Interesting times in the online travel industry. What do Yahoo! shuttering its FareChase air metasearch, TripAdvisor getting into the air metasearch fray, Expedia rolling back booking fees, and Kayak’s new entry into hotel review metasearch have to do with each other?
Travel metasearch (as currently defined) is Dead! Long Live Travel Metasearch! (in its new form). Read on…
The golden age of travel metasearch, as our industry currently calls price metasearch for flights, is over. At least it is in the U.S.
Back when SideStep, FareChase, and Mobissimo initiated airline price metasearch for consumers, businesses, and international respectively, there were significant price differences between different online travel agencies and airline sites. Along came Kayak, Farecast etc. to join the frenzy and the hype – including an upgrading of the sector from price metasearch for flights to “Travel Metasearch” – began (In this post, I’ll refer to air price metasearch as air price metasearch to differentiate it from other forms of travel meta-search – e.g. hotel reviews metasearch – that are emerging).
The online travel agencies and the GDS’s – e.g. Sabre and WorldSpan – were too savvy to let these upstarts steal material market share. They negotiated sweeping contracts that effectively guarantee equality in domestic U.S. air prices whether you buy your flight on an online agency, an offline agency or direct from a supplier.
First GDS was created during the flower power era
Despite this price equality, air price metasearch still grew for three reasons. The first was that the GDS technology backbone, e.g. Sabre, that supports the airline sector was the first global electronic distribution ever created wayyyyyyyyy back in the 1960s. With this old technology base, the GDS’s weren’t always able to mix and match flight options along different routes or across different airlines to come up with the best price – but the newer technology companies that backed the price air metasearch sites like ITA Software and FareCompare excel at this. Second, ‘low cost’ carriers like JetBlue and SWA did not participate in the online agencies. The final reason was that because the online travel agencies started to charge booking fees and effectively created price arbitrage between their sites and airline sites.
But ITA Software licenses its technology broadly to partners like Kayak and Orbitz, so the technology-driven price arbitrage is now greatly reduced. And all the low cost carriers other then SWA are largely working with online agencies and price air metasearch engines.
And with Expedia’s decision to rollback their booking fees yesterday, it seems inevitable that Travelocity and Orbitz will follow.
So, negotiated prices eliminated structural price differences, broadly available software reduced technology-driven price differences, and online agencies just eliminated the final difference in price between suppliers and themselves. Who need price air metasearch?
Read the tea leaves
Insightful enough to read the tea leaves, Rob Solomon of SideStep (now part of Kayak) and Hugh Crean of Farecast (now part of MSFT) sold in the winter of 2007 when there was still bloom on the proverbial price air metasearch rose. Most recently, Yahoo retired their price air metasearch (they did hotel and car price metasearch too), FareChase, shifting Yahoo consumers over to Travelocity, their long time online agency partner.
But I likely over-state my case. There are still material opportunities to arbitrage the old airline technology systems with superior technology as ITA Software and FareCompare’s success indicate. And there are opportunities to help consumers feel more confident about the price they are paying when they buy – like at Farecast (now part of MSFT) and at Yapta.
International price air metasearch opportunity is still very interesting. International price structures, technology mismatches, and a proliferation of low cost carriers yield big opportunities to arbitrage prices outside the U.S. The savvy folks at TripAdvisor know this and have launched a price air metasearch engine well positioned to compete with Farecompare, Mobissimo, Kayak etc.
Domestically, there is a HUGE, yet unsolved opportunity to help metasearch the opaque, fragmented deals and ‘name your own price’ channels. And to help consumers mix and match the translucent air & hotel etc. packages that will proliferate sites as suppliers discount their offerings on online agencies (and offer the agencies very fat margins for moving their seats and rooms). This opportunity needs some heavy technology lifting, but would also run into massive channel conflict.
It isn’t as sexy, but there is a significant opportunity to help the consumer sift through the rapidly spreading reviews, blogs and photos to help them decide what to price metasearch about. Consumers do 10-12 searches and visit 20-25 sites before they make a booking today; there has to be a better way! Someone should start a hotel review or attractions metasearch engine to solve THIS problem 
Photo Credits
1960s Photo: High School History Days
Tea Leaves courtesy of Wikipedia Commons
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24 Responses
Ala Carte is where air travel purchasing is heading and it will be a challenge for all of us to figure out how to rope in sushi menus for each airline with all their broken out amenities (bag fees is just the tip of the iceberg) and provide an interface that will allow consumers to shop and compare apples to apples. Excellent article, thanks for sharing your unique insight and background.
