Travel Metasearch: What’s Coming Next

by Dennis Schaal + Skift Team - Jan 2014

Skift Research Take

Metasearch is the biggest battleground in the online travel agency versus travel brands fight for consumer eyeballs and loyalties, and a tool for hotels to compete against other brands at the property level. What’s in store during its next phase?

Report Overview

Metasearch is the hottest thing in travel. Travel metasearch is a lead generation platform that allows consumers to compare rates from multiple online travel agencies and suppliers, usually in a single grid. The sector has attracted several billion dollars in investment in the last couple of years from Priceline, Expedia, Google and Sequoia Capital, to name a few, and metasearch, in the U.S. at least, is the fastest growing channel for travel shopping.

Source: Trivago

Source: Trivago

Tracing its routes to the very late 1990s and startups such as Sidestep, Qixo and FareChase, travel metasearch features companies displaying pricing and, ever-more-frequently, offering bookings for hotels, flights and car rentals. It has evolved from a channel that online travel agencies and suppliers tested and dabbled in, to a vehicle that large players most often consider an essential part of their digital marketing mix.

Online travel agencies, hotels, airlines, and car rental companies generally view travel metasearch as a relatively efficient way to drive traffic to their own websites, often getting a higher return on investment than they do through Google AdWords because metasearch’s consumer leads are more qualified. Metasearch is also a key battle ground in the online travel agency versus supplier fight for consumer eyeballs and loyalties, and is a tool for hotels to compete against other brands at the property level, for example.

This trends report will examine why travel metasearch is attracting so much attention and investment. It will take an inside look at the economics of travel metasearch for the metasearch companies themselves, and participating online travel agencies and suppliers. This trends report will present interviews with Kayak CEO Steve Hafner and Trivago managing director Malte Siewert about their respective companies’ strategies and practices inside global online travel agencies, and it will provide insights from key executives throughout the sector. This trends report will also detail emerging trends in travel metasearch, including mobile, as well as offer advice on best practices.

Executive Summary

Metasearch is the hottest thing in travel. Travel metasearch is a lead generation platform that allows consumers to compare rates from multiple online travel agencies and suppliers, usually in a single grid. The sector has attracted several billion dollars in investment in the last couple of years from Priceline, Expedia, Google and Sequoia Capital, to name a few, and metasearch, in the U.S. at least, is the fastest growing channel for travel shopping.

Source: Trivago

Source: Trivago

Tracing its routes to the very late 1990s and startups such as Sidestep, Qixo and FareChase, travel metasearch features companies displaying pricing and, ever-more-frequently, offering bookings for hotels, flights and car rentals. It has evolved from a channel that online travel agencies and suppliers tested and dabbled in, to a vehicle that large players most often consider an essential part of their digital marketing mix.

Online travel agencies, hotels, airlines, and car rental companies generally view travel metasearch as a relatively efficient way to drive traffic to their own websites, often getting a higher return on investment than they do through Google AdWords because metasearch’s consumer leads are more qualified. Metasearch is also a key battle ground in the online travel agency versus supplier fight for consumer eyeballs and loyalties, and is a tool for hotels to compete against other brands at the property level, for example.

This trends report will examine why travel metasearch is attracting so much attention and investment. It will take an inside look at the economics of travel metasearch for the metasearch companies themselves, and participating online travel agencies and suppliers. This trends report will present interviews with Kayak CEO Steve Hafner and Trivago managing director Malte Siewert about their respective companies’ strategies and practices inside global online travel agencies, and it will provide insights from key executives throughout the sector. This trends report will also detail emerging trends in travel metasearch, including mobile, as well as offer advice on best practices.


Travel Metasearch: A Look Inside


Behind the Trend

Two recent surveys of U.S. leisure travelers pinpointed travel metasearch as the fastest- growing channel for travel shopping.

An MMGY Global/Harrison Group “Portrait of American Travelers” survey, based on interviews with 2,511 active leisure travelers in February 2013, found that 28% of respondents used travel metasearch sites such as Kayak for travel shopping. This figure was up from 18% in 2012.1 This leap in traveler usage was undoubtedly influenced by online and offline marketing campaigns. For example, Kayak in 2012 spent $75 million on television, billboards and online display media for its Kayak, Swoodoo (Germany) and Checkfelix (Austria) brands.2 In contrast to the growing preference for travel metasearch, the MMGY survey showed that leisure travelers’ preferences for online travel agencies, offline travel agencies, supplier websites and private sales websites either stayed flat or declined during the same period.

Meanwhile, PhoCusWright’s most recent “U.S. Online Travel Overview” cites a consumer travel survey that found that leisure travelers’ preference for travel metasearch sites such as Kayak or Fly.com for travel shopping rose from 28% in 2010 to 36% in 2012.3 Leisure travelers were considerably more likely to use online travel agency websites (59%) and search engines such as Google or Yahoo (49%) than travel metasearch for travel shopping in 2012, but these percentages for online travel agencies and general search engines held steady or decreased, respectively, in the prior two years while travel metasearch leapfrogged as a consumer preference, according to the survey. Travel metasearch sites in 2012 also finally caught up to supplier sites (36%) as a resource for travel shopping, the survey found.

Another indicator of the sometimes-hyper growth of travel metasearch is that in the second quarter of 2013, Germany-based Trivago’s initial quarter within the Expedia Inc. fold, Trivago’s revenue grew 80% year over year as it focused on international expansion into the U.S., Canada, Australia and New Zealand, said Expedia CEO Dara Khosrowshahi.4

And Gareth Williams, CEO of Scotland-based flight-metasearch engine Skyscanner, said the company was on track to see gross bookings for its airline partners jump 66% in 2013 to $6 billion.5


Why Metasearch?


Rate Parity and Disparity

Why are travelers increasingly using travel metasearch sites for comparison shopping if hotel and online travel agency agreements with one another usually call for rate parity? In other words, the room rates on the hotel chains’ own websites are supposed to be the same across all leisure travel channels.

