Arnie WeissmannAs Louis Jordan might have phrased it, Is you is or is you aint? Is the travel product you sell a commodity, or is it not? The question was posed to six high-level marketing executives representing air, tour, gaming, hotel, car rental and retail firms. Most responded with an unqualified No. Some of them were mistaken.

I have to confess that, although every segment of the industry lives in fear of the c-word, I dont think theres anything inherently wrong with producing and selling a commodity. In fact, I suspect that, today, more companies are making money selling pork bellies than selling airline seats.

The marketers, speaking on a panel at the Association of Travel Marketing Executives conference held last week in Philadelphia, each noted that what differentiated its brand from a commodity was service. Perhaps. But I suspect that the companies selling and delivering preprocessed bacon beam with pride over their efficient orders department, user-friendly technology and smiling customer service reps.

There are (sometimes) more moving parts to worry about in providing travel products than carcasses of pork, and that is one key differentiator between a service product and a commodity -- the number of customer touch points.

Another indicator is the motivation for purchase. If a travel product is utilitarian -- to get from point A to point B or to put a roof over ones head for the night -- its more vulnerable to commoditization.

So. A cruise? A tour? A casino? Wont be commoditized. A rental car, hotel room or airplane ticket? Can be. Or already are.

The panelists made distinctions between parity pricing and commoditization. Scott Deaver, a Cendant senior vice president who works with the Avis and Budget brands, observed that while price drives a lot of business, the proof that cars arent a commodity is that market share doesnt simply fall to the lowest price.

Thats true as far as it goes -- many people, particularly business travelers, are willing to pay a premium to rent from an on-airport location with a good frequent-renter program. But at the value end of the scale, its a demolition derby, where rate sits squarely in the drivers seat.

Tom OToole, senior vice president of marketing for Hyatt Hotels & Resorts, was strikingly candid. Yes, hotel rooms can be commoditized, he said. Hyatts are not, but they came dangerously close.

Even before 9/11, our focus was on taking out operating costs, he said. We were realistic -- we knew we were working towards commoditization, but we felt that because of business conditions, we had to do it. What resulted, he said, was the removal of services that distinguished Hyatt as a brand. Now, were putting those service features back.

Tom Anderson, Spirit Airlines senior vice president and chief marketing officer, wondered aloud, How do you differentiate one metal tube flying through the air from another? Price is an important component, but having the lowest price wont ensure success. He said that amenities (but only if people are willing to pay for them) and employee attitude are the important differentiators.

Im not so sure. Southwest, the most profitable domestic carrier, has amply demonstrated that having the lowest price does ensure success -- as long as you have proportionately low costs. Southwest is not without service, but service is not why people fly Southwest.

I know a man in the U.K. who firmly believed that air seats were a commodity. He tried to create a futures market for airline tickets. It didnt go anywhere.

But perhaps it was just timing -- another European who sees air seats as a commodity may have found a better model when he started EasyJet.

And hoteliers take note: The first EasyHotel will be opened by Stelios Haji-Ioannou in mid-2005.


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