If Apple, Google and Facebook Rule the (Travel Distribution) World

By Diane Merlino

In the not-so-distant future, a brave new world of travel distribution is dominated by booking referral mechanisms operated by Google, Facebook, and Apple. Travel providers are paying for each referral that funnels a consumer to their own site, whether that individual makes a reservation or not. 

That’s just one possible scenario described by distribution expert Mark Lomanno, executive board member of newBrandAnalytics, a provider offering social intelligence solutions for the restaurant, hospitality, government and retail industries. Lomanno is well known in the industry for his work with Smith Travel Research over more than two decades, including 12 years as its president.  

Lomanno sees many companies in the travel industry as me-too businesses, short on innovative thinking and prone to copying the successful models of competitors. He warns that many companies are lagging behind reality in a key area that is a potential game changer for travel distribution: acknowledging the growing influence consumers have, courtesy of social media, to shape if not define public opinion about a brand.  

Lomanno spoke with Travel Weekly PLUS Editor in Chief Diane Merlino about the forces behind the shifting travel distribution landscape. 

Merlino: What do you see as the major changes occurring in the travel distribution space?
Lomanno:
Consumers play a much bigger role in influencing other consumers in the distribution network than they ever have before — about how to book, where to book, how to go, where to stay, how to put packages together. That creates a very different environment than the one travel providers are used to operating in. Every segment of the travel industry has to put much more focus on consumers.

Merlino: What’s fueling the increased influence of consumers on travel distribution? 
Lomanno:
When the traditional social media sites like Facebook, Trip Advisor and Yelp started out five or 10 years ago, it was simply a way for guests to comment on their experience, whether that was with an airline, a hotel, a restaurant, a cruise line. It started out that way, but now other consumers are looking at those sites for information, and it’s influencing their decisions.

Some of those sites — particularly Facebook and Google, and potentially Apple — will be able to have booking engines in the near future, so instead of using the sites for research only, you could actually go ahead and transact iTravelschematicthe business. Then all of a sudden it becomes a world where all types of online information-gathering sites and online information-sharing sites will also, in effect, be in the distribution-channel business. 

Merlino: What are the prospects that Google, Apple and/or Facebook will introduce a booking capability?
Lomanno:
I see it as inevitable. Google started out in the hotel space with Google Hotel Finder; that was their entry into it. Apple has patented something called iTravel, which has not been released yet. And Facebook is experimenting with hotels and some other kinds of travel destinations where you can actually do it from your Facebook page, where you don’t have to go anywhere else. In effect, that puts them in that business. 

Merlino: But none of them have booking engines yet.
Lomanno:
They don’t have booking engines, but they will be able to direct you to the appropriate booking engine. And for that they will command a fee — a fee to forward what are, in effect, their consumers to a site that does have a booking engine, whether that’s the airline or hotel site, or somebody like an Expedia.

How that referral gets directed — who, in effect, drives those consumers to the site where they actually can make the reservation — could be the direction of the next online battle. It’s an interesting development. 

Merlino: Very interesting. Potentially a game-changer.
Lomanno:
Yes, potentially a game changer because as those sites move you to the booking engine, they’re going to want to get paid for it, regardless of whether that guest actually books or not. Some of the initial models are experimenting with a pay-per-click kind of thing. It’s more of a referral fee than a booking fee. 

Merlino: Do the travel providers you’re in contact with understand this is a possible if not likely development?
Lomanno:
Yes. They believe it would be an upset if it doesn’t happen on some level, so they should be preparing for it. None of this is baked in stone. But I would be surprised if it didn’t happen simply because of how much money is involved.

The intermediary between a consumer and their ultimate purchase is getting a piece of the fee that the consumer is paying, whether it’s for an airline or a hotel or a package. And you have big companies like the Googles and Apples and Facebooks of the world who look at that and say, ‘Well, that’s a pretty significant revenue stream, with not a lot of work for us. We don’t have to create the booking engine. We don’t have to create anything, except to become a referral. And we have lots of eyeballs on our site to help with that.’ 

Merlino: In addition to distribution, are there other areas where you see increased consumer influence shaping the travel space?
Lomanno:
Prior to consumers’ ability to share their own experiences and opinions on the Web, travel companies and destinations could independently create in the mind of the consumer what they thought their brand was about. Now, there is enough information out there that consumers are helping to shape what people think of you, what your marketing message is, and what your brand is. You can no longer create branding on your own; consumers are going to help you with that. And that means the guest experience is much more critical than it ever was before.

In the past, a good experience or a bad experience was somewhat limited to that guest and whoever they talked to via word of mouth. Going forward, there’s going to be a whole body of information online about people’s MarkLomannoHSexperiences, so opinions about travel companies will be formed by what consumers say as much as by what travel companies want to say about themselves. 

This means every aspect of the travel industry is going to have to do what they’ve always wanted to do and should have done but were not always successful at — be very much in tune to the consumer’s experience at every step along the way. 

Merlino: Mark, I can’t imagine there is a decision maker at a travel provider or distributor who doesn’t know this.
Lomanno:
Yes, they know it, but I don’t think they all fully understand that putting it into practice can be very difficult. I don’t want to single anybody out, but you can tell who understands this when you look at advertising by some travel companies and then read consumer reviews about that same company and they’re not telling you the same thing.

Merlino: We’ve run a number of articles featuring consumer experts outside the travel industry, and what you’ve described about the rising power of the consumer is the prevailing trend they all identify. Do you think the travel industry overall is a little slow on the uptake here?
Lommano:
I would say that’s absolutely the case. My knowledge is most closely attuned with hotels. but I also have some knowledge of airlines and destinations. And they tend to be a very reactive group instead of a group that’s innovative and forward thinking and sets the standard.

There are always exceptions, but generally the travel industry is very much a follower, a me-too kind of industry. Because of that, they tend to lag behind a little, and they also tend to copy what looks successful. 

Merlino:  Why do you think this particular dynamic exists in the travel industry?
Lomanno:
I’m not sure. I think there are different reasons in different aspects of the industry.

The airlines tend to have a very controlled inventory. If you’re going from New York to San Francisco, for example, you know everybody is going to take a plane, so they feel like they have a captive audience. That can play into it.

For hotels it’s a little different. Hotels have very fragmented ownership and operating structures. You have somebody who owns it, an asset manager, somebody who has a franchisee name on it. There are a lot of people whose hands are in the pie. The multinational brands manage very few of the properties; most tend to be franchised. Frankly, they’re not really in the hotel business. They’re in the real estate business and the franchising business, so they’re going to follow financial trends more closely, not consumer trends, which is why they tend to be followers in that space. 

Merlino: So a lot of provider segments in the industry have not come to grips with the reality that power is increasingly in the hands of the consumer, even regarding something as fundamental as the definition of their brand?
Lomanno:
I think they’re starting to, but it’s so new for them. As an example, I’ve been in the industry for almost 30 years and gone to tons of conferences, and there’s rarely, if ever, a session on consumers.  I can’t remember a single panel on consumers at any of these conferences.

Merlino: I guess that says it all.
Lomanno: 
It’s all about how to operate, how to finance, trends in the industry. Just in the last year they’re starting to realize, okay, we better start thinking about the consumer.  

Merlino: Well, that’s a hopeful sign, right?
Lomanno: 
Yes, it is a hopeful sign. Because at the end of the day, if the airlines, cruise lines, and hotel companies don’t come to grips with this, there will always be somebody between them and their customers.

NEXT ISSUE: More insights on the direction of travel distribution from Mark Lomanno.

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