The answer is that there remains a great deal of rate disparity out there, and the travel metasearch sites are capturing and taking advantage of the pricing differences.

Room 77, a metasearch site that focuses on hotels, conducted 19,936 searches and analyzed the base room rates on its own site and the hotel-metasearch desktop offerings of Kayak, Trivago and TripAdvisor from July 26, 2013 to November 15, 2013. It found that there was rate disparity (one or more competitors) 58% of the time. Conversely, the study also found that there was rate parity +/- $1 for all four sites 42% of the time.

Room 77 also analyzed rate parity/disparity on the mobile web for the hotel-metasearch offerings of the four companies, and found that rate disparity was even greater than on the desktop. Of 7,350 mobile web searches conducted August 11, 2013 to November 16, 2013, Room 77 found that rate disparity among one or more of the four competitors existed 65% of the time while rate parity for all four mobile sites was present just 35% of the time.

There are many reasons for the high incidence of rate disparity, including availability issues, out- of-date and inaccurate rates, mobile-only deals, wholesaler rates, lack of commitment to and enforcement of rate parity policies, and displays of different room types, among others. Room 77 states that some metasearch sites’ tendencies to display rates in varying ways, sometimes excluding taxes and fees upfront, was not a factor in its study because Room 77 only considered the base prices, and verified them on the competitors’ websites.

“The big takeaway here is that price parity does not exist on most searches,” Room 77 stated.

And Room 77 was only looking for metasearch price parity and disparity related to hotels.

Source: Kayak

Source: Kayak

There is also pricing disparity of a different type that travelers can find on Kayak.com, which gets the vast majority of its queries from airline searches. For flight-search results, Kayak displays what it calls Hacker Fares, which combine two tickets issued by different airlines to create a roundtrip. So while a JFK-LAX non-stop roundtrip for January 6 to January 9 on United.com might cost $492, Kayak offered an Alaska Airlines-United roundtrip JFK -LAX on the same dates at $452.

There is an additional and seemingly irrational element to travelers’ propensity to comparison shop on metasearch and online travel agency sites. Jeffery Boyd, who was CEO of Priceline until December 31, 2013, pointed to it in September 20126, arguing that there is plenty of room for consumers to find hotel deals online because of the complexity of hotel pricing, and that travelers are also inclined to scour the web for airline tickets even when online travel agencies and airline sites offer basically the same airfares. Travelers, like consumers elsewhere, love to shop and find deals.


Money Is Pouring In

The two largest online travel agencies, Priceline and Expedia Inc., in 2013 acquired their own metasearch sites as a means to bolster profits, control an effective marketing partner, and for knowledge-sharing. All of this followed Google’s $700 million acquisition in 2011 of ITA Software, which became the foundation of metasearch site Google Flight Search.

Priceline announced its intent in November 2012 to acquire travel metasearch site Kayak for $1.8 billion7, and ended Kayak’s brief stint as a standalone public company when the deal closed in May 2013. Meanwhile, Expedia Inc. took a 62% stake in Europe’s leading hotel metasearch player, Dusseldorf-based Trivago, for $564 million in cash and 875,200 shares of Expedia common stock over five years.8 The deal closed in March 2013. Just a week after announcing the Trivago deal in late December 2012, Expedia led a $30.3 million funding round for U.S.-based hotel metasearch site Room 779, and is believed to own about one-third of the company.

Also on the investment front, in a move that highlights how travel metasearch now appears on the big stage and is coming into its own, Sequoia Capital bought out an existing investor at Scotland-based flight-metasearch company Skyscanner, and rewarded Skyscanner with an $800 million valuation.10 Skyscanner, which recently acquired hotel-search site Fogg in a bid to reduce its reliance on flights and expand into the more lucrative hotel-metasearch arena11, recently opened an office in Miami and is making its first concerted effort to expand into12 the U.S.

The funding infusion into travel metasearch isn’t limited to the U.S. and Europe, of course. In November, the Chinese travelmetasearch site Qunar, which is controlled by the leading general search engine in China, Baidu, raised $167 million in a U.S. public offering on Nasdaq.13


The Math of Metasearch

A TripAdvisor CPC based hotel metasearch display. Source: Trip Advisor

A TripAdvisor CPC based hotel metasearch display.
Source: Trip Advisor


Metasearch Economics

In interviews with top travel metasearch officials, financial analysts and hoteliers, as well as an examination of financial reports, the following picture emerges about the economics of travel metasearch.

The CPC (cost per click) model dominates travel metasearch as hotels, airlines and car rental companies pay the metasearch companies when a consumer clicks on their rates or links, and navigates to the online travel agency, hotel or car-rental advertisers’ sites. CPC rates typically range from $0.75 to $2 or more in core metasearch results, although they vary by site, average daily rates, location, dates, and a wide variety of other factors.

Many metasearch players typically also offer pop-under ads, which open in individual windows, as an alternative way to begin a search outside the metasearch framework, but the user experience is sub-par and the leads generated are much less qualified because users are just beginning their searches. CPC rates for pop-under ads typically range from $0.25 to $0.50. The lousy user experience and the proliferation of mobile are two key reasons that TripAdvisor transitioned in the Summer of 2013 from reliance on pop-unders to hotel metasearch in the form of its new Hotel Price Comparison feature14. TripAdvisor has struggled with its new emphasis on metasearch because its CPC rates on metasearch haven’t compensated for the greater click volume that the pop-unders brought, albeit with lower CPC prices.

Hotel and car-rental metasearch is highly monetized while flight metasearch monetization is considerably less the norm. The CPC rates that travel metasearch players get for hotels are generally two to ten times higher than they get for flights. If you are trying to figure out why Skyscanner is broadening its product to include hotels in a much bigger way than it has in the past, then look no further.

