentions for the travel sector. In fact, industry analysts and suppliers say eBay’s travel division is still very much a fledgling business.

“EBay Travel never quite took off,” observes Scott Kessler, an analyst at Standard and Poor’s, who tracks the auction site’s financial performance.

EBay’s first foray into travel was in 2002, when it launched a partnership with Priceline.com. That same year, eBay appealed to high-street retailers to distribute their distressed packaged inventory on the site and unveiled a scheme to allow customers to use their airline miles and points as currency.

Early numbers suggested eBay Travel should have been a massive success. In 2001, an eBay research study concluded that 42% of its 55 million customers made travel-related purchases online, worth $8 billion, or roughly 40% of the then value of the US online market.

With eBay traffic figures rising at an exponential rate year-on-year, logic says eBay Travel should have far surpassed the leading online travel portals both in terms of sales and visitors.

However, apart from some success in the US and certain European countries, such as Germany, the eBay travel model never really lived up to initial expectations, says Kessler.

“The Priceline alliance never amounted to much and there has been no subsequent evidence to indicate that travel is a priority for eBay,” he says.

Indeed, the word ‘travel’ doesn’t even warrant a footnote on eBay’s balance sheets and quarterly investors’ reports.

Michael Hughes, head of sales and marketing for Cultuzz, the main accommodation content provider to eBay, concedes that the travel division has not met suppliers’ expectations. “The model is not as aggressive as we had anticipated,” says Hughes. 

Megan Lawrence of Leonardo Media, a supplier of rich media content for hotels, says she gets the impression that eBay’s travel plans have been put on the “back burner”.

Last year Leonardo inked a deal with Cultuzz to upload rich images on to the eBay Travel site. At the time, Lankarany said: “We expect this to have a positive impact on the buying experience in the short-breaks category of eBay”.

But Lawrence says the deal never came to fruition. “Everyone was really excited last year but nothing ever happened. We’re still hopeful, but we haven’t heard anything for a while.”

EBay maintains its travel strategy has not changed. A spokesperson for the site says that at any one time there are in excess of 10,000 listings in the travel category on eBay.co.uk.

EBay claims: “EBay continues to be a site for larger operators such as Thomson, as well as smaller independent travel firms and individuals to sell holidays, accommodation and related items.”

Thomson tells a different story. “We get the impression that travel isn’t part of eBay’s core strategy,” says Nathan Timmins, head of online marketing for TUI, Thomson’s parent company.

Contrary to what eBay maintains, Timmins says Thomson actually only sells a “handful” of holidays on eBay.

The scores of ‘Thomson’ holidays that one might see on the site are not coming directly from Thomson, but rather from individuals who are selling on a discount code, explains Timmins.

“EBay is not a big channel for us,” says Timmins. Part of the challenge of working with eBay is that the auction model does not necessarily lend itself to travel, says Timmins. He says eBay’s Best Rate, fixed-price option, is a better choice, at least for packages.

 “Even if we thought we could just cover our costs by shifting loads of holidays to eBay then we would do it,
but that’s not the case.”

The main problem, says Timmins, is that eBay is not engaging the consumer to think about the site as a source for travel. He adds: “EBay is not recognised as a travel channel, so even though it has these huge traffic volumes, it’s not translating into travel sales. It’s a hugely untapped market. Even if a small percentage of eBay’s traffic visits the travel site, that’s still a lot of people.”

He says Thomson recently approached eBay with the hope of finding a way to make the channel work, and has launched a display banner ad campaign on the site to test consumers’ receptiveness to eBay as a travel source.

“There is a huge opportunity there. The question is just how to exploit it,” he says.

Cultuzz’s Hughes echoes Timmins’ observations. “One of the biggest challenges for eBay is that it doesn’t have a global travel strategy,” he says.

But that may be about to change. “EBay is planning to globalise travel in the foreseeable future,” says Hughes, who is travelling to eBay’s headquarters in San Jose, California, this summer to discuss Cultuzz’s role in the strategy.

A significant signal of eBay’s travel intentions is the launch of a dynamic packaging option, which will go live on the German site in the fourth quarter of this year and will be available on the UK site next year, says Hughes, who is developing the technology.

He says there are also plans to add car hire and flights in the near future.

“The door to the head office is now open and several industry players have been invited to advise eBay on how to adjust the model to be more travel friendly,” says Hughes.

Kessler says that if eBay is planning a big push into the travel space, then it is keeping it very quiet from market analysts. “I’m not aware of any new decision to prioritise travel.”

However, Kessler observes that eBay has been straying further afield into businesses that are not part of its core competency, such as Skype, so the prospect of a formalised, global travel strategy would not be entirely far-fetched.

There are a few reasons why eBay Travel could work this time around.

Firstly, there are more people buying online. “Even though eBay has tried to make an impact in the travel space in the past without much success, it did so at a time when people were a lot less comfortable buying online,” says Kessler. “Today that barrier no longer exists.”

Secondly, eBay is realising more of its revenues from the fixed pricing model, which is more suitable for many travel products than an auction model. Kessler says about 50% of eBay’s gross merchandise volume is now related to fixed prices. There are also potential synergies between a travel business and eBay’s other assets, namely event ticket distributor, StubHub, and community marketplace site Kigigi.

“Do I think eBay Travel could work? Yes, but it will face some challenges,” says Kessler. “Going beyond your core competency is always an uphill battle because there is not an instant connection from consumers.” 

He points to Google as an ideal example. “When people think of Google they think of search, but Google is now challenged to break out and convince people that it can do other things.”

EBay faces a similar challenge. “The fact is that when people think about eBay they don’t think about travel.”

This website uses cookies to ensure you get the best experience. Learn more