Let's face it - hotel search today is not very different today from the gunky prototypes that sprouted at the dawn of the internet.
NB: This is a viewpoint by Max Rayner, a partner at Hudson Crossing.
Why should an area like this, with very healthy margins and lots of cool unsolved problems remain so, well... "meh"?
First let’s look at the Googlezilla in the room
Yes, Google has a hotel initiative, and yes that should give would-be entrants pause. But once you look at how underwhelming the Google hotel search displays are, at least a few brave souls should be willing to step forward and try to do better.
For example, Google’s response to "left bank boutique paris hotels" includes hotels not in the Left Bank by far, and though the Best Western is actually a fine choice, I don’t know if one would call it a boutique hotel.
And just in case language is raised as a reason, the results for an equivalent query using French are even less apt, with no top results in the Left Bank area.
This illustrates why specialist search is an area where it’s still possible to innovate and make something great without having to take on impossible odds.
Witness Wolfram Alpha, which as a science-oriented vertical search engine, is a joy to use, even if it will never reach significant traffic by any measure.
Witness also the analogous success of specialists in ecommerce where a focused effort to deliver well in a particular field allows companies to carve out niches where they can excel.
Look for example at Glasses and its iPad virtual trial app. Tools like these take advantage of domain specialization to offer a better user experience than their general purposes analogs.
Within hospitality, some have, of course, tried to innovate in hotel distribution and attempted to offer something beyond a matrix of property names and prices and a few faceted search controls.
Room77 is one of the better efforts along these lines providing, as it does, room specific insights that have long been missing.
Another is Hipmunk, which overlays its "Ecstasy index" on top of more traditional classifications and also advertises its independent verification of certain amenities.
Looking more broadly at the market, this is clearly unsettled territory, with a number of recent big moves suggesting that industry players see great potential in metasearch even if as a whole it remains largely boring and derivative: PricelineboughtKayak for $1.8 billion.
SkyscanneracquiredFogg to ramp beyond the lower margins of air meta (and more recently Skyscanner sidled up with Sequoia to give it a valuation of some $800 million... or more).
Earlier this year, Expedia acquired a majority stake in Trivago for over $632 million. But nobody has come up with a true discontinuity offering consumers something novel and compelling.
Why?
Poor margins are certainly not a reason for lack of innovation
The economic model for hotel meta is good enough to attract plenty of belles to the ball: while in air metasearch you’d be lucky to get an airline to pay you $2 per booking, in hotel meta you can get approximately 15% of retail value (eg. for a two-day $200 ADR stay, you get roughly $60).
So, right there, no wonder everybody with a pulse wants in.
You may very well point out that this extreme dichotomy between hotel and air makes little sense: after all the very same airlines that turn their noses at paying fairly for a meta-originated booking, see no problem in effectively paying Google and Bing an "effective" $10-$20 for the very same air booking.
But let’s not hold our breath waiting for rational economic behavior here.
A few fundamental technical, mindset, and content reasons lie behind the paucity of innovation...
Legacy-imposed limitations of hospitality systems are certainly a key driver
In the dark ages, as some of you may recall, Property Management Systems were at the epicenter of hotel life. These beasts take a licking and keep on ticking and they’ve been built to support a great many things... but sophisticated web distribution is not their strong suit.
They can’t be shopped at “internet scale” in any reasonable way without compromising other functions, and their data models represent rooms, rates and restrictions in ways that inhibit large scale shopping.
Meanwhile, traditional Global Distribution Systems carried on in their merry way, optimized for brevity and transactional speed, but woefully inadequate with respect to modern multi-media, multi-language, multi-form factor content.
Of course, next came Central Reservation Systems and they were better at web distribution - but were intentionally made both room-blind and ignorant of specific room-details (meaning a CRS might know that so-called King rooms are available, but not that #111 is next to the noisy elevator and ice machine area while #245 is a quiet corner with an ocean view).
Furthermore, to this day CRSs are disappointing in channel management for more than a few high-volume, classic channels.
Eventually, along came channel managers to act as clever workarounds for CRS feebleness in handling more than a few channels. Channel managers include both hundreds of two-way connects and "human emulation technologies", i.e. extranet/screen scraping.