Airlines can participate in travel metasearch for free or at lower costs because for some travel metasearch companies, such as Kayak, they still, in some respects, drive the show. In Kayak’s 11th amended IPO registration statement, issued before its financials became more opaque as part of Priceline, the company stated that airline queries accounted for 86% of its desktop and mobile searches during the first quarter of 2012, but represented only 24% of distribution revenue.15

Travel metasearch players have embraced mobile apps and the mobile web, but like others outside of travel, they face a big challenge in monetizing mobile. Kayak reported that in the first quarter of 2012, 16.9% of its queries came from its mobile apps, but they accounted for only 2% of total revenue.16 And, UBS Internet analyst Eric Sheridan tells Skift a hotel that might pay a $1 CPC on a desktop might typically pay only $0.20 to $0.30 on mobile.

While the CPC model dominates, and has suppliers and online travel agencies paying travel metasearch companies at the time of the lead referral, a CPA (cost per acquisition) model is also in play. Under CPA, the advertiser pays the travel metasearch company a fixed percentage of revenue when the traveler completes a booking on the advertiser’s site.

Travel metasearch companies such as Kayak, Hipmunk, Room 77, and, in 2014, TripAdvisor are increasingly using a branded booking model (Book via Kayak or Book on Hipmunk) in which the user can stay on the metasearch site or app to book, although an online travel agency or supplier partner in the background is the merchant of record, handles fulfillment and customer service. Branded booking typically uses the CPA model, with the travel metasearch company taking the lion’s share of the revenue split with the fulfillment partner.

Travel metasearch companies also earn revenue from display advertising using the CPM (cost per 1,000 impressions) model, CPC text links, and in the case of TripAdvisor, subscription revenue from its Business Listings product.

In the hotel-marketing universe, advertising through Google search and on TripAdvisor, including its hotel-property pages and, to a lesser extent its Hotel Price Comparison metasearch tool, are considered must-buys.


Bidding Platforms Or Not

TripAdvisor and Google Hotel Finder use bidding platforms, sites such as Hipmunk, Trivago, Room 77, Skyscanner and Momondo eschew them, and Kayak offers something of a hybrid approach to hotel placement and monetization in metasearch.

Source: Skyscanner

Source: Skyscanner

Room 77 CEO Drew Patterson explained the company’s thinking about abstaining from a “marketplace mechanism” for hotel placement by default, and this view dove tails with several other travel metasearch companies’ philosophies on the subject.

“The right answer as a search engine is marketplace relevancy,” Patterson said. “We think consumers want to find the lowest prices and we should always show them.”

“We don’t want to be in a position where we are not putting in the lowest price option in our default click box because we are getting paid more,” Patterson added. “That seems like it is not in the right interest for the consumer and it doesn’t build trust.”

TripAdvisor, on the other hand, offers an auction model, and provides information on suggested bids to optimize a campaign, said Robin Ingle, senior vice president, advertising sales for TripAdvisor.

Most of TripAdvisor’s larger hotel partners update their CPCs “several times a week,” Ingle said.

On sites without auction platforms, the updating of placements can take place much less frequently.

It is widely acknowledged that online travel agencies, as a rule, dominate the top three to five positions of hotel-metasearch displays, although it varies from site to site, and search to search. Online travel agencies generally have larger marketing budgets for metasearch than do hotels, airlines and car rental companies, have more sophisticated tech skill sets, and aren’t distracted by having to run hotel lobby front desks or operate room service.

For example, Priceline and Expedia accounted for about 60% of TripAdvisor’s CPC revenue in the third quarter of 2013, UBS Internet analyst Eric Sheridan estimates.

And, in the first quarter of 2012, Expedia and its affiliates, including Hotels.com and Hotwire, generated 23% of Kayak’s total revenue while Orbitz, Cheaptickets, HotelClub, ebookers and other affiliates kicked in 10% of Kayak’s total revenue.17


Interview: Kayak CEO Steve Hafner

Co-founded in 2004 by CEO Steve Hafner and chief technology officer Paul English, Kayak executed an initial public offering in July 2012, but just four months later Priceline announced it would acquire Kayak for $1.8 billion. Skift spoke with Hafner in December 2013 about its operations within the Priceline Group, the competitive landscape, and trends in travel metasearch.

Skift: How has the operation and the business changed since Priceline’s acquisition of Kayak?

Steve Hafner: It’s pretty much business as usual. Priceline is a traditional holding company so they don’t run us any differently than we ran independently before. So it’s the same team structure, a little more oversight on the legal and financial side, but that’s about it. Commercially we don’t interact that much with the other Priceline Group companies.

Skift: Isn’t there a lot of information-sharing about best practices?

Hafner: Most of the brands are fiercely competitive with each other on the marketing and customer acquisition side. And then a lot of the information-sharing is restricted by confidentiality agreements which we have with each of our customers. I hope that’s true at Expedia, as well. I don’t get the sense that Trivago is sharing with Expedia what Booking.com’s transaction count is. It’s pretty much business as usual.

The one thing we have been able to do is expand internationally much more quickly. Before at Kayak we thought, OK, let’s prioritize our market expansion this way, and the Priceline guys were able to say is you should bring this market higher on the list and you should de-prioritize this other country. At the time of the acquisition we were in 17 markets. By the first quarter of next year we will be in 39.

Skift: When you are sitting back in the office with your colleagues do you ever look at a specific competitor and say, wow something they did is pretty good or the opposite, something they did you think is dumb?

Hafner: We do that all the time. The great thing about competing on the Internet or the mobile app space is that you can see what competitors are doing on the app side. When you see something that looks cool, that’s resonating with consumers, you say how can I launch that on Kayak or how can I improve upon that feature and launch it on Kayak. So there is a lot of cross-pollination of ideas.

Skift: Is there one that you can share as an example?

Hafner: It is a small one, but Bing had the price-predictive charts on airfares. We were always dismissive of them at Kayak because we knew once you find a flight you want to buy, you should buy because airfares go up over time. But you know what? After seeing that in the market for four years, which was a long time, we decided to implement it, and after some A/B testing we saw it worked. It does give peace of mind to a range of consumers and they are more inclined to buy if you show them a price chart that says “buy.” That’s a small example and it goes on all the time.

