IBM research: OTAs, suppliers are misreading buyers' values By Danny King & Johanna Jainchill / April 09, 2012 Share 1 -- Growing consumer dissatisfaction with online travel agencies (OTAs) and suppliers' websites offers traditional agents and agencies an opportunity to pick up market share, according to a recent IBM report. In an executive report titled "Travel 2020: The Distribution Dilemma," IBM researchers said that fewer than half of leisure and business travelers believe they're getting a fair value for their travel dollar when they book online. The reason for this, the report's authors determined, is that most online travel intermediaries misread their customers by focusing primarily on price instead of value. Moreover, that satisfaction level could drop further in the next few years as a new crop of overseas travelers enters the market. The study suggests that traditional agents, by providing the kind of personalized customer service that is lacking with OTAs and on supplier sites, can pick up market share as travel spending continues to rebound. Of the more than 2,000 business and leisure travelers surveyed by the IBM Institute for Business Value and its research partner, Frost & Sullivan, 47% said their travel expenses were "well spent." Predictably, bargain-hunters, a group IBM labeled "perpetual searchers," were among the least satisfied group of travelers, while customers willing to pay for upgrades and particular perks, which the report labeled "occasional luxurists," were far more likely to feel that they got their money's worth. (View a chart of the types of travelers and how satisfied they were by clicking on the graph at left.) The study also found that technology has hindered customer service at least as much as it has helped, because travel suppliers have turned increasingly to automation and away from human sales reps to fulfill travel orders. "While booking fees have declined over time, the disassembly of the travel agent model has also resulted in a decrease in customer services," wrote Steve Peterson, the global travel and transportation leader for the IBM Institute for Business Value and lead author of the report. "For price-focused travelers, these changes may be a welcome development. But the extra work travelers have to do to compensate for the work travel agents once performed is exacting a toll on traveler satisfaction." This is not the first report to identify dissatisfaction among online travel bookers. Atmosphere Research Group's fourth-quarter 2011 survey of 5,058 online leisure travelers in the U.S. found that 69% said they enjoyed online travel planning and booking, but just 54% believed that travel websites presented clear information. Henry Harteveldt, principal analyst at Atmosphere, said, "The problems that my research identified as far back as 2008 exist today. Major travel websites, including both OTAs and suppliers, have failed to innovate the planning and booking processes." That lack of innovation, coupled with the growing complexity of trip planning, "is one reason why travel agents are succeeding," Harteveldt said. As an example he cited a major agency owner whose organic business growth is up more than 15% from a year ago, which Harteveldt in part attributes to frustrations with travel websites. "I'm concerned about the complacency that exists among too many travel providers regarding their e-commerce strategies and websites," Harteveldt said. "That complacency, however, creates opportunity for smart travel agency owners and executives." Virtuoso President Kristi Jones noted that since 2003, reports have indicated that customer satisfaction with OTAs has diminished every year. "These facts don't mean smooth sailing for travel advisers, however," she said. "Because now OTAs and travel advisers are up against Google, Facebook, Apple and hundreds of other online players, each anxious to represent travel sales." Jones said Virtuoso has made it a priority to differentiate its members from "on-line consolidators and order-takers." "Our marketing, training, PR efforts and our new technology define and support the most marked characteristics of Virtuoso travel advisers: their ability to collaborate with and advocate for their clients," Jones said. "Those two things cannot be replicated online, and as IBM points out, that lack of personal interaction and accountability has left consumers feeling frustrated." She continued: "Travel advisers who prioritize service and have access to a global network to support their client relationships have the opportunity to re-establish their value to existing clients and woo back those who are dissatisfied with the Web." The IBM study also found that the costs associated with running a travel website have jumped in recent years because the proliferation of both competing websites and information has meant that the typical traveler is initiating 10 times as many page views per booking as he or she did a decade ago. Thus, websites' traffic-to-revenue ratio -- and, as a result, costs -- have jumped. At the same time, those extra searches result in less satisfaction. About one in five travelers take more than five hours to research and book a travel reservation online, while about half of the respondents said they took more than two hours to book. The study's conclusions are timely because the growth in online travel bookings over the past decade is showing no signs of slowing. By next year, U.S. leisure travelers will have booked $39.2 billion in travel reservations, up 44% from 2009, travel research firm PhoCusWright said in a report late last year. Meanwhile, according to the IBM report, travel suppliers and distributors will face even more challenges trying to satisfy travelers as a larger percentage come from areas such as Asia and Eastern Europe, where travel customs and preferences are even less familiar to agents and other intermediaries. Meeting these challenges and turning around the drop in customer satisfaction levels will require travel companies to collaborate more instead of getting more cutthroat, the report stated. As travelers increasingly turn to social media to get recommendations, the additional mass of information will require that competing companies cooperate by sharing customer data with each other. Such collaboration enables the customer to cut down on search time because, in most cases, his or her search history and travel habits and amenity preferences will have been documented, saved and applied each time a new travel query is made, shortening the booking process as a result. "In an industry defined by perceptions of commoditization among customers and intense competitive rivalry between market participants, the opportunity exists for antagonists to reach common ground," Peterson wrote in the report. "They can give customers what they have been longing for: travel distribution solutions that cater to their unique patterns and current position in the travel process." Scott Milne of Milne Travel American Express said that corporate travel management companies "have been doing this all along, except we don't need to expose folks to shared data." "We know our clients already, and we have human beings to support questions and advocate for clients, whether the bookings are live or through a self-booking product," he said. The report also asserts that suppliers are as much a part of the problem as the OTAs. "Too many travel providers view marketing expenditures as a mechanism to boost short-term sales, and too few see them as longer-term strategic investments that can consistently reinforce the differences among available products and services," the report stated. Harteveldt agreed. "Travel suppliers don't understand marketing," he said. "For too many, marketing is the 'make it pretty' department. In most other industries, marketing 'owns' the customer, in that it's marketing that leads product development, pricing, distribution, advertising, e-commerce and more." In travel, he said, suppliers often distribute responsibilities that should fall under marketing to various departments. Among airlines, Harteveldt said, marketing is often one of the weakest departments. He noted that airlines give marketing of their loyalty programs to credit card companies rather to their own loyalty marketing departments. "There's little long-term marketing vision among travel suppliers," he said. Follow Danny King on Twitter @dktravelweekly and Johanna Jainchill @jjainchilltw.