Hmmm. Yes. Someone SHOULD start a hotel review or attractions metasearch engine! I’d rather visit 1 than 25.
I for one would love to see someone make sense of all the airfare/hotel deals that you see out there…
Yen is right on target here. This meta airfare search is only a sideshow to the overall customer experience, especially as the focus moves to the research and planning phase of the entire trip. Of course, price will remain an important factor but less so in the overall trip picture. What’s especially disappointing is today’s situation which requires people to visit 20 to 25 sites and so often still not getting what they really are looking for based on their preferences. This is what needs to become the industry focus. Offer an improved personal preference based overall experience. I don’t buy the argument expressed by some industry leaders like Charron of TripAdvisor Europe claiming that people actually like wading through all these choices presented. This is just an excuse for not offering something better.
Joe Buhler’s last blog post..Excellent brief explanation of the Semantic Web
If they can’t peddle differences in price, they can always peddle other differences. There’s this site called insidetrip.com which allows you to search for all sorts of things – like the speed, duration of the flight, connecting time, type of aircraft, legroom, and lost baggage history of the airline.
And you could always add more things to the search – like the name, history and experience of the pilot and flight crew. You can choose pilots like Capt. Sully, and not choose rookie crews like those who were in contol of the Buffalo flight.
Makes a lot of sense to try and harness the web’s attributes to create order from the ever increasing entropy occurring within travel today (aka the “second law of travel-dynamics”?). As airlines embrace fees and value pricing of amenities, and hotels attempt to create attributes outside the purview of the OTAs, it is almost entirely the province of the web to reign it all in and provide meaningful comparisons and thoughtful reviews for planning travel. Somewhere in all this, the sanctity of the travel planner’s time is getting lost! PLEASE create such a site! We don’t need to visit 15-20 sites when a 2-3 should do…at a minimum, the next-gen metasearch travel site should be a meaningful first stop to point us in the right direction.
The bottom line is that a business model based purely on price oriented shopping will not succeed as the industry becomes more sophisticated. There are still huge opportunities to be tapped for true dynamic packaging (rules-based, dynamically priced packages) and future endeavors into the realm of distributed packaging on the transactional side of the equation.
As travel is fundamentally experiential, a huge number of opportunities exist to integrate the true experience defining activities into the mix and not just focus on the basic transport and lodging aspects. Uptake has made big strides forward, but there is a long way to go in order to transition from a Web 2.0 search/social platform to a Web 3.0 semantic/persona based platform.
With the numerous dimensions and extreme fragmentation of the travel industry, metasearch will not die, it wll transform into processes that will provide highly customized and personalized recommendations for travelers across a broad spectrum of travel experience components – then it will need to get accurately priced, promoted and sold.
My guess is that by the time Travel 7.0 rolls around, we will be getting close.
[...] CEO Yen Lee says that Travel Metasearch, as we know it, is Done. “So, negotiated prices eliminated structural price differences, [...]
Good post, Yen — very thought provoking.
I think these changes highlight the need for good UI, plain and simple. As price and inventory differences evaporate (and I think they’ve largely been gone for a while now), consumers will be drawn more to sites that are fast, easy to use, and reliable. Kayak, Expedia, and ITA Software’s site all fit that description for air search and it’s no surprise those companies stand out among the crowd. Do a search on united.com and then do the same one at Kayak and you’ll see that they are night and day.
Kayak is light, simple, fast… reminds me of doing a search on Google. Orbitz has heavy graphics, popups, large ads, interstitials — feels like Yahoo. Which one would you rather be?
In this rough economy, everyone is talking about getting back to basics… and I think that holds true for travel booking sites.
