Anyone reading this who thinks are in the travel business should probably think again. They are only part right because, really, travel these days is as much about sales and marketing – putting bums on seats or backs on beds – as showing clients a good time.
You doubt this? Well, Expedia has just increased hotel room night sales 27% during the September quarter on the back of a US$500+ million sales and marketing spend.
This means the online travel conglomerate is on track to spend more than US$2bn on sales and marketing over the next 12 months.
That is extraordinary, don’t you think? Its technology spending is also way up as it looks for better, more efficient ways to connect and sell to its customers. There’s strong evidence this is happening.
Commitment to sales and marketing has been a multi-year trend at Expedia, and one that has helped this once stagnant company get its mojo – and stock price – back.
In the last quarter of 2008, Expedia’s marketing spend was US$214.7m, or 34.6% of revenue, a percentage that has been creeping up ever since.
Its latest results show a quarterly marketing spend in excess of US$500m, or 42% of revenue.
That’s year-on-year growth in spend of 24%, and most of it went on digital marketing.
It’s hard to see such extreme growth rates continuing, but why on earth would they pull back?
It is working, after all, and the people who are managing Expedia’s efforts in this area have a very firm grasp on Return On Investment.
The same must be said for their counterparts at the Priceline.com companies, which include Booking.com and Agoda.com, who have been carving out large chunks of many key international markets through their expertise in digital marketing, especially search.
Priceline, a smaller company than Expedia, spent US$341m on digital marketing in the June quarter (just an extra US$10m offline).
Consequently, and not surprisingly, both companies have been taking market share from other Online Travel Agents and also suppliers, whose products they are actually selling for a commission.
That money being reinvested in the OTAs marketing. A virtuous, vicious cycle.
Of course the suppliers don’t have anywhere the same marketing budgets.
So how can suppliers compete?
That is a rhetorical question and the end of this little story.