Enjoy Your Stay
It’s a promise that seemed almost too good to be true: Overnight, one of the company’s enterprise-critical applications is updated to the latest version. In the morning, employees — at the home office and field offices across the country — are working along as usual, noticing only some important new features that help them get their jobs done better. Later, at a management meeting, the CMO reports that faster responses to opportunities have bumped their share five points. And the CIO reports that the technology spend is exactly on target, no additional budget needed.
Elsewhere, in a nondescript glass-and-steel building in northern Virginia, the CEO of a two-year-old tech startup reports to his team that the overnight "With the economy going nowhere, many consumers and businesses are choosing to go nowhere, too, or at least to stay closer to home. According to Forrester Research, 47 percent of online travel consumers expect to reduce their travel spending this year, and 44 percent will take fewer trips, whether for business or pleasure. 1Forrester Research, “Four Tactics to Use Your Web Site to Succeed in Today’s Price-Driven Travel Buying Process,” by Diane Clarkson, April 23, 2009 Hotel occupancy for the first six months of 2009 was down 10.9%, and revenue per available room — RevPAR, the industry’s principal financial benchmark — was down 18.7%, according to Smith Travel Research. 2HotelNewsNow.com/HNN Newswire, “STR reports U.S. results for first-half 2009,” July 28, 2009
With so many consumers and businesses cutting their spending and hunkering down to ride out the extended downturn, sellers are not hesitating to sweeten their offers. And in this intractably tough economy, whether it’s for a trip or a refrigerator or a computer, those who are buying are looking for a deal.
Online travel is a fiercely competitive industry to start with. And in a dramatically down economy that seems determined to resist all efforts to revive it, online travel agencies and direct suppliers alike are pulling out the stops to capture what they can of a reluctant market. The online travel agencies (OTAs), in particular, are aggressively putting out competing offers of price protection, fee waivers, and whatever other promotional tactics they can concoct. Earlier this year, Orbitz, Expedia and Travelocity eliminated (at least temporarily) their flight booking fees — even though flights are already a business with razor-thin margins — to try to lure travelers to their sites. Suppliers, too, are offering deals, with free nights, bonus amenities, and discounted rates popping up regularly on major hotel brand Web sites. Deals like these are exactly what travel consumers are looking for. Some 66 percent of online travelers indicate that they expect the travel sites to “try harder” for their business, according to Forrester. 3op cit.
Wish You Were Here?
While online travel agencies and suppliers are feeling the pinch just like everyone else, they are in an enviable position, relatively speaking. Even as margins are being squeezed and it’s taking more effort to convert customers, the online travel market is still expected to grow this year, albeit at a slower pace. Online travel revenues are projected to grow just shy of five percent in 2009, even as the overall travel industry is expected to be down by a similar margin. 4Forrester Research, “US Online Travel Forecast, 2007 to 2013,” by Diane Clarkson, January 20, 2009 Compared to the rest of the economy, online travel is not a bad place to be.
Price "Satisfaction" is the Number One Conversion Driver
While online travelers are definitely looking for the best deal they can find, that doesn’t necessarily mean they are scouring every site to find the lowest possible price. Earlier this year, Keynote Systems published its “Keynote Customer Experience Rankings/Lodging” report, compiled from a detailed interactive study of 1,800 panelists, finding that “price satisfaction” is the primary conversion impact driver. But satisfaction encompasses a range of perceptions that add up to a good value. It’s not just about delivering the lowest dollars-and-cents price.
“Interestingly, we find that it’s not simply a matter of having to publish the lowest price,” says Christopher Musto, general manager, Keynote Competitive Research, “but rather positioning it so that people see the value that they’re getting, and having them believe they’re getting a good deal.”
It’s not surprising that the OTAs cluster at the top of the satisfaction rankings for price. With the ability to deliver product and pricing from a range of travel suppliers, and intensely competitive positioning against each other, the OTAs are bound to lead in the perception of low pricing. In this group, Expedia is at the top of the rankings. Conversely, the direct hotel suppliers — Marriott, Hilton, Sheraton, Hyatt and Westin — all fall below the OTAs collectively in the price satisfaction driver.
“It’s not just the price, but also the framing,” Musto says. “Showing what the price could have been, then having it crossed out to show a lower price. Showing shoppers what they are getting: a picture of the room, a list of amenities, what it is that’s so wonderful about this hotel. What they are getting that makes it feel like a $200 room. Not just that it’s cheap, but a good value.”
The OTAs’ price leader positioning is supported by prominent promotional content on their home pages. Expedia, Orbitz, and Priceline devote a full column of their home pages to special deals and promotions. Hotels.com’s home page includes an upper-right-hand, rotating content box that promotes its price and no-frills positioning, along with a series of specific specials running in boxes straight through the middle of the page. Travelocity devotes a large top banner to a series of three rotating promotional offers, and offers visitors a “more great deals” tab for more special offers.
Expedia Sweeps CE Rankings
Year over year, Expedia and its affiliate Hotels.com leapfrogged Marriott to take first place for Overall Customer Experience in the US Lodging Study. Expedia took first for all three components of Overall Customer Experience, bumping Marriott out of first place for both Brand Impact and Customer Satisfaction while maintaining its number one ranking for Conversion Impact. Hotels.com was the only other site to place in the top three across the board. Marriott was the only lodging supplier site in the top three, as it was last year. Travelocity held out with a top-three finish in conversion impact.
