Fare Enough to Buy

Uggg...

The dreaded “SDC” – Second Day of Conference. Actually – for Phocuswright, it was actually the "Dreaded Third Day" because they had some other lame pre-Phocuswright session that many people also went to.

The highlight for FMV was the FareCast session where Hugh Crean presented some interesting facts and characteristics:

* Farecast has 5 different suggestions for customers when they look at fares, and it turns out that they will recommend that a customer “Buy” their flight 85% of the time...

* Although customers can search Orbitz, Travelocity, Hotwire, Expedia and other Online Travel Agents – FareCast still sends a customer to an airline website 85% of the time. Honestly – we really can’t understand that those other 15% of the people are doing – unless it’s some sort of multi-carrier flight.

* It turns out that FareCast is correct in their prediction approximately 75% of the time, citing an audit that sampled 44,000 quotes.

Question: Is 75% accuracy good? Especially given the fact that you would predict a Buy 85% of the time. Fares going up is the default - therefore FMV things the REAL guage of accuracy is what percentage of the time can you predict that the airfare will go DOWN.

Hugh repeatedly says that Farecast is data-driven, not marketing driven. FMV likes that they are pretty much trying to tackle the most relevant problem of the traveler “when should I buy a ticket?”. However, what would be the difference if you had a site that just said “buy” every time?

Don't be afraid, I'm a friendly gnome

Michelle Peluso of Travelocity gave a presentation about the site's new interface, without talking about the new interface. Well played.

Instead, she discussed a huge study performed by The Gnome, which indicated that over 42% of Internet consumers who start travel shopping at an OTA book at an OTA, while over 46% of consumers who start shopping with a supplier book with a supplier. The Gnome's conclusion? Internet consumers already know where they are going to book. Sure, they shop around, but it's only to avoid buyers' remorse. Therefore, channel shift is over, and OTAs and Suppliers can peacefully co-exist in a Utopian partnership.

Peace sells, but we're not buying. Consider these facts:

* Al Lenza of Northwest Airlines felt that OTAs and suppliers are not partners, rather the parties simply have a business relationship.

* In the spirit of partnership, Peluso spouted that Travelocity could terminate their business with Kayak (a succesful supplier marketing vehicle), "in about two hours". Nice.

* Further, Peluso felt that The Gnome would not acquire at-risk air inventory since it's "not good for the carriers". Exxon would say the same thing about a carrier fuel hedge.

This felt like a total schmooze play by Travelocity. Sure they're a buddy now, because they're struggling to add value over the supplier sites and meta's. But if they get a chance,they'll pounce on both with the rusty shiv hidden in their hat. Keep an eye on that Gnome.

OTA Booking Fees: Why?

Intereting realization at Phocuswright that Priceline is no longer charging a fee to consumers for air bookings. Why? To build their brand reputation as a low-price retailer.


They confessed at PCW that, for these bookings, they don't really add service value over a carrier site, and they don't offer the customer care tools of their OTA peers. Bravo! What have we been saying for some time?


Don't look for other OTAs to match, because they've invested too much in pitching their service proposition to throw away that revenue stream. Unless Priceline is able to make up some ground in share of course, which may be unlikely, but actually could happenen. Especially through savvy partnership with meta's.


The important takeaway here for FMV is that this is another chink in the armor of the OTAs. We simply beleive that they are really going to struggle to stay relevant in the long run when: a) meta's are there to provide cross shopping, b) carriers remain commited to driving shift to internal channels, and c) traditional Travel Agent's provide a much clearer service proposition, for a competitive fee...

The Buzz was NOT Palpable

OK, OK - we are late with Phocuswright posts - but we'll post our thoughts over the next few days...

The "big" (aka "paid") announcement on Day 1.0 @ PCW was the launch of a new travel web site site called Vibe Agent. Sit down, you're not going to believe how awesome this is. It is a site that combines (are you sitting?) hotel reviews, with meta-search, with social networking.


You can't make this stuff up. Maybe it's always been this way, but the travel space is starting to feel like the cliche world of Hollywood. "Let's make a SitCom about the GEICO Cavemen" sounds a lot like "Let's mash-up The Long Tail with Travel 2.0".

Best of luck to Vibe Agent. Seriously. More importantly, why are we writing this blog and not starting "Travel-Wad.com"? Which will get us a yacht quicker? Hmmm....

Hello from Phocuswright !

Hello from sunny Orlando, where this year’s Phocuswright Executive Conference is being held at the Omni Hotel - which is pretty much in the middle of freaking nowhere, Florida. There are NO restaurants nearby except for a Chili’s, and if you registered late and didn’t get into the Omni – you guaranteed yourself a 17 mile hike to the nearest Marriott or Radisson (read: Dump).

BUT – it is the best travel conference every year, and highlights how badly some of the others really suck. Good lineup for Day 1 so we’ll log some entries a bit later.

Drinks on my company!

For those living under a rock, Southwest announced some new changes to their fare structure and product this week.





We love the throwback strategy of using alcohol to entice business travellers. But otherwise, it's just more of the carrier moving away from it's no-frills past to embrace some complexity in order to drive more revenue from business customers:

• Bonus rewards credits for higher fares?



• Preferred boarding and seating for loyal travellers?



• Opaque and incomprehensible fare structure?

Hey! Who are you and what have you done to Southwest?

The inevitable has happened.

US on-line travel sales now exceed off-line travel sales. PhoCusWright has released their seventh annual on-line travel overview. Per this synopsis, PCW reports that online travel sales hit 51% in 2007, and should continue to grow to 60% in 2009.


We always take this stat with a grain of salt, since it's typically computed in dollars rather than transactions. Either may be appropriate for a given argument, but it totally depends on the case you want to make. Regardless, we'll agree with the conclusion: on-line channels will continue to grow despite their setbacks and possible risks to brandloyalty.


We'll be keeping it real at the PCW executive conference next week, so we'll keep you posted on the latest buzz.