By Martin Kelly, Editor, Travel Trends

THE question has been nagging me for years. What’s happening at the centre of the world’s online travel industry? Finally, I put my hand in my pocket and travelled to the PhoCusWright conference in Hollywood to find out. The answer … complicated.

First, US consumer demand is dramatically slowing putting pressure on the big online travel agents: Expedia, Travelocity, Orbitz and Priceline. There’ll probably be very little growth in the sector over the next 12 months and maybe some consolidation.

Second, the larger US companies are looking to diversify by buying faster-growing businesses in other markets or by growing nascent revenue streams such as advertising, which means OTAs become more like publishers…

Third, while advertising is much-hyped the results are moderate to date (for the OTAs at least, TripAdvisor another story). Expedia is most advanced – 10% of revenue from ads and just launched own system – Expedia Ads.

Fourth, in terms of the transaction models, it’s all about hotels (d’oh). Merchant mark-up pricing still hanging in there but much stronger momentum behind commission based businesses.

Fifth, more innovation is required but consensus is there isn’t much around. The US online travel industry is very “straight” – run by middle-aged MBAs in chinos – whose business decisions are driven by investors not customers.

Sixth, many “innovators” believe the big business opportunity in the online travel space right now lies in pay per click and affiliate revenue advertising models incorporated into travel planning/mgt websites or mobile applications.

Seventh, surprisingly little discussion on using social media to drive business apart from a presentation by Stephen Kaufer, CEO of TripAdvisor. Presenters were generally very into their business, not so much the consumer.

Eighth, after years and years of publicity, the “mobile” era may now actually be on us thanks to the sheer sexiness of the iPhone and other net-friendly mobile applications. Some of the best innovation was mobile.

Ninth, in terms of the technology, it’s all about distribution in one form or another. I didn’t see too much on the booking side, where some pundits believe there’s a good opportunity.

Tenth, the big trends apparent in the US are already obvious here, though hard to say if the consumer slowdown will be as significant. Australia is not “behind” the US – it’s just different – vive la difference!

Travel Trends: November 24, 2008

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