You know one thing about being big — Kayak being big, Trivago getting bigger, and TripAdvisor being three times the size of us — is each of these companies can A/B test lots of different experiments. As a result of that, each of these websites gets 1 to 2 percent better every month, and the small guys can’t keep up with that level of innovation.

Skift: You guys pioneered direct booking on metasearch as an alternative to handing off travelers to third-party sites. How do you see that evolving in the future?

Hafner: It is still a modest test on Kayak because we don’t have every itinerary bookable without leaving the Kayak ecosystem. It is not where we need to be. Historically we made searching on Kayak really great, better than every other site, but buying on the Kayak site sucked. And it still sucks for the flight vertical. For hotels and rental cars we pretty much have a bookable Kayak itinerary for just about every option. But on flights we only have for a handful of itineraries, and in 2014 we want to make that change.

Skift: Looking at the big picture, what’s ahead for Kayak and metasearch in general? Besides mobile, besides international, what do you see changing?

Hafner: I think the core premise is going to get better, which is these sites are all going to get more comprehensive. So not every airline, not every hotel or rental car is on each website yet. I think you will see the look and feel of the websites get a lot simpler this year.

What we’ve been wrestling with is we all can show you a ton of information, but it can be overwhelming. How do we make the display algorithm smarter? So we are all working on that. And actually we are taking our cue on the design side from Airbnb. They just built a beautiful website.

The last part is the fight for consumer awareness and market share. Most of these markets are turning into a three-horse race from eight to 10, and I think over time it’s going to be a one or two-horse race. We are very keen on making sure we are one of the two parties in the room.

Skift: What about the “foreign invasion” of the U.S.? You are expanding internationally. Skyscanner is coming into the U.S. Momondo is trying to enter the U.S. and Trivago, too. Are they going to be successful?

Hafner: You know it is a big category so there is room for just about everybody. The U.S. is the biggest online travel market so if I were outside the U.S. I’d be looking at it. But I like my cards here at Kayak with regards to the U.S. because we have a great product offering, and we’ve got a great head start, and we’ve got consumer brand awareness.

By the same token those companies have been out-executing us overseas, and we’ve got to get our act together there. So they’ll bring the fight to us, and we’ll bring the fight to them, and whichever company executes better is going to win.


Metasearch Goes Mainstream

Priceline’s Booking. com and Agoda are now advertising in Priceline’s in-house travel metasearch subsidiary, Kayak. Source: Kayak

Priceline’s Booking.com and Agoda are now advertising in Priceline’s in-house travel metasearch subsidiary, Kayak. / Source: Kayak


Online Travel Agencies and Their Metasearch Pets

In 2013, Expedia Inc. took majority ownership of Trivago and Priceline acquired Kayak, and the financial impact on the parent companies has so far been uneven.

Expedia’s Trivago is profitable, and is focusing on top-line growth in its global expansion efforts. Trivago was responsible for 12 percentage points of the growth in Expedia’s selling and marketing expense in the third quarter of 2013, and that adversely impacted Expedia’s profitability.18

Malte Siewert, Trivago co-founder and managing director, tells Skift Trivago’s marketing spend is self-generated from its own cash-flow (see interview below), although it still shows up on parent company Expedia’s balance sheet.

While Expedia is thus taking an expense hit from Trivago, its Germany-based hotel metasearch subsidiary was responsible for a considerable chunk of Expedia’s revenue growth. In fact, Trivago contributed 6 percentage points to Expedia’s 17 percent revenue growth in the third quarter of 2013.19

However, Expedia Inc.’s profits were flat in the third quarter of 2013, and for the second consecutive quarter it cited difficulties in navigating former subsidiary TripAdvisor’s transition from pop-under ads to hotel metasearch as one of the contributing factors in Expedia’s sluggish results.

The metasearch acquisition trend is playing out somewhat differently so far at Priceline. While Expedia’s profits were flat, in the third quarter of 2013 Priceline saw its net income rise 39.5% to $833 million, and it pointed to advertising on Kayak as contributing to increased booking volumes for Priceline Group brands.20

Priceline’s Booking.com and Agoda are now advertising in Priceline’s in-house travel metasearch subsidiary, Kayak.

Priceline is benefiting from being one of Kayak’s fulfillment partners in Book via Kayak for the first time, and most of its brands are otherwise advertising on Kayak sites, where they had previously been under-represented, officials said.21


Suppliers and Booking Advertisers


Starwood

Starwood Hotels and Resorts, with nine hotel brands including Four Points by Sheraton, Sheraton, Aloft, W Hotels, Westin and St. Regis, among others, considers hotel metasearch “definitely an attractive” and “productive” channel, said Julie Atkinson, vice president of global online distribution.

Starwood brands participate in a variety of metasearch sites, including TripAdvisor and Kayak, for example, and as their volumes and popularity increase, Starwood views these sites as an essential way to drive traffic to its own websites to engage with customers directly, Atkinson said.

In other words, a hotel has to be where its customers are.

Increased competition, and new product launches and pricing mechanisms, mean the costs of advertising in metasearch sites fluctuate, although they’ve been rising in recent years, and negotiations vary from site to site, Atkinson said. One trend she’s noticed is that many more smaller companies, including European online travel agencies, are advertising in travel metasearch than did in the past.

About Priceline’s and Expedia acquisitions of Kayak and Trivago, respectively, Atkinson believes there is much more to come. “I don’t think we’ve seen what they will do with meta yet,” Atkinson said.


Wyndham

Stas Pietrucha, vice president of online marketing and global ecommerce for Wyndham Hotel Group, says metasearch is “a key channel and source of bookings revenue” for Wyndham, and gives it the opportunity to drive traffic to its sites so it can share information with guests about its rewards program and rate guarantees.

