As 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
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
(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
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
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
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
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
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