All posts by Martin Kelly

China’s Independent Travel Market Takes Off

By Martin Kelly

Excellent sales growth from China’s leading online retailer Ctrip once again exceeded market expectations and set a cracking pace in the world’s most exciting travel market.

Results from rival China travel retailer eLong told a different story – that of a company still establishing itself … strong sales were counter balanced by increased spending on acquisitions and marketing.

Consequently a clear split has emerged between China’s two big independent travel brands in the eyes of regional travel industry analysts.

That is, Ctrip, which is already making money, will remain dominant for the foreseeable future, while eLong focuses on building for the longer-term.

Analyst William Bao Bean from Deutsche Bank commented: "In light of eLong’s focus on customer acquisition rather than profitability, transaction metrics are the key to measuring success.

"eLong is getting traction as its relationships with portals are driving much higher traffic – but it is now up to the company to convert traffic into customers."

He said other players such as CYTS and Cendant (via their www.aoyou.com joint venture) are not yet having impact on the independent travel marketplace.

eLong’s net sales for the second quarter were RMB52 million ($US6.42 million) driven mostly by hotels, although the growth in airline ticket sales exceeded expectations.

Ultimately, though, eLong lost RMB11 million ($US1.35 million) for the quarter.

Ctrip powered on, recording net sales for the second quarter of RMB129 million ($US16 million), up 60% year on year. Net income was RMB56.5 ($US6.8 million), an 80% increase on last year’s result.

President and Chief Financial Officer of Ctrip, Neil Shen, who is leaving the company, said the results "highlighted our strength in strong organic and balanced growth.

"We have a healthy business model that we believe will continue to enable us to take full advantage of the vibrant travel industry in China."

Analyst Bean said: "Ctrip hit the ball out of the park again in the second quarter and is gradually cementing its position as a category leader in the China market based on its execution, high barriers and strong growth.

"While risks remain, including the economy and execution, we believe the outlook for Ctrip in the near and long term is good as it leads the small but fast growing independent travel market. "

Revenue at Ctrip is dominated by hotels at a ratio of around 2.5 for every airline dollar. Hotel bookings are also growing marginally quicker, although the most spectacular growth is coming from package tours, albeit from a very low base.

Online transactions are steady at 30%, compared with 20% for eLong.

Ends.

 

Search Engine Pricing Blowout For Travel And Hotel Websites

By Martin Kelly

Paid Search Engine Marketing costs in the travel sector have blown out dramatically over the past 12 months with sales conversion rates for Australian accommodation sites in particular reaching unsustainable levels.

Industry experts such as Frank Grasso from e-Channel say sales conversion rates have rocketed to almost US$90 per customer for some new players in competitive categories, while a study by researcher Frost & Sullivan confirmed it is a major concern for the industry.

“The increasing pricing problem is worse for new entrants into the market because they get hit twice: they have to pay a higher cost per click and due to their lack of brand presence they have a lower conversion rate,” says Grasso.

This is clearly making the first sale per customer uneconomic and forcing a strategic reassessment with websites justifying the high SEM cost by attempting to generate repeat business.

Grasso says the average cost per click for top position with popular terms such as ‘Sydney Hotels’, ‘Singapore Hotels’ and ‘Bangkok Hotels’ for an established company range between US$2 and US$2.95 on Google.

“A year or so ago we would have been able to get the top position for much less,” he says.

Managing Director of Amplify, Richard Noon, says: “What we are seeing is people moving more to a lifetime acquisition mode because they can’t justify paid search on a single sale basis.

“However, the jury is still out on whether this is the right approach, but clearly some players are prepared to play that game.”

Meanwhile, a report from Frost & Sullivan has revealed that rising prices and increasing competition for top ranking keywords are the top two concerns for Australian travel search engine marketers.

But Research Director, Technology, Foad Fadaghi, predicts paid search in the travel and accommodation category will still grow by at least 30% over the next 12 months.