Trying to enroll guests in Wyndham Rewards prior to their stay has advantages over merely attempting to pitch them at the property or after the stay, Pietrucha said.

The CPC and auction trends in metasearch have driven up costs for hotels, and it is a lot more complex and labor-intensive to handle than in the days when hotels paid a standard commission, Pietrucha said. Wyndham’s internal marketing teams manage CPC bidding at the national level, while properties contribute funding.

Participating in hotel metasearch is less expensive than getting bookings through online travel agencies, but costlier than when customers go directly to Wyndham websites, Pietrucha said.

“It’s a good channel for us from a cost perspective,” Pietrucha said, referring to the core metasearch results, although he added that it is three to five times more expensive than bidding on pop-under ads. Depending on average daily rates and other variables, the CPCs in metasearch can range “anywhere from $0.50 to a few dollars,” he added.

Wyndham currently participates in Hipmunk, TripAdvisor, Kayak and some smaller metasearch sites, Pietrucha said, adding that “Trivago is next in line,” and discussions are under way with Room 77.

Pietrucha concedes that in the hotel versus online travel agency competition, “the OTAS are winning in metasearch for a variety of reasons.” OTAs have deeper pockets, they have more inventory to share that they get from numerous chains, they implement technology faster, and they aren’t preoccupied with running hotels or hotels brands, he added.

One interesting tweak that Wyndham has developed to become more efficient in fine-tuning its marketing spend through metasearch and elsewhere is “attribution technology” to gauge the relative contribution of each device, site or channel toward the eventual booking.

Wyndham previously might have measured the value of the first click or last click, but now it evaluates the impact of the Introducer, the Influencer and the Closer to measure return on investment and the relative contribution of sites and devices en route to a booking.

Digital marketing is definitely getting more complex, and the merger and acquisition activity in travel metasearch has added volatility.

“As the online travel agencies acquire them [metasearch sites], it does get a little dicey,” Pietrucha said.


Online Travel Agencies

All agree that online travel agencies are the most active and largest advertisers in travel metasearch, beating out suppliers in scope.

Several years ago, it was fairly common for travel metasearch companies to enter into exclusive relationships with online travel agencies. Today, exclusive relationships between metasearch companies and online travel agencies are all but nonexistent, but there are still lots of preferred relationships. They may take the form of limitations on the ability of competitors to display their links under certain circumstances.

Or a preferred online travel agency relationship with a metasearch company may take the form of “tie-breaker” rules. In exchange for some kind of consideration, an online travel agency wins the right to have their rates shown higher in the display whenever they have the same inventory at the same price as rivals.

Orbitz Worldwide did a sort of reset in its metasearch marketing several years ago and reevaluated its ROI from various sites since it believes “not all are created equal with regard to their value and impact,” said Chris Chiames, an Orbitz Worldwide spokesperson.

“If we feel a metasearch partner is going to provide access to customers we couldn’t otherwise reach, then we are likely to work with that partner and invest more in the relationship,” Chiames said. “There are always commercial aspects to how much we engage with a partner, but at a fundamental level the decision to work with a partner comes down to whether they can bring us a new customer who hasn’t purchased from Orbitz in the past.”

But, the online travel agency-travel metasearch relationship is obviously a two-way street.

“If we choose to work with a partner, we are constantly evaluating the quality of their traffic and transactions to determine how much incremental value the partner drives,” Chiames said. “So while there is a burden on the meta site to deliver, we also have a responsibility to maximize the opportunity with smart investments.”

Expedia now has a metasearch site (Trivago and a stake in Room 77), and Priceline has Kayak. As an online travel agency, does Orbitz Worldwide need one, too, in order to jumpstart an expansion drive?

Barney Harford, the CEO of Orbitz Worldwide, which owns Orbitz, CheapTickets, eBookers, HotelClub and RatesToGo, tells Skift his company doesn’t need to own a travel metasearch site. That may indeed be true, but he doesn’t mention that Orbitz also might not be in a financial position to buy one even if it so desired.

“We have a big opportunity to help grow our brands in emerging markets,” Harford said. “I don’t think we need to have one.”


Airlines

Fly.com displays only the airfares from AA.com in core search results and doesn’t offer navigation to or comparable airfares from online travel agencies. Source: Fly

Fly.com displays only the airfares from AA.com in core search results and doesn’t offer navigation to or comparable airfares from online travel agencies / Source: Fly

Flights are the least-monetized sector with-in metasearch because flight-metasearch players such as Kayak, Google Flights, Skyscanner, Hipmunk, Bing, Fly.com, TripAdvisor, Momomondo, Mobissimo and others need airline participation to offer a semblance of comprehensiveness.

Highlighting that lack of monetization from airlines, as noted in Kayak’s 11th amended IPO registration statement, issued before it went relatively silent within the Priceline Group, Kayak stated that airline queries accounted for 86% of its desktop and mobile searches during the first quarter of 2012, and represented only 24% of distribution revenue.

In the U.S., the network airlines and others such as JetBlue have exerted their power by setting down rules for their metasearch participation. For example, on sites such as Kayak, Hipmunk, and Fly.com you won’t see American, Delta, United, US Airways and JetBlue have their airfares and links compared against airfares and links from online travel agencies in the core search results.

Source: Hipmunk

Source: Hipmunk

Fly.com displays only the airfares from AA.com in core search results and doesn’t offer navigation to or comparable airfares from online travel agencies.

The metas, however, have nuanced ways to get around these airline mandates without breaking the rules. For example, Fly.com will adhere to the rules by only showing a Delta airfare in a core search result. But, Fly.com in the same grid displays the option to book the Delta flight as part of a package on Travelocity. Fly.com doesn’t show Travelocity’s precise package price, but merely shows a link for a Travelocity air and hotel package, with a promise of savings of up to 40%.

The same rules, however, don’t apply to airlines such as Alaska Airlines or AirTran, which seemingly have less clout with the metas. You can see below how Hipmunk handles an SEA-DFW roundtrip for Alaska Airlines, comparing the $402
airfare on AlaskaAir.com with Alaska airfares from Priceline, CheapOair, Expedia and Airfare.com.

