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

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.

So, what next for metasearch?

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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