@dan, downtown tommy, pling and scott. Agreed. Air price metasearch improved the flight shopping experience, and as downtown tommy suggested that improvement is now the price of entry (e.g. the new TripAdvisor flight metasearch is pretty slick)
@downtown tommy, I agree the next step is to go beyond price and get the consumer more confident, more quickly about their choices. @joe, yes price is just part of the experience, and while some folks might not like the TripAdvisor UI as it is, I cannot believe that Steve Hafner said that “TripAdvisor has polluted the Web”
@ rick, a la carte pricing is a potential game changer I had not considered in this post. It will be interesting to see how air price metasearch, online agencies, and suppliers integrate a la carte pricing. Given the new and flexible nature of air metasearch engines, I assume they will be able to better merchandise it. Good opportunity for them to differentiate. Will the new CRS that ITA is building for Air Canada enable AC and other suppliers to deliver a la carte pricing?
Thanks Yen for an interesting article. These days, when I search online to plan vacations for my family, it’s pretty easy to find good deals on airline tickets and hotel stays. Where Uptake adds value is helping to generate ideas of what to do on the vacation. In my case, we’re always looking for fun, family-friendly things to do. Please continue to take Uptake to that next level.
@jasper, I disagree. I think the online agencies in general will come out of the recession in better relative shape then they went in. Take Expedia for example, their market share makes them a must-be-at channel for hotels and airlines looking for demand and their superior packaging functionality and hotel margins will enable them to improve profitability.
@pling and scott, I agree with you that there is a superior air search experience on Kayak et al. That will keep those air metasearch engines relevant as there will be less reason to shop there based on the original value proposition of lower prices.
@dennis, Sabre’s comment sounds a little bit like the new mantra going around Silicon Valley, “flat is the new growth”- with business and group travel dropping off a cliff, it’s no wonder leisure travel looks great with ‘just’ a gradual decline. At the Goldman Sach’s conference, Expedia’s CEO, Dara Khosrowshahi shared that corporate travel (with the exception of visiting customers) was off, and group travel was already declining before President Obama’s comments. In this context, we should expect leisure to be a higher percentage of a declining travel sector
And yes, consumer price shopping across the board will increase in these gloomy economic times. No surprise there. But while price searching increases, “price-focused” metasearch in domestic air will be hard to differentiate on as prices have converged. But that doesn’t mean that flights metasearch > prices won’t do well. Sites & air metasearch engines with better air shopping experiences then supplier sites and agencies (e.g. Kayak – and now TripAdvisor); internationally focused folks (e.g. TripAdvisor, Mobissimo, FareCompare); guys with real technology that dig into itinerary-based, multi-carrier to find real price differences (e.g. ITA, FareCompare); or those that can aggressively cross-sell hotels etc. (e.g. TripAdvisor) will do well
@alison, bong. we are biased, of course, but we don’t think travel metasearch is dead. We think it’s in it’s infancy and will evolve and thrive as it moves beyond commoditizing travel based on price. We think there is a compelling opportunity to help consumers make better decisions about where to go, what to do, where to stay (and what hotels/flights to price metasearch) by aggregating and organizing information from the thousands of local and travel sites out there. We especially think all the unstructured text content is a goldmine to analyze and match up with consumers’ trip preferences – e.g. a romantic vs. kid friendly hotel or a dog-friendly attractions and restaurants. @robert, we know we are just getting started and have LOTS of room for improvement. Please let us know what you think we should focus on first or if you know folks/companies doing things that can accelerate our progress…
Yen’s last blog post..Eco friendly beach resorts
@ken and rick: very intrigued about how you think a la carte pricing will roll out in the industry. care to share your thoughts?
Yen’s last blog post..Eco friendly beach resorts
Yen,
Some ideas and possible focus:
What about the vacation rental market. It’s a big worldwide market !
Maybe an opportunity for meta-search and for yield pricing/dynamic pricing.
Other view, I strongly beleive you can make progress with the maps search. Google Api is not the best tool, you can find Open Source map engine and build some great additionnal service with your data and additionnal data in the map….
ManyTravel data can be geolocalised and it’s a great way for human brain to navigate in the tourism landscape.
Wish a good day to all UpTake team
Claude
Claude’s last blog post..Does Twitter become the new google?