Source: Fly

Source: Fly

In general, most airlines view flight metasearch sites as an essential way to drive traffic to their own sites because they know some prefer to start at metasearch sites and do comparison shopping. Southwest, of course, doesn’t participate in travel metasearch or online travel agencies sites at all.

As one executive from a network airline, who declined to be identified, told Skift, “To the extent that a metasearch site directs a customer to our own website, it gives us a better chance of completing a sale that includes other elements [like preferred seats] that customers may value beyond the base ticket.”

“In the past few years, metasearch sites have done a good job of attracting customers, some of whom might think of them in the same context as an online travel agency,” the executive said. “As long as customers care about price shopping, there will be some website to support that task, whether it’s a metasearcher or something else that we haven’t even identified yet.”


Interview: Trivago Co-Founder Malte Siewert

Founded in 2005, Dusseldorf-based Trivago is the leading hotel-metasearch site in Europe, with a strong presence in Germany, Spain, the UK, Italy and France. It has built a strong brand through offline advertising, and it is currently expanding into the U.S., as well as Australia and New Zealand.

Skift spoke with Trivago co-founder and managing director Malte Siewert about the Expedia investment, international expansion, and Trivago’s drive to personalize its hotel-search results.

Skift: Can you tell us a little bit on how things have changed since the Expedia transaction? I see you are spending a ton of money on marketing. So what has actually changed for you?

Malte Siewert: Nothing.

Skift: Nothing?

Siewert: Nothing. We run the business exactly the same way like we did prior to the Expedia deal. That is actually part of the agreement. Here’s the thing: The founders owned 50% prior to the deal. The founders now own 40%. So as a result we sold 10%. We sold less than one quarter of what we owned prior. So how would we ever barely sell a fraction and then not be in the driver’s seat any longer? So Expedia has agreed to not run the business and to keep it absolutely independent. And, that is exactly what is happening. All of the advertising we are doing is all funded from our cash flow. So Expedia also is not funding the business in any way.

Partner-wise we added a lot of new partners over the year. Our advertising base got much stronger so it’s also true when you look at the website that we are not a lead-generator for Expedia subsidiaries. That is absolutely not happening. In fact, Expedia’s was offline a couple of days or weeks with several brands after the transaction so we still had the same negotiation, competitive situation as we had prior to the transaction.

Skift: From an operational perspective what is the focus now? Are there particular new markets that you are focusing on now, including the U.S.?

Siewert: Yes, you can see it already. That is pretty much the direction. If you look at Trivago traffic development we had a strong year in the U.S. From a U.S. perspective we are tiny. Then, in turn, there is growth potential, and I think we managed this year to get a little footprint in the market and so we are likely to go further into that direction. Time will tell what the opportunities are in terms of marketing spend.

We are looking into Asia in several markets, and there is definitely growth potential in South America. And so we are all over the place, and testing things out, testing where the model that we did most successfully in Europe, in which markets it can be applied most easily next.

Skift: What about the Trivago product itself? How are you changing it, and improving it? What are some of the initiatives that you are working on?

Siewert: We are pretty good in rate search, finding the best deal. Now, it is all down to the search experience and delivering the ideal hotel to the individual who is searching. So rather than saying here is the best hotel, sort of an average of the crowd, what they said, and that average may match or may not match the individual’s need. We are heading toward delivering individual search results, learning about the visitors to the website, and then showing the right hotel. Ideally, in the end you would just go to the website, open it and there’s your hotel deal, the ones that are best for you. So that you don’t even need to search. That’s from a strategic point of view, an ideal version.

Skift: There’s been so much talk about personalization. Can you give an example of how it would work? How do you do that?

Siewert: First of all we need to be better able to cluster and understand the hotels. Currently, honestly, we don’t know much about the hotels. We have the star ratings and amenities, and things like that, but you don’t really know. We’ve launched a Mystery Guest program that’s rolled out in Europe currently on European websites where we send people to the hotel. They want to travel to the hotel anyhow, and they do an extensive testing of the hotel. They answer questions prior to their travel and afterwards. And prior to their travel, we ask are you a punk person or a businessman, or are you a family man?

So we ask what is the purpose of your stay, what are you looking for? Then they go to the hotel and we ask how does it match your expectations and things like that. That’s very extensive; it’s a rather large set of questions, and people get paid good money for it. It is structured information gathering and that is something we are rolling out together with the hotels. The hotels may or may not fund that. We pay for that on our own for the most important hotels. You cannot do that on a broad scale. On the other hand 80% of our traffic has been sent to 20% of the hotels in the world so you don’t need to have 700,000 hotels fully dispatched.

We are looking into semantic analyzing of reviews, but we don’t have anything under way there. We don’t gather our own reviews so we need to get them from other sources.

Skift: What about the competition? Do you pay much attention to the competition?

Siewert: Not really. It is in our DNA to develop Trivago with what we have and think about our product, and less about the competition and what they do. Of course we are not ignorant to not monitor TripAdvisor, Kayak and Google. We do our homework but we don’t’ get extremely excited about other people’s features or copy things. That hasn’t happened historically.

Skift: Do you see more merger and acquisition activity ahead with some of the smaller players like Hipmunk, Room 77 or any European players?

Siewert: I wouldn’t know. I’m not following M&A activity or getting my hands around it. We as a team at Trivago are very much involved in growing from our internal resources and putting our testing together in a way that we get better day by day. All of that is already indicating we are not an M&A strategy company, rolling up the metasearch market and buying smaller players. That doesn’t match. We would probably be really scared that would be disruptive to our business. We are not really spending much time around that. So I don’t see any opportunity for Trivago so I don’t spend my time thinking about what others may see or not see.


