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Crashing the party: we like our meta with moxie
It wasn't that long ago-OK, almost 10 years ago (ancient times in online travel)-when a handful of metasearch engines (Farechase, Qixo, SideStep, etc.) burst uninvited into the online travel party. No sooner did they arrive when cease-and-desists started flying. Online travel agencies (OTAs) were the ball of the bash, and it seemed somebody popped a downer in their big party cups.
But by 2002 the party mood had cooled considerably. Farechase faded, Qixo quieted, and SideStep managed to morph into a nice little survivor, serving up a modest marketing service for suppliers that more or less paid the bills (or so they said). But then came 2004 and the party picked up some pep. Kayak, with some compelling innovation and an outspoken CEO, stepped in and quickly took charge though plenty of other new entrants (Mobissimo, Farecast, Dohop, etc.) continued to nip at its heels.
The opportunity seemed obvious. Suppliers were laser focused on driving share from OTAs to their Web sites. Metasearch offered more mean muscle to push those lowest yield leisure travelers past OTAs directly to airline and hotel Web sites, where the same low fares and rates awaited, only without the intermediary's booking fee. Kayak changed the meta market, and by the end of 2007 it had closed a US$196 million round of financing, swallowing whole its once larger foe, SideStep.
But then something switched-again. OTAs, seeing their customers migrate en masse to suppliers, started marketing via meta in a major way. A 2008 report by PhoCusWright and Hitwise revealed that the biggest beneficiaries of downstream traffic from the metasearch category were not suppliers at all, but OTAs1. In fact, the seven largest downstream traffic recipients were Priceline, Expedia, CheapTickets, Orbitz, Cheapoair, Hotwire and Travelocity.
Meta-Heads: Expedia Takes off the Gloves
After a long and unpredictable relationship between OTAs and meta that veered from downright disrespect to a marketing marriage of convenience (or necessity?), the biggest OTA on the block is taking on meta head on. Expedia's TripAdvisor last week launched Flight Search, a meta still in beta that is already turning heads and clearly gunning for the biggest boat in the moat.
Well, how does TripAdvisor's meta measure up? Pretty darn well, considering Kayak has a five-year head start. It does not have all the bells and whistles of Kayak, such as flexible dates search and low fare availability calendars, and it only offers flights (whereas Kayak offers metasearch for hotel, car, cruise and vacations), but TripAdvisor also offers a few innovations-such as links to SeatGuru flight reviews and deep links into live seat availability maps on Expedia-that make its Flight Search product stand out.
TripAdvisor claims Flight Search returns far more results than any other metasearch player. While our test searches corroborated this claim, this does not appear to be a competitive differentiator. The number of results returned is not as important as the number and relevance of lowest logical fares. Both Kayak and Flight Search use ITA Software for the underlying airfare shopping technology, and there is likely to be little if any practical difference in the lowest logical fares returned.
One meaningful difference in fares has to do with Kayak's relationship with Orbitz, whereby on some searches Kayak gives prominent placement to Orbitz results. In several (but not all) comparative searches we conducted, Kayak displayed fares from Orbitz prominently, while Fare Search displayed the same fare, but directly from the supplier Web site. The Orbitz booking fee thus gave the appearance of a slightly higher fare via Kayak.
But where TripAdvisor Flight Search really ups the ante is with its Fee Estimator tool. This cool feature allows users to enter parameters around their planned checked baggage, frequent flyer program membership and desired in-flight services (see Figure 1). Flight Search then recalculates all of the presented fares in the result set with the expected fees included in the price (see Figure 2).
While the fee estimator now is merely a calculator (it does not pre-populate the search result on the supplier site since those capabilities are not yet available), it does give us a glimpse into the future. This represents a relevant and powerful new approach to addressing what will only be an increasingly challenging but important conundrum: how travel distributors will handle fees in ticket pricing as airlines increasingly unbundle service elements in their fare structures.
While these are still the early days of airfare merchandising, expect it to only get more complex and sticky for distributors and metas. Airlines are just beginning to define their marketing approach, first by unbundling, with separate fee-based components. The next phase will see them "rebundle" into fare families that discount the cost of the individual components or add partner services like hotel upgrades. This will require continued vigilance and innovation on the part not only of metasearch engines, but all online travel distributors.
The Bottom Line: This Party Ain't Over Yet
The entrance of Expedia via TripAdvisor into metasearch is definitely a game-changer. A serious competitor has entered the fray. Fare Search's Fee Estimator is definitely a compelling near-term advantage. But the team at Kayak likely has few slouches (that we know of, anyway). Expect Kayak to introduce a very competitive comparable sooner than later. And then let the feature/function tit-for-tats begin.
Perhaps the bigger question hovers around TripAdvisor's expansive network of customers who are already researching and planning travel. Will TripAdvisor be able to effectively leverage that huge customer base to drive the Flight Search product? Travelers use TripAdvisor primarily for its hotel reviews and destination content, so a mass migration into the new air meta tool may not happen overnight, but it could happen. Those who suddenly find themselves competing head-to-head with TripAdvisor should plan on it.
What will that mean for Kayak and other metas? Such new and big competition will only intensify the pressure on less well financed players. As for Kayak, they are probably up for the challenge. After all, there is nothing like some good competition to keep the big gorilla fit and trim.
PhoCusWright provides global marketplace intelligence, offering an array of qualitative and quantitative research through subscription services, individual reports and sponsored assignments. Areas of emphasis include consumer travel planning behavior as well as industry segmentation, sizing, forecasting, trends and analysis. Clients represent all facets of the industry value chain from around the world.
The company is headquartered in Connecticut, USA, with offices in New York, Duesseldorf and Mumbai. For more information please visit www.phocuswright.com.
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