He says the strongest growth will come from companies marketing destination activities.

Fadaghi estimates that travel is the dominant force within the Australian search engine marketing industry with 17% of total spend, closely followed by financial services on 14%.

Grasso says the rising costs are forcing many travel and accommodation companies to reassess their search marketing spend.

“The answer to this dilemma is to get smarter when devising a search engine marketing strategy,” says Grasso.

“Companies should allocate some of their budget towards PR and Branding, while using search as an acquisition tool. 

“Advertisers also need to become more aware of what the lifetime value their customers is and work out how much they are willing to pay to acquire a new customer. 

“The most successful search engine campaigns are the ones that follow a strict Cost Per Acquisition benchmark.”

Noon says the cost blowout throws the spotlight back on the importance of organic search and other marketing tools.

Both Frank Grasso and Foad Fadaghi will be speaking at TRAVELtech in Sydney on August 30. 

Ends.

 

The News Is All Good, Or All Bad – It’s A Matter Of Perspective

 

 

 

 

 

 

 

 

By Martin Kelly

OMIGOD – the world has changed. Things are different now. Those crazy kids aren’t reading newspapers, all they do is talk and text on mobiles; they’re always online and you can’t even talk to them any more.

I mean, even Rupert Murdoch reckons the internet is the way to go!

Recent reports, many of which were read online, carried the shocking news that media baron Rupert Murdoch believes newspaper editors must embrace the internet, saying print news executives “sat by and watched” as a generation of digital consumers turned away from print.

He could be talking about travel.

The omnipotent CEO of News Corp cited a recent report by the Carnegie Corp in the United States showing that 44 per cent of respondents between 18 and 34 years old said they use websites at least once a day for news.

In Australia, figures from Nielsen//NetRatings reveal that 13.2 million, or 84%, of people aged 16+ have access to the internet, 50% of users have broadband, most spend 30 minutes a day online, and that travel (like news) is one of the most popular categories with 36% “reach” among users. The vast majority of users are aged between 25 and 54.

Murdoch said that newspapers face a dire future unless the way they gather and deliver news changes dramatically. Otherwise, he said, the steady migration of readers and advertisers to web will continue unabated.

“The trends are against us,” Murdoch told the annual meeting of the American Society of Newspaper Editors. “We’ve been slow to react. We’ve sat by and watched. Unless we awaken to these changes, which are quite different than those five or six years ago, we will, as an industry, be relegated to the status of also-rans.”

So why am I telling you this? Well, replace ‘news’ with ‘traditional travel businesses’ and see what you come up with. Murdoch’s words should resonate with us all because he is simply talking about consumers wanting their product delivered in a different format more suited to the times.

Also, remember, it’s Rupert Murdoch, one of the world’s smartest businessmen, who is saying this. And, while he may be well north of 70, the so-called ‘Dirty Digger’ knows a good thing when he sees it, and it is not too proud to see the error of his ways.

The same applies Kerry Packer who, like his former compatriot, did not become insanely rich by ignoring the bleeding obvious and is set to make another large fortune with the upcoming listing of Seek, the market-leading internet job site.

Murdoch concluded that the future is strong, provided the newspaper industry – like traditional travel businesses – finds the correct balance of product delivery to satisfy a new generation of customers.

“I’m still confident of our future, both in print and via electronic delivery platforms. The data may show that young people aren’t reading newspapers as much as their predecessors, but it doesn’t show they don’t want news. In fact, they want a lot of news, just faster news of a different kind and delivered in a different way.

“And we are uniquely positioned to deliver that news. We have the experience, the brands, the resources, and the know-how to get it done. We have unique content to differentiate ourselves in a world where news is becoming increasingly commoditized. And most importantly, we have a great new partner to help us reach this new consumer — the Internet.

