Consolidation: it’s a dirty word right now. The big boys (no girls) of online travel – virtually all of them US based multinationals – seem like they’re in a mad race for territory like the colonialists of old.
Leading the charge is TripAdvisor, which has bought seven or eight companies over the few months, followed by Expedia, Priceline and others, though their recent acquisitions have been much bigger (Kayak/Priceline, Expedia/Trivago).
Chasing growth, scale and investor kudos, their ambition is limited only by finance – and, to an extent, imagination.
The online travel business has become the finance business, a place where investment bankers trawl the market for acquisition and fee-earning opportunities.
The fact is these days there’s little or no growth for the larger travel online travel companies without acquisition.
The days of organic growth in most major markets – the United States, Britain, Western Europe – are over. They are so 10 years ago.
It’s so much easier to buy the future than create it yourself in 2013.
That can apply to new growth markets such as Asia or perceived under-exploited verticals such as holiday rentals, the space that TripAdvisor is paying a lot of attention to right now.
But it wasn’t always that way.
I had coffee with the founder of a global travel brand this week and he said they would not have been anywhere near as successful if they’d started now rather than a decade ago when there was so much less competition.
Those years also gave them time to build the scale and financial firepower now essential to create and maintain a brand on the one travel marketplace that truly matters – Google AdWords.
As Frank Sinatra once sang: “If I can make it there, I’ll make it anywhere”.
Oh, but it costs a lot of money because marketing costs are through the roof.
And that’s the issue for smaller companies trying to gain traction and also commission revenue without the size to ask for the big percentage required.
It’s a Catch 22.
Ian Cumming who started then closed an airfare search company, explained: “Without a lot of funding I don’t see how new entrants can grow their distribution to the minimum size that airlines currently require in order to pay commission.
“Depending on the airline, the minimum is typically $20,000 to $40,000 a month worth of bookings referred before they will agree to pay commission.”
So the question remains: How do they compete with a company like Expedia, which is on track to spend US$2 billion on marketing this year (more than 45% of revenue, compared with around 35% of revenue in 2009)?
Maybe you have some ideas though the answer, as always, is to be found through innovation, as Airbnb has shown in recent times.
Hmmm, speaking of consolidation…
I just wanted to let you know that there a few of us women out there in this marketplace.
And you know what the big difference is – we are not looking at it from a ‘make us rich’ business perspective.
What we are offering that is making us stand out is our passion and outstanding customer service.
Sites like my own, http://www.familyfriendlyaccommodation.com.au or http://www.whatspot.com.au (both started and run by Melbourne mums) are slowly growing in the marketplace.
We don’t have the massive advertising budgets, but we know our market. And are committed to it.
As these mega-companies continue to grow and people realise the money-making machines that are behind them, niche sites run by people who really do care will be the stand-outs.
Remember – who was it who won the race?
Thanks Amanda. My line in the opening par about the “big boys of online travel” is a reference to the fact that all the big Online Travel Agents are run by men.
Totally understand Martin. Just wanted to let you know us ‘Little Girls’ (and boys for that matter) are working out there, not to make mega $$$$ off the Australian tourism industry, but coming from the point of view of running businesses or even blogs that provide great customer service (with knowledge of our own country thrown in). Maybe there is a story in there for you – growth of the mummy market in the tourist industry.