It’s always great to get confirmation about what I believe the future of travel is going to be. Philip has been a leader in identifying trends that will impact travel in the future. He spoke about the resistance of companies and preserving business models. “Winners focus on customer preservation, not business model preservation.” was a quote that resonated with me.
During Travel 1.0, travel distribution moved online. Traditional companies resisted this change because it impacted their business model. As a result, virtually none of the traditional brands became online travel leaders.
Now in Travel 2.0, social media, web services and the resulting long tail opportunities are impacting the online travel space. And again, companies are resisting this change. But now even travel 1.0 companies (online travel agencies) are trying to preserve their commission based business model. They initially rejected meta search for example, and companies like Kayak are becoming the next leaders in the travel space.
So what’s the future for distribution? According to Philip. Pay-per-Click (PPC) and Pay-per-Action (PPA) models are changing. Expedia’s agreement with IHG to move to a PPC model is a clear indicator.
I agree. The distribution is going to be dominated by the supplier because they want to control the transaction. They are interested in qualified leads and will pay websites that deliver the most qualified leads that drive transactions. Instead of paying a commission, they will pay for the lead and monitor the cost per transaction. As soon as this drives enough business, they will abandon commission based distributors.