Battle raging between online agencies and suppliers
The online travel market is going through an evolution but the balance of power has shifted in the past year from online agencies to the suppliers, says PricewaterhouseCoopers, LLP.
Said Malcolm Preston, partner and travel sector leader, PricewaterhouseCoopers LLP:
“Suppliers are now providing the lowest-cost bookings available on the internet. Those suppliers that have sufficient scale will continue to see more and more bookings made through their own sites. It’s the smaller operators that will become the key clients of the aggregators.”
The internet has also had a significant impact on the cost of customer acquisition with customer loyalty in the online world traditionally being very low, he added. Some companies have seen marketing costs increase almost every quarter over the last five quarters, while for others it represents 35% of the net margin.
Loyalty schemes for hoteliers and reward points for airlines are proving to be very successful and provide the online supplier with another advantage over aggregators.
“These schemes are very persuasive at ensuring customer loyalty and they are also extremely cost-effective. After all, they are giving away something that would not otherwise be taken. The cost to an airline, for example, is minimal but the benefit to the customer is enormous,” said Mr Preston.
In the future, all online travel players will need to be more creative in their offerings, he said.
Already there are companies offering a wider range of services unrelated to travel – theatre tickets, restaurant bookings and theme park entry for example. This can result in increased customer loyalty and higher revenues per booking for the online operator.
Report by David Wilkening
David
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