PhocusWire has four core areas of focus: Startups, Distribution, Technology and Online.
In this analysis for the PhocusWire Forecast 2018, we focus on Online, in particular the web agency and supplier market, the continued stranglehold on the sector by Google, and some of the emerging trends hitting market.
Online
The state of online travel as we leave 2017 and enter 2018 couldn’t be more fascinating and yet still fairly difficult to gauge.
Here are some figures, first up, to help make sense of it all: the global leisure and corporate travel market is valued somewhere in the region of $1.3 trillion, according to our sister brand Phocuswright.
This jaw-dropping figure – travel, tourism and hospitality ranks as one of the world’s biggest sectors - is made up of 37% heading the way of airlines and 31% to hotels.
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Online penetration varies by country or type, but it can be anything up to 60% for hotel bookings in some developed markets, for example.
This digitisation of the industry is not any sign of slowing down, yet various sectors within it find themselves at a crossroads as they enter a new year.
Marketing, elephants and more
Financial analysts think online travel agencies are better equipped than the suppliers they serve to compete in the hectic and expensive world of digital marketing, and 2018 is unlikely to change that.
This is because their core outlay is to drive people to their websites, rather than refurbish hotels or kit-out new aircraft, so they continue to hire the best and have created teams that specialise solely in aggregating demand for products.
But what needs to be noted is the wobble in the markets in the fourth quarter of 2017 and whether such concerns will continue.
Google’s ambitions are fairly obvious – own the customer, own the supply chain relationship, own the data and, with online services such as Trips, own the experience.
Nervy investors or something more fundamental – it’s too early to say, with a few more quarters to go before it becomes a crisis.
Whether the two biggest OTAs in the world can continue (or want) to support what is essentially becoming their fiercest competitor to the tune of $8 billion a year between them on ad-spend is a key question next year.
If they rein that spend in, with TripAdvisor channelling some of its marketing money to TV (alongside that of Trivago), we have a trend worth noting – that the marketing tactics that have served online travel so well for many years are changing.
And such a shift means that the suppliers at one end are affected, plus the consumers hitting the ecosystem at the top of the funnel are, too.
Central to this potential change is Google, the “elephant in the room” since, well, forever.
What the industry eventually realised, after the ITA Software acquisition was probably the only ever dramatic, single event in the search giant’s involvement in travel, was Google does things slowly but surely – piecemeal, if you like.
But as we hit 2018, Google’s ambitions are fairly obvious – own the customer, own the supply chain relationship, own the data and, with online services such as Trips, own the experience.
The State of Digital Travel 2017
With a huge opportunity to capitalize (funded, of course, by those ad dollars), next year could be the one where we see OTAs, suppliers and tech vendors figure out what they are going to have to do as Google’s squeeze on the industry gets even tighter.
The debate about direct bookings and working with OTAs is likely to evolve further in 2018 as suppliers figure out how to potentially use their relationship with Google to better effect, possibly as a negotiating tactic.
Other elements in play
Alongside the shenanigans playing out in the air and hotel sector, a few other notable areas to keep an eye on include some of the emerging sectors, new models and the influence of new technology.
For example, it cannot be long until the “experience” of a leisure trip is given equal billing to the way travelers get to a destination and where they sleep when they do.
The apparent lip-service currently paid to “things to do” will surely flip and, therefore, more broadly, give the so-called plumbers and consumer-facing specialist brands in tours and activities something to truly capitalize on.
The multi-billion dollar addressable market in that sector will be addressed soon by the existing players, or it will be the biggest untapped opportunity in the history of travel. Or, worse for them, someone else will come along and figure it out.
Finally, with search wrapped tightly around the online travel landscape, next year is likely to see voice become a significant channel that has to be taken seriously.
For all of the current quirks with Alexa, Home or Siri, a human’s voice is the most natural way to ask a question, yet it feels as if travel brands are not fully prepared to give the most valuable and relevant answers back.