“The challenge, however, is to deliver that news in ways consumers want to receive it. Before we can apply our competitive advantages, we have to free our minds of our prejudices and predispositions, and start thinking like our newest consumers. In short, we have to answer this fundamental question: What do we – a bunch of digital immigrants — need to do to be relevant to the digital natives?”

Ends/ 20 April, 2005.

 

Webjet Diversifies as Sales Grow

ONLINE retailer Webjet is starting to diversify income by placing its airline booking engine – which already generates most of the company’s revenue – on three new websites within the next two months.

Managing Director David Clarke said the booking engine will soon feature on the Travelmate and Need It Now consumer sites, in addition to the Creative Holidays trade site.

The booking engine is part of the Travel Service Aggregator technology platform Webjet developed in conjunction with Galileo and Microsoft.

It can process up to 1000 transactions a minute and has been a key reason for the recent strong business performance of Webjet, which recently announced a net profit for the six months to December 31, 2004, of A$254,484.

Further profit announcements are expected with sales continuing to surge.

February, with just 28 days, was a record month with A$8.1 million in sales (11% up on January) driven by 22,000 bookings covering 30,000 passengers.

“Just wait until you see March,” Clarke said.

He added that TSA, which is able to aggregate and display product from disparate suppliers, has allowed Webjet to increase sales while controlling staffing costs.

“Most of the incremental growth goes straight to the bottom line,” he said.

“At Webjet we have 16 full-time staff,” he said. “The throughput of the best run traditional travel agencies is around $1 million a year per staff member – we can do A$6 million per person.”

Clarke said Webjet operates on a gross margin of 7% before costs – 6% is fixed while the remaining 1% goes to marketing, generally evenly split between online and offline.

“I believe you’ve got to be a visible presence in the real world – it’s no good just being a cyber space identity.”

While Clarke was reluctant to forecast because of ASX rules, he said “if the model holds true I believe our net margin can fall within the 1.5% to 2% range by the end of the year based on current trends.”

Current rampant growth rates will be difficult to maintain, he said, although the company is aiming to double existing (low-commission) airline traffic, which currently dominates income at 60%.

Another 20% comes from car, hotels, and insurance, while the remaining 20% comprises services fees.

Webjet charges a A$6.95 service fee for every transaction, no matter what volume or amount.

“It’s been in place for more than a year and we have had absolutely no resistance,” he said.

Meanwhile, whatever resistance there was to investing in Webjet has evaporated.

Over the past seven months Webjet shares have increased from three cents to a high of 22 cents (check) and are currently trading at around 16 cents.

Daily trading volumes regularly exceed one million shares, resulting in major paper profits for some of the biggest names in Australian travel.

Significant investors who bought in or struck options deals when the stock was scraping the bottom of its range include Harvey World Travel (19%), Cendant (9%) and Australian Outback Travel (3.5%), which owns Need It Now and Travelmate.

Both Cendant (GDS, hotels and car – Avis, Budget) and Australian Outback Travel (Australia and NZ hotels) are also using Webjet to distribute its products, while the HWT alliance provides it with buying power.

The frenetic stock activity has inevitably led to speculation and rumour.

But Clarke said there has been little or no recent change in the Top 20 shareholders.

“We are not sitting here trying to organise a buyout or takeover,” Mr Clarke said.

“If someone makes an offer, we’ll consider it but it’s not in the business plan or strategy.”

Ends/ 22 March, 2005

Record Traffic Levels For Aussie Travel Web Sites

CONSUMER traffic to Australian travel websites is at an all-time high, according to Nielsen//NetRatings and Hitwise.

Not surprisingly, given the launch of Jetstar, the sharpest growth has occurred within the airline sites over the past two years.

However, hotels and travel agencies are not far behind.

According to Hitwise:

  • Commercial Airlines >> Increased 69% between December 2003 and January 2005
  • Travel Agencies >> Increased 40% between December 2003 and January 2005
  • Destinations & Accommodation >> Increased 46% between December 2003 and January 2005

Meanwhile Nielsen//NetRatings reports a similar pattern.