What’s Happening Next


Branded Booking

Recently we integrated Google Wallet into Hotel Finder so that users could easily ‘buy with Google’ for some of those integrated partners,” said Richard Holden, Google’s product management director, travel.

Most of the travel metasearch companies, including Kayak, Hipmunk, Room 77, TripAdvisor, Skyscanner and Trivago, have either implemented branded booking or plan to do so soon. With branded booking, which is sometimes referred to as “direct booking,” travelers don’t navigate away from the metasearch site to complete a hotel or flight booking, but can complete a transaction right on the metasearch site or mobile app.

In the background, an online travel agency, airline or car rental company is the merchant of record for these branded bookings, and handles fulfillment and customer service. The metasearch company and the fulfillment partner do a revenue share for branded bookings, with the metasearch company getting the larger share because it generated the consumer lead.

Hipmunk CEO Adam Goldstein argues that in the near future hotels will get much more involved in branded booking on travel metasearch sites, gaining some leverage against online travel agencies22. And Steve Hafner, the CEO of Kayak, which already does Book via Kayak for lots of hotels, cars and some airlines, tells Skift that flight search on Kayak still “sucks,” but the company plans on making a big push to improve it through branded booking of flights in 2014.

Google hasn’t implemented branded booking, but it has begun to offer an offshoot in beta, namely mobile booking through Google Wallet in its hotel-metasearch product, Google Hotel Finder. Carlson Rezidor Hotel Group is one of the chains participating in the Google Wallet integration.

“Companies like Priceline, Orbitz and Expedia are enabling users to book travel on their mobile sites and apps within just a few taps, and recently we integrated Google Wallet into Hotel Finder so that users could easily ‘buy with Google’ for some of those integrated partners,” said Richard Holden, Google’s product management director, travel.

The branded booking trend is very much tied into the proliferation of mobile traffic because conversion rates and CPCs are drastically lower on mobile as would-be bookers get lost in the handoff to third-party sites. Branded booking is designed to improve the booking experience on travel metasearch mobile apps and desktops as users don’t have to leave the site or app to complete their bookings.

Many people point to branded bookings as a signal that travel metasearch companies will evolve into online travel agencies. As it is, consumers are hard-pressed to tell the difference between the two anyway. While an evolution of this sort can’t be ruled out, there are no signs yet that a transition of this type is under way as it would call for drastic changes in the way the metasearch companies, most of which consider themselves technology companies, would have to do business.


Mobile

Mobile, of course, is transforming travel metasearch, and everything in travel retailing and e-commerce in general.

Richard Holden, Google’s product management director, travel, said the biggest technology trend these days is “the shift to a multi-screen consumer.”

“People now live their daily lives moving back and forth across different screens—from smartphones to tablets to desktops—and the technology industry has had to make that shift as well,” Holden said. “We recently commissioned a travel study23 that showed 89% of travel activities start on one device and end on another, and the numbers are more than 40% when comparing prices, reading reviews and looking for promotions or deals.”

One way Google addressed that issue was to introduce a “saved flights” feature in its flight-metasearch tool, Google Flight Search. Users can save flight results they are interested in, and retrieve them later when they return to any device. In addition, Google Flight Search will display the price changes that occurred since the last time the user reviewed the flights.

Denmark-based Momondo, a metasearch site, indicates that 25% of its traffic comes from smartphones and tablets, while Skyscanner reports that half of all visits come from mobile devices. The Skyscanner app has been downloaded more than 25 million times.

Mobile is a huge opportunity and challenge for travel metasearch sites because conversion and CPC rates are much lower than on desktops. A hotel that might pay $2 for a CPC on a travel metasearch desktop might only have to pay $0.40 to $0.60 on a mobile device.

Many travel metasearch companies are targeting last-minute or tonight-only rates, and companies such as Hipmunk are making a big push to access mobile-only rates, too.


Refining and Personalizing Search

Improving the search experience on meta and personalizing search results are major trends that will begin to take shape in 2014 and will come into their own in years to come. Metasearch companies years ago introduced filters that allow users to select the car type or rental agency, the room type or hotel brand, or the cabin class and take-off times. These filters greatly improve booking conversions and make the search experience more personal. But only a minority of users, say 15%, engage with filters, so metasearch companies are looking for ways to expand such personalization to a wider set of travelers.

Room 77, for example, is rolling out an auto-complete feature for hotel searches. When a user navigates to the Room 77 homepage instead of entering the city, check-in and check-out dates, number of rooms and guests, the user finds a search box like you might see on Google or Yahoo. When users enter “New York,” they view suggested searches such as “hotels near Times Square,” “hotels with free wi-fi,” and “hotels with free breakfast” to streamline and personalize the search.

In Europe, Trivago managing director Malte Siewert said the company ideally wants to be able to deliver search results tailored to the individual, and is working toward learning more about its users and about the hotels themselves to personalize results.

“So rather than saying here is the best hotel, sort of an an average of the crowd, what they said, and that average may or may not match the individual’s needs,” Siewert said. “We are heading toward delivering individual search results, learning about the visitors to the website, and then showing the right hotel.”

As part of that initiative to learn more about the hotel, Trivago in Europe launched a Mystery Guest program, paid for by Trivago or sometimes the hotel, that enlists Trivago users who are staying at the hotel anyway to perform a detailed survey of the hotel’s amenities and services.


Simple User Interfaces Vs. Comprehensiveness

Metasearch companies also face the challenge of making their offerings comprehensive, but at the same time there will be a big drive to free their user interfaces of clutter and to make them more simple. It is a very difficult balancing act, and will take much experimentation on how to simplify and improve the user experience without losing business.

As metasearch companies search dozens or even hundreds of websites to provide one-stop price comparisons for users, comprehensiveness is the holy grail. Many of the sites already offer searches of air, car, hotel, and vacation packages, and you can expect many others to branch out into rail, bus, tours, and Airbnb-type apartment rentals. Other sites, such as Trivago, Room 77 and HotelsCombined have chosen to focus on hotels only, but even here they want to have access to as many properties as possible.

