By Martin Kelly, Editor, TRAVELtech
He’s a one trick pony
One trick is all that horse can do
He does one trick only
It’s the principal source of his revenue
Funny, Paul Simon could be singing about the Australian online travel industry circa 2007, where the most successful companies are one trick ponies, selling either hotels, airfares, cars or insurance.
It makes sense: a simple business plan aligned with decent technology, a driven leader, aggressive single-premise marketing, and a young, accepting marketplace with very few opponents.
But times are changing , competition is intensifying across all sectors, and maybe now is a good time for the one-trick ponies to loook at expanding their repertoire.
Companies that once had a particular field to themselves are now confronting a maturing marketplace.
And, while even the biggest companies such as Wotif.com – which has declared it will stick with selling hotels in Australia and NZ, are still growing bookings at more than 40%, there is evidence that the strongest online travel growth has already occurred.
Indeed, this period could well mark the start of a gradual moderation in Australian online booking rates.
In the more mature US market, the most recent results for Priceline show organic year-on-year annual growth of 13% for domestic sales, while domestic bookings for Expedia grew a measly 2%.
Interestingly, Priceline’s European sales went through the roof (albeit from a much lower base) while Expedia’s international gross bookings grew 23%.
Slower growth rates are OK if you are a privately owned company answerable only to a couple of shareholders.
However it’s a different story if you are on the stock exchange. Expedia, for example, has been hammered.
In Australia, online travel shares have had a good run but recent results have have been quietly received.
Webjet shares still cost around the same as they did a year ago despite the company recording profit growth of 50% in the six months to December 31.
It seems professional investors also think online growth has peaked and are sitting on their hands while things pan out.
So how are the one trick ponies of the online travel industry reacting to the shifting dynamics?
Sticking to their knitting is the answer – and it doesn’t look as if they are going to try needlepoint any time soon.
Leaders who once took a chance have become conservative using the same strategies that have served them well in the past.
They are focussing on a single brand and revenue stream.
Yet surely now, while no-one is looking, is the perfect time to take a risk, learn a few more tricks and diversify.
That way these companies will still have some entertainment value when the audience tires of the present routine.
4 February 2007
Lyrics to One Trick Pony: http://www.lyricsfreak.com/p/paul+simon/onetrick+pony_20105901.html