Senior Analyst Andrew Eckford said the trend has been particularly evident during the first three months of 2005.

“Over the past few weeks we have seen consistently more than 630,000 unique browsers a week to audited travel sites.

“This is significantly higher than seen for any week since we launched the Market Intelligence measurement for the travel industry.”

Tables Below From Nielsen//NetRatings and Hitwise:

 

Nielsen//NetRatings Market Intelligence, Domestic Traffic to Travel Sites by Category for February 2005

Category              Unique Browsers      Page Impressions

Travel Portals       1,272,537                  10,659,606
Destinations         488,256                      5,065,915
Hotels                   203,342                     1,640,914
Rental Cars          133,497                     1,576,388

Hitwise – Travel – Agencies ” February 2005 ” Ranks by ‘Visits’
   
Name                           Domain                                               Market Share

1 Flight Centre             www.flightcentre.com                 11.50%
2 Webjet                      www.webjet.com.au                     6.31%
3 lastminute.com.au    www.au.lastminute.com              5.96%
4 Expedia.com             www.expedia.com                         4.47%
5 ZUJI Australia           www.zuji.com                                 3.91%
6 Best Flights              www.bestflights.com.au              3.44%
7 Travel.com.au          www.travel.com.au                        3.18%
8 Octopus Travel        www.octopustravel.com/au         2.50%
9 ITN.net                      www.itn.net                                    1.92%
10 ninemsn Travel       www.ninemsn.com.au                 1.90%

 

Hitwise – Travel – Destinations and Accommodation ” February 2005 ” Ranks by ‘Visits’
   
Name                         Domain                                              Market Share

1 Wotif.com                www.wotif.com                            6.71%
2 HotelClub.net           www.hotelclub.net                      5.70%
3 RatesToGo.com      www.ratestogo.com                   2.93%
4 Need It Now            www.needitnow.com.au            1.96%
5 TravelMate              www.travelmate.com.au            1.91%
6 Trip Advisor            www.tripadvisor.com                 1.60%
7 Totaltravel.com       www.totaltravel.com                   1.37%
8 Visit Victoria           www.visitvictoria.com.au           1.36%
9 Lonely Planet          www.lonelyplanet.com               1.35%
10 AAA Tourism        www.aaatourism.com.au           1.30%

Nielsen//NetRatings Market Intelligence, Top Destination Sites for February 2005


                                            Unique Browsers                 Page Impressions

  
1 visitvictoria.com              161,372                                  1,353,450
2 ourbrisbane.com             154,053                                  1,235,204
3 visitnsw.com.au              60,383                                    559,331
4 discovertasmania.com    48,739                                    813,611
5 westernaustralia.com     39,281                                    337,420
6 southaustralia.com          21,653                                    319,092

Ends/ 22 March, 2005

Travel.com.au Launches DP

New management at perennial under-achiever Travel.com.au Limited (TVL) has launched Dynamic Packaging on both its sites – travel.com.au and lastminute.com.au.

TVL has also ended its dual supplier approach to GDS, concluding a long-standing relationship with Sabre Pacific and fully committing to Amadeus, which has a stake in the company.

These moves come after disappointing results for the six months to December 31, a period in which TVL lost A$745,000 compared with a net profit of A$9000 for the corresponding period in 2003.

Encouraging sales growth of 9% was completely overshadowed by a 20% blowout in expenses largely due to the relaunch of the main site with a new design and booking engine.

Sales were driven solely by lastminute.com.au, which grew 35%, while Travel.com.au continued to disappoint with a 1% fall in sales. The bulk of its bookings are still handled offline.

Acting CEO Adam Johnson, who replaced incumbent Bill Gair in mid-February, said the focus at TVL – which employs 80 staff – is on growing automated sales.

He said this approach has been given strong impetus through the acquisition of Arnold Travel Technology (which Johnson used to run) via a share issue late last year.