TripAdvisor launched an initiative in October 2013 that will make its hotel-metasearch offering more compehensive. TripConnect enables small hotels, B&Bs and inns that subscribe to TripAdvisor Business Listings and are tied into an Internet booking engine to participate in TripAdvisor’s price-comparison metasearch feature using its CPC-based auction model. These independent properties will have to pick their spots, though, because at times they will be bidding against much larger hotels with more tech acumen and much greater resources.


International Expansion

Regardless which country you live in, get out the welcome mat because new metasearch players will be appearing in your favorite computing devices very soon.

Kayak had a presence in 17 countries when Priceline acquired it in 2013, and CEO Steve Hafner said Kayak will expand to 39 countries by the end of the first quarter of 2014.

Trivago is expanding from Europe into the U.S., Australia and New Zealand, and is looking at markets in Asia and South America. Denmark-based Momondo is coming too, trying to break into the U.S., and it has laid down roots in Russia. Skyscanner opened an Americas office in Miami in 2013, and is pushing into the U.S., South America and Asia-Pacific.

Is there going to be a glut of these companies in relatively mature markets like the U.S.? Skyscanner CEO Gareth Williams argues that these are still early days for online travel, even in the U.S.24

“I think it is a very immature market,” Williams said. “There is no dominant player in online travel like Amazon in selling books. There is no equivalent in online travel.”

Undoubtedly there will be further consolidation in the metasearch sector in the next few years, and it sets up as a market-share fight, one country at a time.

Apart from the varying resources that the largest travel metasearch players will have at their disposal, most agree that the winners that emerge will be those that come up with the best products, and execute most ably on their missions.


Insights & Strategies

What are some of the best practices for metasearch advertisers and for the metasearch companies themselves?

  • Get the basics right and ensure that your hotel’s contact information is correct and that you offer the best rates on desktop and mobile. And ensure that properties’ rooms are actually available when they appear in metasearch displays.
  • Online travel agencies should select the routes and products where they are most competitive instead of spending inefficiently in metasearch on routes where they may have no edge.
  • Airlines, hotels and car-rental companies should use their own analytics as well as data and advice from the metasearch partner to optimize participation. Pick and choose your metasearch partners carefully; some are better than others, particularly for your purposes.
  • Suppliers and online travel agencies should ensure they offer fast response times to users’ queries via APIs, live pricing or cache. Don’t settle for an Internet booking engine or other middleman if they don’t ensure fast and accurate responses.
  • For suppliers and online travel agency metasearch participants, and for the metasearch companies themselves, make mobile a key part of your strategy, and not something you’ll address half-heartedly or get to later. Branded booking is an important way to ease the pain of metasearch booking, particularly on mobile.
  • From a consumer perspective, pop-under ads, with new windows opening by default, are a big bummer. So are the tendencies of some metasearch players to avoid showing the total rate on the initial search results screen. Eliminating pop-under and taxes-and-fee surprises would go a long way toward winning consumer confidence and goodwill. However, some metasearch companies are finding that transparency is not necessarily a winning financial strategy.


Further Reading

  1. Shankman, Samantha ,”7 Most Popular Types of Travel Booking Websites of 2013,” 8/29/2013, Skift 
  2. Kayak annual report, 3/29/2013, Securities and Exchange Commission.
  3. PhoCusWright, “U.S. Online Travel Overview Thirteenth Edition: Online Travel Agencies,” 11/2013.
  4. Expedia Inc., “Expedia Inc. (EXPE) Management Discusses Q2 2013 Results — Earnings Call Transcript,” 7/25/2013, Seeking Alpha.
  5. Dennis Schaal, “Skyscanner Is Making Its First Real Attempt to Crack Metasearch in the U.S.” 11/21/2013, Skift.
  6. Dennis Schaal, “Priceline’s CEO Says People Looking To Book Online Just Love To Shop,” 9/10/2012, Skift.
  7. Rafat Ali, “Priceline to Buy Kayak for $1.8 Billion,” 11/8/2012, Skift.
  8. Dennis Schaal, “Analysis: Expedia, With Trivago, Won’t Get Caught Flat-Footed This Time Around,” 12/26/2012, Skift.
  9. Dennis Schaal, “Expedia and Concur Team Up For $30 Million Funding Round For Room 77,” 1/3/2013, Skift.
  10. Dennis Schaal, “Skyscanner Got a Marquee New Shareholder But No New Money,” 10/3/2013, Skift.
  11. Rafat Ali, “Skyscanner Acquires Hotel Search Site Fogg, Moves Beyond Flight Search,” 9/5/2013, Skift.
  12. Dennis Schaal, “Skyscanner Is Making Its First Real Attempt to Crack Metasearch in the U.S.” 11/21/2013, Skift.
  13. Bloomberg, “Popular Chinese Travel Booking Service Qunar Raises $167 Million in IPO,” 11/1/2013, Skift.
  14. Dennis Schaal, “TripAdvisor’s New Metasearch Is Falling Short of Expectations,” 9/12/2013 Skift.
  15. Kayak, “Amendment No. 11 to Form S-1 Registration Statement,” 5/8/2012, Securities and Exchange Commission.
  16. Ibid.
  17. Ibid.
  18. Expedia Inc., “Expedia Management Discusses Q3 2013 Results — Earnings Call Transcript,” 10/30/2013, Seeking Alpha.
  19. Ibid
  20. Priceline, “Priceline.com Incorporated Management Discusses Q3 2013 Results — Earnings Call Transcript,” 11/7/2013, Seeking Alpha.
  21. Ibid
  22. Dennis Schaal, “Hipmunk CEO: Competitors Unwilling To Take Risks and Have Subpar Products,” 11/19/2013, Skift.
  23. Google, “The 2013 Traveler,” 11/2013.
  24. Dennis Schaal, “Skyscanner Is Making Its First Real Attempt to Crack Metasearch in the U.S.,” 11/21/2013 Skift.