A ray of hope, but one quickly extinguished since their source data is likely a CRS or PMS. So whether one uses a PMS, a CRS or a channel manager as the source system, limitations on data and connectivity have put a damper on innovation.
An additional gap has been the lack of an "ITA Software for hotels"
Kayak is all the rage these days (in the US mostly, but increasingly elsewhere), and that is well deserved. But there would be no Kayak without ITA Software.
Although Kayak has now largely replaced it with Amadeus, ITA Software took obscure, hidebound airline faring data that had been obscured for ages behind a wall of arcane rules and fixed connection points and made low airfare search elegantly available at reasonable prices.
Once that was in place the rest was just some clever bits of code. In contrast, beyond GDSs and GDS switches, there haven’t been similarly elegant aggregations of hotel prices and availability. This may well be because hospitality is inherently more complex, but the fact remains.
And for you nostalgic travel lifers, don’t even try to argue that that’s what a switch like Pegasus does. A good switch though it may be, if Pegs had everything needed to power the next quantum jump in innovation, the jump would have occurred already.
But an even bigger reason for a dearth of innovation in hotel meta may be a mindset
There have always been and there are now way too many "religious" barriers creating artificial distinctions between related distribution areas.
At an abstract level, a booked room is a booked room. Nobody should care much what plumbing got you that room and if that involved cross-media follow-through on a branded advert, a merchant pre-pay OTA, a retail commission post-pay OTA, daily deals and media publishers, Google PPC, or metasearch aggregators.
In fact the economically rational path would be dynamic arbitration of the effective cost per revenue dollar across all paths - but sadly many hotels allocate budgets, departmental turf, and focus in an uncoordinated way.
In some cases we see one department looking after branded advertising, another after pay per click campaigns, yet another negotiating net rates for merchant relationships, with further complexities between corporate chain staff and property staff.
Before metasearch comes into full fruition, people involved will have to let go of current preconceptions that currently hobble innovative thinking
First let’s consider the mind barrier between the merchant (traditional Expedia), retail commission (traditional Booking.com), and meta (in this case Skyscanner) business models.
To travel sophists (that’s you and me and most like us) they may appear very different. To the general public they appear like the same big, intimidating grid. You could squint, take a few steps back and not be able to tell the difference at first blush.
It might be argued that a big difference resides in who takes payment details - except that Kayak has already proven that is not necessarily true.
Although normally a meta, Kayak is able and willing to either take credit card details and pass then on or to forward saved traveller credit cards.
A better experience than "pure" meta referrals to another site, and for mobile far better – with saved data, no need to re-input credit card info and even better no need to fight with sub-optimal UI at some distributor that may not be as mobile-ready as a progressive site like Kayak.
So what is to be done (taking the problems from attitude to aptitude)?
SEO and the advent of modern XML APIs are finally putting content at the top
While it may well be true that PMSs and CRSs and channel managers are not brilliant content engines, hotels and industry participants are beginning to realize that attractive content is the mother’s milk of higher conversions.
One of Hudson Crossing’s clients in China is an innovative OTA targeting affluent Chinese – Lychee.
Lychee was faced with the same problem that has made Ctrip’s interface so sketchy for users looking for Western hotels: GDSs, Pegasus and OTAs often fail to provide complete multinational content and Chinese users were facing the jarring experience of seeing the intro paragraph in simplified Chinese, but then getting all else in English.
The company made a strategic choice to invest in high quality editorial efforts to actually get property, room and policies descriptions in Chinese.
What it does now is maintain high quality local language content and swap it in on-the-fly to replace ugly all-caps old school content in English.
While still a work in progress, this effort is paying dividends as it develops a loyal, high net worth following who appreciates it’s curation and translation efforts.
And on another front of even greater relevance to industry standards, papers by HEDNA working groups advocating new standards for "Change Discovery Services" and for transmission of multidimensional ARI and FPLOS (HEDNA’s The Future of Shopping) also give great hope that meta developers may soon be able to rely on more sophisticated source data.