As a result, interests associated with Arnold now control around 25% of the company. These include Johnson and new Chairman Roger Sharp.

Johnson claimed the early results from its Dynamic Packaging flight/hotel offering were encouraging, adding that automated booking numbers had increased on both sites as customers became familiar with the new booking engine.

“We’re already ahead of budget and are going to be promoting it more over the next couple of months,” he said.

Its Dynamic Packaging product is branded as ‘TripSaver’ which allows clients to “book flights and hotels together and save”.

Chairman Roger Sharp described Travel.com.au in the six month results as a company which has “traditionally operated as an offline travel agency with a website offering limited online functionality”.

It is a situation he aims to change.

Sharp said the aim now was to slow the cash burn – at December 31, TVL had reserves of A$2.5 million compared with A$4.4 million six months earlier – while growing sales.

But how? “Just having the Arnold booking engine in there means we can reduce costs, so as we grow we’ll need fewer people to handle a larger number of bookings,” said Sharp.

“The trick is to get growth in online transactions, and get it past our offline business.”

Ends/ 22 March, 2005

JTB and Viator Combine to Distribute Japanese Product

A new distribution deal between JTB Corp, Japan’s biggest travel company, and Sydney-based Viator is already yielding strong sales, according to Viator CEO Rod Cuthbert.

Cuthbert said Viator has now added JTB’s huge Japanese destination product range to its database, which is marketed through through Viator.com and 500 affiliate sites such as Hotwire, Travelocity, Zuji and Priceline.com.

Products include sightseeing and destination activities like the famous Shinansen Bullet Train tours.

“We’ve been surprised and pleased at the booking levels so far,” Cuthbert said.

“Clearly, given the perceived language challenges a destination like Japan presents, people like to get themselves organized before they go.”

Cuthbert said the initial product focus is on Tokyo, Osaka, Hiroshima and Kyoto, while the primary target market is inbound English-speaking travellers to Japan.

Cuthbert said Viator has partnered with the Sunrise Tours division of JTB.

“It’s a clear leader in English-language tours to Japan,” he said.

“There’s a bias towards educating visitors about the culture and history of Japan, and that’s exactly what our customers are looking for.”

Viator claims to be the world’s leading online aggregator and seller of destination product. Purchases are typically made by travellers prior to departure.

JTB Corp. is Japan’s largest travel company. Founded in 1912, it has offices worldwide and annual revenues in excess of US$13 billion.

More than seven million overseas travellers are expected to visit Japan during 2005, according to JTB estimates.

Ends / March 22, 2005

 

Strong Foundations For Decipher.biz

Decipher.biz – billed as the world’s largest tourism data portal – today announced it has signed three of Australia’s largest travel companies and all state tourism bodies as foundation members.

CEO Mark Phillips said Decipher, which aggregates tourism data from more than 200 sources and features a range of business planning tools, wants to further boost sales of its resources through industry resellers. 

“We’re looking for distributors and want to establish a network of resellers,” Mr Phillips said. Decipher packages start at A$550 for small companies, up to A$33,000 for large corporations.

Mr Phillips said Decipher had been buoyed by strong industry support with hotel group Best Western, hire car companies Avis and Budget signing on as foundation members.

“They view it as a valuable business planning tool – it allows them to access the latest data from around the country and build that information into their business strategies,” Mr Phillips said.

Other partners include AAA Tourism, Australian Tourism Export Council, Tourism Queensland, Tourism Tasmania, South Australia Tourism Commission, Northern Territory Tourism Commission, Australian Capital Tourism, Tourism Australia, Tourism Victoria and Tourism NSW.

He said www.decipher.biz has attracted more than 7000 unique visitors since its launch last month by the Minister for Small Business and Tourism, Fran Bailey, with the average visit lasting 20 minutes.

“I think this shows we have really hit the mark,” Mr Phillips said.

