I finished up recently in Part 1 of this post by saying that the really interesting thing was not so much in looking at sites like Lufthansa, Iberia and Travelocity, but in trying to work out where search by attributes was going. And at the same time, trying to figure out who is holding the cards today; and maybe even who will be holding them once the technology matures and the business model of search by attributes evolves?
Personally I’ve always thought that the promise of the original concept of dynamic packaging for airline websites was oversold back when it was all the rage (circa 2006), ie. before ancillary revenue and social networking become the flavour of the month buzzwords. But now with shopping basket technology across various providers being developed, affinity shopping in production, cached data allowing much more powerful search parameters like extreme search, the relative ease of building mashups, and interactive mapping technology so widespread, maybe DP will come back in a slightly different guise. Looking back at that sentence I think they key phrase is across various providers.
The old dynamic packaging mantra that assumed people would just trust the bundled price and all buy packages instead of having purchasing the travel components separately never really eventuated, or at least nowhere to the extent that the OTA’s would have been hoping for. But what has happened is that with search by attributes, we have the beginnings of a very powerful new paradigm in travel search that will almost certainly have big implications for the leisure travel market. Not immediately, but it will come.
Before going any further, I’d recommend watching at least the first half of the ten minute video embedded below. It features Denis Lacroix of Amadeus presenting with Marcus Casey from Lufthansa. Marcus makes an interesting point that LH found 20% of visitors to their website did not actually know where they wanted to go. Denis shows a few slides on the history of search and how it is evolving into search by attributes.
As much of a fan as I am of airline direct distribution, airlines have their work cut out for them in taking control of this sure to grow segment; on the face of it the OTAs are holding more of the cards today. The reason is obvious, as when price is the key attribute on which people are searching, loyalty to a brand diminishes; but even more importantly, total cost of trip is more important than just the flight component. If I’ve got a set budget for a weekend away, it is of less value to show me cheap flights to London, as the chance of me getting a decent hotel that doesn’t blow the budget is somewhere between buckleys and none – well maybe now with the pound sterling at low levels this is less of a concern, but you get the point. For price driven shopping by attributes to really hit the mainstream, packaging will play a much bigger role. Hotels is the first obvious inclusion (as Travelocity have shown), but even that is not quite enough.
To really become big, shopping by attributes needs to be offering something compellingly different to what I can do today online. Those who saw my presentation in Kuala Lumpur in June last year would already know that I am a strong believer in the misunderstood and unloved step-child of the ancillary revenue scene – destination content. I was very interested to see Rezgo are sponsoring an upcoming PhoCusWright report aimed at answering How do travelers purchase activities and attractions and how much do they spend? Think of it as adding context to the trip, and if it is included in the packaged price, and tied into the attributes one has searched on, then when combined with a flight and a hotel, it becomes a travel search experience well beyond what is available today. Especially when through shopping basket technology or similar you are then able to purchase the package without leaving that same site. In this model, the attributes become so much more meaningful than they are today.
To put it bluntly, today’s attributes have a long long way to go before we are at the end game. For example, today I can search by attributes listing museums as my preference. But are there really more than a handful of airports that don’t have at least one museum in the major city or town that they service? What would be much more compelling would be to put in my maximum price, and have each destination returned with a flight, a hotel (that I could vary by star level using a slider) and one entry ticket to a temporary exhibition at a local museum. As Stephen Joyce from Rezgo wrote about his hopes on sponsoring the PhoCusRight report:
We will also see large OTAs and distributors looking for ways to connect with suppliers in a big way. This will put pressure on application developers to build systems that easily connect to these distribution channels
So destination content is one part of the puzzle. Another part is more attributes that aren’t dependent upon human whim. I saw one attribute that could be selected was children. What makes one destination more child friendly than another without any knowledge of the ages of the children or what they like is utter guess work. Attributes like this lack credibility and take up valuable screen real estate for no apparent gain. Much better attributes would be things that could interact with a slider, and that also could be populated with data sources that were automatically updated rather than manually maintained. Average temperate at that time of the year, chance of rain, days of sunshine, water temperature – or maybe something really edgy like safety (aka muggings/murders per head of population) or even average age of other people that flew to this destination (difficult to be accurate in domestic). They are all off-the-top-of-the-head ideas without even giving it too much thought, but none are dependent upon human classification. Adding more attributes that follow these rules are potential game changers, and for airlines they have the added benefit of moving their presence to the left of the Bow Tie and into travel inspiration in a big way. But airlines will still be at a disadvantage relative to OTAs unless they can find a basis of competition that puts the ball back in their court – nothing I have written above is sufficiently unique to do that.
It will be a sad day if I ever have to concede defeat on behalf of my airline customers to the OTAs (unless I change tune by working for the other side!), and I’m determined to demonstrate a way in which shopping by attributes can be owned by the airlines’ own websites. Airline.com, by not having to deal with a wide range of air content will be able to maintain a cleaner interface and a much better quality of cached flight availability data. Nothing kills the user experience quite like moving from the cache to the real availability screen only to see the price increase! So this is a start, but it is still not enough of an advantage compared to reduced air content; although a less accurate cache could do more damage than good, so this is certainly a plus for airlines. Just not a big enough plus in itself
Let’s not forget that a lot of consumers have a distinct preference for booking direct. Just look at the evidence of the Expedia billboard effect. Whether that preference will extend to the airline selling on behalf of others hasn’t been proven comprehensively, but the success of white label car and hotel sales using the airline.com brand may indicate the answer is yes. I’ve always thought that airlines undersell the perception passengers have that because an airline flies to a destination frequently they must have credibility with recommendations about what to do and see in that destination. But this is more the Two of Clubs rather than the Ace card. A small advantage, but nowhere near enough in itself to win a game.
A la carte pricing definitely plays into the hands of the direct channel, and even more so when it comes to staking a claim in owning the search by attributes space. Metasearch finds it hard enough to keep up, and OTA’s will face the same problem. Every time they update airline fees, an airline will create a new one sold only via the web. Whenever you are touting the search by price capabilities in your engine, you’d better be pretty confident the prices are a fair representation of reality. Airline.com has an advantage here that can’t be taken away. Going even one step further, airlines who get merchandising right will really carve out a defendable lead in search. Getting it right means properly differentiating fare families to such an extent that passengers actually know the differences and will pay for these differences. Air Canada and Frontier have been touting their credentials in this area for a while, but the importance of doing this properly cannot be overstated – even more so when an airline can add a slider with fare families to their search by attributes screen. When prospective passengers understand the brand proposition underlying the airline’s merchandising strategy then search by price will do more than just bringing the low yielding business. I don’t even think that many industry insiders today realize search by price could ever do more than deliver low yield business (as it does today), but with really good merchandising from the airline, I genuinely believe that one day this will be possible.
This post is already getting way too long as is, so well done if you’ve read this far. In Denis Lacroix’s presentation above he refers to Affinity Shopper opening up possibilities for new generation award search, and this one definitely sits in the airline direct sphere. Social networking opportunities tied into an existing airline loyalty program will also help put the balance of power for search by attributes back in favour of the airline. But at the end of the day, merchandising is the killer blow that airline’s need to get right if they want to ward off OTA’s stealing their market share in what promises to be the future of spontaneous leisure travel search, and possibly a lot more.