Digging for a Deal: Today’s Air Travel Environment Means High Flying for Aggregator Sites

waiting for plane

Recent data released by American Express Business Travel reports that the average price paid for a flight during Q4 2010 was up 7% versus the same time period last year. Ask the airlines, and they’ll tell you this is due in near entirety to rising operational costs, specifically the price of oil. And with crude prices increasing an additional 21% during Q1, it’s no surprise that ticket prices continue to soar in 2011. In fact, FareCompare reports that domestic airlines have attempted nine fare hikes thus far this year, six of which were “successful” (read as: you’re still paying for them today).

Rate increases aside, airlines have addressed the new operating environment in different ways: some legacy brands have looked to cut domestic capacity, while several low cost carriers have demonstrated intent to expand. Industry experts expressed concern that aggressive increases in both pricing and seat capacity might cause the recent profitability of the industry to be short-lived, but airline actions, when taken in aggregate, appear to be spot on. Domestic demand to travel by air has not faltered, despite the surging cost to do so.

average number OTA visited by shoppers bookersDon’t interpret this to mean, however, that consumers are forking over these extra dollars without a second thought. Today’s shopper expects a complete and transparent set of flight information at their fingertips, enabling them to actively weigh value and convenience. Rising fares, as well as an ongoing GDS battle are both increasing demand for this data, and eroding confidence that they are receiving it. Therefore, consumers have demonstrated a willingness to expend both more time and more effort into the shopping process before pressing the “book now” button.

What does that mean for online travel websites? Well, that depends on the role they play in the shopping process. Vendors can expect to have brand loyalty tested: cross-shop between brands is on the rise, evidenced by consumers visiting more booking portals. Active cross-shopping compels carriers to be both competitive and transparent in their pricing. And for OTAs, who lack control over the pricing function, they feel the pressure to work with the broadest possible selection of brands, or risk losing relevance.

y-o-y growth uvs key meta lead gen sitesFor travel aggregators, however, this may be a set of dream market conditions. Consumers are aggressively seeking accurate, up-to-date, and comprehensive flight information, and that’s precisely what they’re selling – scratch that, giving away for free! And as a result, many meta-search and lead generator sites are seeing dramatic year-over-year jumps in traffic.

Yes, we’re referring to market giant Kayak here, but we’re also looking at a host of lesser-known aggregator sites. In fact, the last three months appear to have served as a launching pad for the traffic numbers of the second-tier flight aggregators shown above and more.

It stands to reason that more traffic going to these aggregation sites will lead to more traffic coming from them. And that is precisely what’s happening in the online air space today: referrals from meta-search and lead gen sites are on the rise, in both an absolute sense, and as a share of total referrals. Share Total Referrals Coming from Meta-Search Lead-Gen SitesThis trend applies not just to the OTA set, which have long been heavy users of these referral sources, but also many of the major domestic airlines.

It’s important to note that this isn’t necessarily great news for anyone but the aggregator sites themselves; these referrals are not free, and depending on the inference of quality, can actually be pretty pricey on a cost-per-click basis. So what is vital to know, and what Compete is constantly monitoring, is the actual quality of each of these sites. And the quality of the site, of course, is wholly dependent on the quality of its audience. Specifically:

  • How likely are its visitors to book a flight
    • In the same session, or in the same month
    • With a supplier vs. with an OTA
    • And if you are a partner, with your brand
  • The extent of cross-shop, or overlap of visitation between the various meta/lead gen sites
  • The referral sources relied upon to generate traffic to meta-search sites

As the travel aggregation category continues to proliferate much more rapidly than growth in airline ticket sales, participating with all sites, paying more money, for more clicks, only to capture the same number of bookings, is Share, Online Flight Bookers Visiting a Meta Lead-Gen Site Same Month as Bookingclearly not a recipe for success. Still, with more than 4 in 10 online flight bookers visiting at least one of these sites during their shopping process, it is not a referral source category you can afford to ignore. Rather, a deep understanding of each site and its ability to attract and deliver serious flight shoppers will provide vendors with the leverage needed to develop an efficient and effective meta/lead-gen strategy.