Excellent post, Yen. All good points. I agree that metasearch is in its infancy, and will keep evolving. The appeal to advertisers is that the customer is way down the funnel when it comes to bookings. The conversions on meta are the highest in the industry, and that’s with all of the inadequacies that you’ve pointed to. That’s whay Meta remains the darling of advertisers, and should reap additional profits for TripAdvisor with their new meta product. As the GDS’s morph into GMSs (Global Merchandising Systems), and can show unbundled product (checked bags, selected preferred coach seating, etc…) it will be interesting to see how this effects metasearch. Buyers may be able to profile how they would like to see comparitive pricing (those airlines that charge for “extras” and those that don’t). The big win, however, will come from comparing complex product like cruises, packages and deals on meta (the holy grail). Sidestep tried to initiate this back in 2005 with Mark Travel, Lib/Go and Expedia, but there were too many variables. Value-adds or not – and how do you attribute specific prices to value-adds like kids eat free? When Meta moves to comparing complex product, it will have come of age. Advertisers and consumers will both win. This will take considerable technology and time, but this, I believe, is the future of Meta.
@Yen The only way I see the industry (from an outsider’s perspective) being able to successfully promote a “single” new Metasearch model is to create the giant-killer ap. Searching multiple websites for the “best” deal (price, amenities, etc.) really isn’t that difficult for savvy travelers. From personal observation only, the once-a-year-travel folks already just go to Travelocity or Expedia (or whatever they’ve used in the past) and buy a ticket – and they’ll probably use the same service until they get burned (with baggage fees, etc.). So the Meta 2.0 that’s gonna be the next killer ap has to include everything. There have to be a good enough reasons for BOTH the sophisticated traveler and the newbie to use the service. And the big variable is the “other” stuff involved in airline “service” nowadays. Susan makes some great points (“the darling of advertisers”) but it is, as she says, a funnel. The consumer will drive the next generation of travel Metasearch services. We only need to look at the category-killers in other fields – Google, Amazon, etc. I’m just a simple marketing guy who believes that selling travel is no different than selling chocolate or books or ski lift tickets. There is so much room to grow, and someone will finally find the key.
Ken’s last blog post..Restrictions on Cuba Travel Beginning to Ease
Per your last comment — focusing on what to do when you get somewhere is dead on — there is just TOO much information available and the ability to search it and sift it quickly, easily against a set of personalized criteria is necessary. This is the future of all search (not just travel) — honing down the level of information so it is digestible and actionable.
Great post and obviously a hot topic. I find it ironic that Yahoo is shuttering FareChase while TZOO and TripAdvisor work to commoditize Kayak’s air metasearch product. Certainly don’t look to Yahoo for thought leadership these days!
At SideStep, our market research indicated that when people found SideStep, they LOVED it and couldn’t believe it existed. It was a level of response the research staff had never seen. So, I see a lot of room for metasearch in it’s existing form, and the moves by Tzoo and TripAdvisor are smart as these companies can expose their audiences to air metasearch and lock them in before Kayak can.
My view for the future of air metasearch is that the business model will be based on delivering incremental revenue to the airlines, not additional bookings. Things like extra fees for reserving an empty seat next to you, priority wait list for upgrades, one-time access to a VIP lounge, double reward points, etc. There’s a lot of opportunity and airlines are starting to embrace these products, and they have high margins, so they can reward air metasearch engines with high rev shares. Someone like Kayak could be a superb distributor and upseller of these products by providing a way for airlines to compete on something other than just price and schedule. Would you pay an extra $50 to fly a red eye on United over American if it included a full row of seats?
With regard to an aggregator of reviews – will be interesting to see what the new TravelPost looks like.
Sam’s last blog post..TripAdvisor Being SideStepped for Kayak? 6 Ways Kayak Can Win
Travelocity matched Expedia’s booking fee cut today – no surprise. Real bad news for Orbitz is that they matched price guarantee too – http://tinyurl.com/thegnomematches
[...] Travel Metasearch is Done! [...]
[...] the volume and passion of feedback and questions following my intentionally provocative Travel Metasearch is dead post and collaboration with Dennis Schaal on a similar story, here’s a summary of the [...]
[...] Travel Metasearch is done [...]
[...] Our perspective is that flight price metasearch is getting increasingly commoditized and its only natural that Kayak extend into hotel metasearch (beyond price comparison). Tim Hughes (@timothychughes) notes that Yahoo!’s killing of FareChase deals another blow to the metasearch model, an issue that we’ve posted on before. [...]
Hm this was posted just before the hotelicopter 1rst April Launch and around the time I tried to nudge Elliott to have some talks with the hotelicopter ppl…I missed it then but would have made the same sort of comment.