For many consumers, travel planning is not just a means to an end, but an enjoyable activity in its own right. The intangible nature of travel makes it well suited for online research. PhoCusWright claims three-fifths of online travel shoppers cite search engines as resources to research their vacations.
A comScore study of search behavior prior to online purchasing found that a higher percentage of travel shoppers conduct relevant searches in the 12 weeks prior to making an online purchase than online buyers of computer hardware, apparel and sports and fitness goods. Some 73 percent of online travel buyers conducted relevant keyword searches in the weeks prior to an online travel purchase, and more than three-quarters of the searches performed by these consumers were based on generic terms as opposed to merchants’ brand names.
So what are consumers looking for when they conduct online travel searches? Forrester Research found that a majority of online travelers use search engines to find information about different aspects of a destination. Another popular use of search engines is to find pricing information. Over half the online leisure (52 percent) and business travelers (53 percent) surveyed selected this as a reason.
Forrester Research also found that very few online travelers start searches using the new breed of travel search engines most likely because they are not aware of their existence. While 33 percent of leisure travelers said they had conducted searches on Google for travel information in the past 12 months, less than a half percent said they had used Mobissimo, Kayak.com or FareChase. Yet Hitwise, a worldwide competitive intelligence service, found that it is through search engines that internet users are discovering these travel comparison sites.
A high proportion of visitors to travel search engine sites are arriving from general search engines. Yahoo! FareChase, for instance, received 39.3 percent of its visits from general search engines during one week in April 2005. This suggests that travel search engine firms are becoming effective search engine marketers. Also of interest, Hitwise found that visitors to the top travel search engines were by far likely to be over 55 years of age. Hitwise attributed this to baby boomers who, as a price-conscious group, have more leisure time.
Right now the vertical search engines are lacking in features and functionality. But there is every reason to believe that they will gain popularity because consumers want powerful price comparison tools. Online travel agencies have to be concerned that the travel search engines are siphoning off their customers.
“If travel meta-search engines deliver on their promise to efficiently find the lowest prices, then it is possible they will quickly and successfully insert themselves into the travel-shopping value chain,” says Bill Tancer, vice president of research at Hitwise.
When online travel shoppers move from searching to travel planning, they usually begin at an online travel website (54 percent), according to Nielsen//NetRatings research. This is because they offer one-stop shopping convenience. However, a visit to an online travel agency website is no guarantee of a subsequent sale. Four in ten online travel shoppers who begin their research at an online travel agency, according to PhoCusWright, ultimately purchase directly from a travel supplier’s website or call center. This behavior is more common for purchases of air travel than for hotel or car rental reservations.
Similarly, Feedback Research, a division of the Claria Corporation, an online behavioral marketing firm, found that 73 percent of respondents who purchased travel online researched travel at a general site, but then went to a specific company’s site to book their travel. Many of these survey respondents attributed their decision to lower prices and special deals.
“The wide selection of travel suppliers drive the majority of travel shoppers to begin their research with agencies and meta-search providers before directly visiting a supplier,” says Heather Dougherty, senior internet analyst at Nielsen//NetRatings.
Nielsen//NetRatings provides further evidence that online travel shoppers like to do research at travel agency websites but then move to supplier sites to make final purchases. The next two charts show the number of unique visitors and sales conversion rates for the three major online travel agencies and three leading airlines. Whereas online travel agencies excel at drawing visitors to their sites to shop travel, airline sites draw visitors who are ready to convert into buyers.
According to a Harris Interactive survey, price (78 percent) is by far the leading factor influencing adults to be loyal to a particular online travel agency. The problem is that not one online travel agency has demonstrated that it can consistently offer the best price. Worse yet, when price is the sole purchase determinant, online travel agencies almost always lose out to direct suppliers.
Not all travel segments are as highly price sensitive as the airlines. Flying is deemed a means to an end and the various carriers have achieved parity across the important purchase decision factors. What is left then to compete on is price. Hotel accommodations, in contrast, tend to be an intrinsic part of the travel experience. Price is a factor, but may weigh in only after other criteria such as location, brand name, customer service and amenities are considered.
When PhoCusWright asked online travelers to compare direct travel suppliers with online travel agencies by several criteria, direct suppliers scored higher on all but one --lowest price. But this holds little comfort for the travel agencies. The direct suppliers are closing the gap: While 38 percent of respondents to last year’s survey said suppliers offered lower prices, 14 percent said so in 2002. Direct suppliers have been aggressive this year in making their offers compelling to customers. By now the gap could be negligible.
“Online agencies have lost their footing with leisure travelers in 2004 as a result of aggressive supplier efforts to better manage inventory and win business through a combination of online and offline direct channels,” says Susan Steinbrink, analyst, PhoCusWright.
Suppliers have also gained an important advantage over traditional bricks-and-mortar travel agencies. Some 36 percent of respondents to PhoCusWright’s survey said suppliers offer the best customer service, compared to 33 percent who selected offline agencies. This means suppliers are getting very good at the one thing they do: for Continental, selling airline seats; for Hilton, selling hotel rooms. What is less a surprise is that direct suppliers beat out online travel agencies in customer service, although the greater than two-to-one margin may raise some eyebrows.
Jeffrey Grau is a senior analyst at eMarketer (www.emarketer.com). This article is drawn from his new report, “Online Travel Worldwide.”
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