In 1997, two men — Michael Kenny and Robert Rosenstein – co-founded a company with a website named PlanetHoliday.com, which aimed to disrupt the hotel booking space. In Phuket, Thailand, they started to work out deals with hotels and charged users directly with their credit cards.
In early 2000, the company started experimenting with user experience features like real-time chat with customer service officers, and grew the business with pay-per-click advertising.
In 2003, PlanetHoliday added PrecisionReservations.com as a partner and the two merged as Singapore-based Agoda. Later on in 2007, Agoda was then acquired by Priceline. Robert, now the CEO of Agoda, told Tech Cocktail in 2012 that he had started the company with a global site in mind.
“We felt we could create a global site that would have the scale and reach to deliver better deals and more choice through a simple online booking interface,” he said. “Also, we loved to travel and this seemed like a fun business to be in.”
Currently, competition in the online hotel booking industry is rife and everyone seems to be wanting a bigger slice of the pie. Putting ourselves into the shoes of those in the online hotel booking business, there is a bevy of problems, challenges and opportunities waiting to be faced. Taking this in to a different perspective, though, challenges can be well taken advantage of.
This can be especially profound in Asia, a fragmented and diversified market thanks to the multitude of languages (including dialects) and cultures available. Here, we speak to several big players in the industry to understand how they’re taking a shot at this part of the region.
Challenge #1: Customer acquisition
Robert shared that even though there has been substantial growth in terms of developing markets and in Asia, there is still an untapped market in Southeast Asia. He added:
“There are still so many customers across Southeast Asia that aren’t using online hotel booking. Many new customers are using mobile as their primary Internet device and making their first booking on a small device last minute.”
He also explained that in the past, Internet access and the slow adoption of online credit payments in markets where e-commerce is a foreign and still nascent industry have been cited as issues and hurdles for online hotel booking sites. However, now Agoda is looking at tackling multi-device behaviors that involve tablets, mobile devices and desktops.
This year, their goal is to reach new types of consumers with mobile devices who are constantly on-the-go. He also cited data published by the Pacific Asia Travel Association, which revealed that there has been significant growth in terms of tourists entering Asian countries like Myanmar (+52 percent), Cambodia (+24 percent) and Laos PDR (+22 percent). He added, “The same data also noted overall arrivals to Asia grew by 9.9 percent. We tend to concentrate our efforts on Asian markets and their most popular destinations.”
We also spoke to Kartikeya Tripathi, regional director of hotel distribution at Amadeus Asia Pacific, a technology provider in the travel and tourism industry. From a technological standpoint, he said that Amadeus expects that these online hotel booking sites will see more traffic come from mobile devices. This is largely due to 3G networks being rolled out across the regions, and in some markets the presence of actual or planned 4G networks. He then pointed out that about 40 percent of business travelers and 25 percent of leisure travelers are now using these devices to make travel-related arrangements and bookings.
Challenge #2: Customer loyalty
According to Kartikeya, there is a decline in customer loyalty. Travelers tend to reference two or three different sources before making a booking online. That could indicate a lower degree of confidence in price and content accuracy. “This is in line with the findings of our second Asia Pacific hotel distribution survey, which found that travelers are increasingly comparing travel agent offers with websites and reviews,” he added.
Interestingly, even though there are multiple websites available for hotel booking, travelers often prefer to go brick-and-mortar travel agents for the actual booking process. Kartikeya said:
“We call this a low look-to-book ratio. Take China for example. According to travel research firm PhoCusWright, as a result of China’s high internet and mobile phone penetration rate (500+ million internet users and 1+billion mobile phone users), Chinese consumers are increasingly going online to explore their travel options. However, while online travel websites are being heavily used in China, usage is linked to travel research rather than for making actual travel bookings. We often hear that when travelers obtain information about ticket availability online, it isn’t available when they try to book it.”
How then is Agoda overcoming this challenge? Robert shared, “Through advertising and partnerships, we try to educate consumers about the ease and savings available via online hotel bookings. Once online, we hope our easy-to-use interface, great prices, complete coverage of hotel types and apps for mobile or tablet will make it easy for customers to choose Agoda.com.”
#3: IT costs
Kartikeya shared that the last challenge could be IT costs which many of these smaller travel agencies might not be able to afford. “Many sites have large contracting teams that contract for content from different suppliers directly,” he said. “We refer to this as the commercial cost of doing business. In addition, there is also the cost of developing and maintaining IT infrastructure.”
By outsourcing IT to Amadeus, many of these online travel agencies have been successful at reducing cost and complexities. It also translates to increased productivity. Kartikeya added, “An added benefit is that Amadeus invests to keep the technology updated, avoiding significant future investment on the [...] agency’s part.”
Focus on opportunities
According to Amadeus’ Shaping the future of travel in Asia Pacific: the big FOUR effects study, there seems to be a significant leap in the tourism numbers in the region. China and India are expected to generate an additional 70 million visitors to Asia Pacific destinations by 2030. Their research also shows that Korea, Japan, and Singapore are the most favored Asia Pacific destinations for Chinese leisure travelers, and Singapore, Malaysia and Thailand for Indian leisure travelers.
Kartikeya also said that there are three things these online booking sites can focus on. The three are:
He explained that due to fragmentation, there is a huge opportunity for hotel booking sites to curate and present the widest range of content.
Amadeus also has a plethora of solutions which offer these online travel agencies a single point of access. For example, with the Amadeus Web Services 2.0, these providers can update customized travel booking applications without hassle. There are also solutions like the Amadeus Hotels e-commerce suite which works to help hotel guests shop with ease.
The search experience could be a pain point for hotel booking sites as well. Kartikeya shared:
“Travelers today are looking for a unique search experience, but more importantly, they want to be inspired when they search for travel. We call this ‘inspirational shopping’. To this end, we launched Amadeus Extreme Search and Amadeus Featured Results for air travel. These solutions allow travelers to search easily in the same way they think, at the same time offering personalized recommendations and exciting travel ideas, all based on the traveller’s unique interests. We hope to see these tools used for hotel content in the future.”