Expedia and Hotels.com, two of the great innovators and success stories in the online travel agency business, have recently been spun off by their parent, Barry Diller's IAC, into a new company called Expedia. The spin-off is intended to boost IAC's sagging stock price. Apparently, Diller believes there is more upside potential in IAC's remaining properties, which include Ticketmaster and the Ask Jeeves search engine, than in its online travel properties.
On August 8, the New York Times wrote a piece that nicely summarized the many challenges facing the newly independent Expedia. In essence, Expedia profited handsomely during the economic downturn by buying blocks of hotel rooms on the cheap from the major hotel chains then reselling them at a markup. Hotels got badly needed money, but they ended up paying a high price in business disruption, not the least of which was enabling a third party to sell their hotel rooms less expensively than they could.
But now with an improving economy, the hotels are fighting back, aggressively pushing travelers to their own, much improved Web sites, which now always offer the best available room prices. Some chains have gone even further, and are now squeezing Expedia on standard booking commissions. Further, Expedia's many competitors have begun copying much of the Expedia business model. End result: much more competition and a less compelling product are both kicking in at the same time. Expedia is hardly out of the game, but it's going to be a tough battle going forward. And how does Expedia plan to distinguish itself and hold onto market share in this hotly competitive market? A new focus on content to help travelers make more informed travel purchases, an effort that will likely be fueled by another company that IAC included in the Expedia spin-off, TripAdvisor (a 2004 InfoCommerce Model of Excellence winner).
A second article in the New York Times on August 16 described the rapid growth and success of the managed corporate travel business. Managed corporate travel essentially involves a corporation pushing all its travel bookings through a single online travel agency in exchange for efficiencies and savings. One of the biggest players in this field, the article noted, is Expedia Corporate Travel.
Is there a contradiction here? Not at all. What it underscored are the essential differences between consumer and business markets, and the power of infocommerce.
Because consumer markets for almost anything tend to be huge, they attract lots of players. These players compete aggressively for market share, because consumer markets tend to depend on volume to make real money. To attract fickle consumers, the general pattern is for the competitors to start an arms race to offer the most content, the most features and the most functionality. It's an endless, expensive spiral, and many companies cripple themselves in the process of trying to cripple the competition. Worst of all, it's harder than ever to build loyalty among consumers, and more expensive than ever to try to remain front-of-mind with them.
In contrast, business information markets tend to be smaller but afford greater stability. Further, businesses still tend to consider other factors in the buying decision beyond price, such as dependability and functionality. Expedia Corporate Travel is doing so well in the corporate travel market because it's doing a lot more than booking cheap fares. In addition, it provides management tools, enforces corporate travel policies, provides sophisticated reporting and saves client companies money as well. By taking information (hotel and airline rates and schedules) and making it actionable (by taking reservations), Expedia adds value by improving productivity while controlling costs. By acting as a central corporate travel agency and providing management control and reporting, it embeds itself into corporate workflow so deeply it is almost impossible to dislodge.
Not all data providers can or want to take their customers all the way to a purchase, but what we should be striving towards is adding functionality to data so that it helps customers improve their efficiency and productivity. And that is the essence of infocommerce - to become part of internal customer workflow, where you can deliver the highest value while creating long-term customer dependency and significant switching costs. As the tale of the two Expedias illustrates, the future of data publishing is less linked to finding lots of new customers than pushing more deeply into the businesses of our existing ones.
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TODAY'S AND TOMORROW'S InfoCommerce 2005 is proud to announce that Dale T. Denham, Senior Vice President, Advertising Specialty Institute, has been confirmed as a speaker.