Thanks to the valiant efforts of HEDNA’s Connectivity Working Group, we can look forward to a future of full FPLOS compliant data transmission between data originators, publishers and consumers, which will permit far more sophisticated representations of true stay costs.
A channel is a channel is a channel
The first change meta needs is for hotels to be as dispassionate about distribution as they might be about choosing a rep company or buying VOIP services.
Whatever the channel, distribution is just distribution, look at the effective costs of putting one head in one bed (brand spend, PPC campaigns to drive traffic to your Web properties, and spend for each channel dispassionately).
Hotels may well find that metasearch is a better proposition than they thought, and moreover that from a strategic perspective it is in their interests to cultivate alternatives to both Google and the major global OTAs.
Hospitality’s "ITA Software" may be around the corner
The second change is to recognize the need for a powerful aggregator and harmonizer of heterogeneous data to fulfill the role ITA Software has played in air. This may actually be closer than one would think.
Recent announcements by Travelport regarding its Universal API (uAPI) give hope for easy XML-based access to content ranging from full service air to low cost carriers to hotels and land services, EVEN if they are not on the GDS.
Travelport has shown a proof of concept for these capabilities in their Rooms and More application (for those keeping track, this is the next gen of the former metasearch engine Sprice, which it bought in May 2010).
The "Sprice engine" takes content from various sources that includes both GDS and non-GDS sources and normalizes the content into single messages so that uAPI does not have to deal with the differences—or the many and heterogeneous sources.
To assure enough commonality to content, Travelport maintains their own content cache, as well as passes through any dynamically returned content. In a sense, this permits aggregation and redistribution of Web, GDS, and other hotel data.
So is there hope for hotel meta to get beyond "meh"?
I’d like to think so. Some of the key ingredients for unfettered innovation appear to be converging:
- A strategic awareness by hotels that nurturing meta search increases their ability to arbitrage distribution costs and reduce dependency on Google
- Metas are breaking free of the shackles of being "referral engines only" and delivering user convenience by taking credit cards whether they’re the agency of record or not
- Innovators have a growing sense that people prize pleasantly proffered propositions: there may be a market after all for something beyond a matrix that starts with the lowest price
- Technical developments such as Travelport’s uAPI that integrate both GDS and non-GDS hotel content and present it all in a modern API interface
- Other related technical developments are likely to come as the industry adopts the standards envisioned by HEDNA and others to power far more sophisticated hotel content distribution
Going back to the very first example about "left bank boutique paris hotels", what would non-"meh" look like? At least it would:
- Provide a complete, statistically accurate overview of prices for a variety of arrival dates and lengths of stay, and possible relevant air fares
- Encourage an immediate purchase, with relevant up-sells and merchandising of appropriate ancillaries
And just in case the user is not ready to close the deal without further info:
- Bring personal, context, social, mapping, intent, images and video to play
- Surface, as TripAdvisor already does, what the user’s social graph has to say about the location/hotels in it, and publish verified reviews that go with that
- Offer the kind of helpful hints that only a human travel agent has historically offered. If the user’s click stream suggests a museum-bound tea-lover, suggest considering the Carte Musée, taking tea at legendary Left Bank tea house Mariage Frères, etc…
- More interestingly and back to the future, actually connect the traveller with somebody with local knowledge. Maybe the click stream doesn’t suggest it but the user is dying to know when it’s best to visit the Paris catacombs.
In other words:
- Sell, up-sell and cross-sell
- Be relevant, responsive, and rewarding
- Let the "Web Of (dumb) Things" become a Smart Web Of People and Things…
- Move hospitality distribution from a desperate “metasearch” to the lowest possible price to an aspirational “Metasearch” for a priceless experience
Something like that might gets us past "meh".
Google, Apple, Amazon, or two new gals in a garage: anybody listening?
NB: This is a viewpoint by Max Rayner, a partner at Hudson Crossing. Some of the companies referenced in the article may have been consulting Hudson Crossing clients. Prior to joining Hudson Crossing, Rayner led the creation of metasearch engine Fly.com while chief technology officer at Travelzoo.
NB2: Join Rayner and an all-star panel as we hold a webinar Demystifying Hotel Meta Search on October 31. Sign up to tune in here.