Managing Director of Decipher Technologies, Peter O’Clery, said Decipher aggregates the latest statistics from disparate sources such as the Australian Bureau of Statistics, Tourism Research Australia, State and Regional tourism organisations and private companies like Roy Morgan.

“It is designed to help tourism operators of all sizes, as well as local governments, regional tourism authorities, destination marketers and industry organisations.”

Decipher has been in development for many years and is the result of a working alliance involving the Sustainable Tourism Cooperative Research Centre, Amadeus and international consultants Ernst & Young.

Much of the funding has come from the Federal Government, which identified poor access to as a major industry issue in the late-2003 Tourism White Paper.

Decipher Technologies is administered as a business unit of the CRC for Sustainable Tourism Pty Ltd, which is responsible for developing and managing the commercial operating system.

Tourism contributes nearly 6 per cent of Australia’s employment and earns about A$17 billion in exports.

Ends / 22 March, 2005

Totally Teetotal on Technology

Can you survive a week without your mobile and Blackberry? Yeoh Siew Hoon goes cold turkey in the golden land of temples – Myanmar

I’ve just been reading a report about what it takes to keep the 21st century business traveller happy.

Apparently, the four top requirements are a direct flight, a flat bed, a Blackberry and being met at the airport – so said 1000 business travellers who were surveyed at the recent Business Travel Show in London.

According to the survey:

  • 62% said a direct flight would make their journey more enjoyable
  • 48% craved to see a chauffeur hold up a card with their name on at their destination airport
  • 46% said they wouldn’t be parted from their Blackberry for the world
  • 43% longed for the undeniable luxury of a flat bed on their long-haul flights

So there we have it – the 21st century business traveler is a spoilt and insecure species.
 
Spoilt because he or she craves luxuries and comforts and insecure because he or she can’t do without their communication devices – some psychiatrists believe our fear of being without our mobiles or Blackberries stems more from insecurity than conscientiousness about our work.

In other words, we all need to be needed and we all want to feel indispensable in our jobs. Imagine if everything ran smoothly while we were away and were out of touch …

Anyway, the survey got me thinking that if they were ever to do similar research on what it takes to keep a 21st century leisure traveler happy, I am quite sure that top on the list would be no mobile phones and no Blackberries.

I say this because I have just spent a week in Myanmar, mobile-less and email-less.
 
And I am glad to say I survived. In fact, more than survived. I felt a sense of freedom and liberation that I had not felt in years. It was like walking on winged feet through a golden land of temples.

At first, it felt strange. In the first few hours of arrival, my mind kept wandering to my phone and laptop, wondering what messages I was missing and if I had missed any deadlines. My fingers actually started to itch.

Switching off my mind was infinitely harder than switching off my electronic gadgets.

It’s hard when you are an SMS addict, like I am, to suddenly go cold turkey. But let’s face it, if you have to go cold turkey, Myanmar is the best possible rehabilitation clinic on earth for us urban, email, mobile phone junkies.

This is a land that is timeless. It’s a place steeped in time. People have time. They take time to do things. They do not rush. They sit. They talk. They pray. They smile a lot. They do not have much but they have a lot.

It teaches you not to hurry because why worry? There is time.

By the time I went to bed at the Pansea that first night, I was in step with Myanmar.

I dreamt of white clouds, not Blackberries.

During the course of the week, there were temptations thrown my way. Perish the idea but some hotels now actually have business centres with Internet facilities.

The temptation was strongest on “The Road to Mandalay” cruise from Mandalay to Bagan where I had to spend three nights on the ship in really close proximity to an Internet connection.

It was tough but whenever I felt the old habit creeping up on me, I immediately ordered a gin tonic, recited Rudyard Kipling and counted flying fishes.

I therefore recommend Myanmar to any 21st century business traveler who wants to learn to do without his or her Blackberry.

Truth is, it’s amazing how easy it is to do without when you are forced to do without.

Ends / 21 March, 2005