In the competition between OTAs and suppliers, the OTAs come out ahead in many of the most critical drivers of website effectiveness, with Expedia, Hotels.com, and Travelocity all putting in noteworthy performances. Marriott showed strength in service, reputation, leadership and customer satisfaction — it tied or led keyword associations for these attributes on its way to the recording the strongest performance of any supplier in the study. But only a third to half of panelists evaluating Marriott’s site felt Marriott offered the best deals and promotions. In contrast, most visitors to OTA sites responded that the OTA site they used offered the best deals and promotions.
Top Drivers of Online Travel Success
“The number one aspect of the site experience that can produce greater brand effectiveness or conversion impact is customer support,” Musto says. “If you want to make your site more effective, improve the help system — the way the site helps you to understand how to resolve problems, the overall sense that the site provides good customer support. In particular, it’s customer service that most supports brand lift. Other factors are not nearly as important.”
In Customer Support and its companion driver, Trust and Security, Marriott and Expedia were top finishers in the Keynote study. Study participants cited Expedia’s multiple contact options and 24/7 telephone support as reasons to give it top marks. Clarity of the pricing, including taxes and fees, as well as prominent price guarantees, earned Expedia a solid second-place position in Trust and Security. In rating Marriott top in that category, participants pointed out that the privacy and security information was highlighted — in some cases, literally, as if with a highlighter pen — and not hidden.
“Trust and security are good predictors of brand lift and conversion lift,” Musto points out, “and interestingly, it’s an area where the OTAs and well-established hotel brands mix together in the study results.
Making The Leap from Browsing to Booking
The booking process itself is the third principal driver that impacts both brand and conversion. In this key metric, Expedia, Travelocity and Hotels.com finish at the top of the Keynote study, with Marriott and Priceline virtually tied as a close fourth. Across the board, users preferred the ability to book travel without having to register on the site, as well as the option to add extras during the booking process.
“We’re seeing a lot of effort around the booking process to try and solve how you make it seamless and pleasant to book a hotel room while finding the opportunity to cross-sell a rental car, local activities, or possibly a flight,” says Musto. “Broadly for the OTAs, though, much of the volume starts with people who are trying to book a flight, which is not a very profitable activity. One of their challenges is to make money off of people coming to book flights. They’re usually in a hurry to find the best deal, and not in a frame of mind to deal with something else. It’s a very difficult trick to pull off. On the other hand, when visitors are booking a vacation or even lodging, there’s a much greater opportunity to cross-sell. They have more time and a more open mind.”
Fundamentals Drive Brand Impact and Conversion
In vying for their share of the $117 billion online travel market, online travel agencies and suppliers have to impress site visitors in four fundamental areas: customer support, trust and security, the booking process, and price satisfaction. Getting these basics right translates into greater brand impact and higher conversion ratios. “It tends to be that the OTAs did better than the suppliers in the Keynote study,” Musto concludes. “OTAs live and die on having people come into their sites and book a hotel room — and they are filled with best practices that the suppliers could be emulating. Here and there, a supplier, especially Marriott, will adopt many of these best practices and do very well.”
Right now, online travel sites and consumers alike are responding to the worst economic crisis in generations. The sites are reacting with heavy promotional tactics, and consumers with intensive comparison shopping. While the current Keynote study has Expedia sitting on the top of the heap for OTAs, and Marriott for suppliers, the results are close and mixed across the board. Those sites that best adhere to customer-centric best practices at any point in time — offering good value and a smooth process, backed by exceptional service and trustworthiness — can achieve the greatest impact. But no matter who is at the top at any given time, the ongoing raising of the bar for customer experience and value is an ultimate win for consumers.
Ad Revenue, Deal Closer, Performance Caveat?
With most industries in a deep downturn, businesses are mining every available revenue opportunity that could help the bottom line. Online advertising is a potentially lucrative revenue stream, as evidenced by Google’s unprecedented success and the recently inked Microsoft-Yahoo! deal. The online travel agencies have recognized this opportunity, selling space for cooperative advertising with suppliers and unaffiliated ads as well. It’s a potentially win-win situation: the OTAs earn incremental revenues, and the airlines, hotels, car rental agencies, destinations and resorts have the opportunity to put their brands in front of active buyers. It would be expected that such deals will be more and more common in such a challenging economy.
There is a downside risk, however, if sites are not configured properly — the loading of contextual ads can drag down performance of the entire site, as page loads are stalled waiting for the ad feeds. This was markedly demonstrated on the day that Michael Jackson died. The news Web sites experienced huge spikes in traffic, with Akamai reporting an 11 percent surge in Internet traffic overall. The news sites are typically prepared to handle such a spike, but the ad networks that serve up many of the ads are not necessarily as robust. If the ads are fed externally, they are basically out of control of the site on which they appear, and consequently their impact on performance cannot be controlled, either.
“This is an important distinction, because in some cases, depending upon how a site is constructed or how the Web browser is used, a page may display perfectly fine with a blank area where a third party image should have been shown,” according to Shawn White, director of external operations at Keynote Systems. “In other cases, the entire Web page will wait until that last image is downloaded from the third party advertisement service, frustrating the reader.”
So if you are an OTA or any other site boosting revenue by selling ad space, performance monitoring is more critical than ever. With competitor sites just a click away, slow performance that drives visitors away can quickly negate revenues gained from ad sales. Sophisticated performance monitoring technology such as that available from Keynote can measure not just the overall page load times, but the loading performance of each element on the page as well.