The Travel Industry Enters The Social Media War

Posted: August 8, 2012 in Travel, Travel Industry, Vacation Travel

The battle lines are drawn. Members of the travel industry have thrown down the gauntlet in order to attain their piece of the customer-pie. Tour operators, hotels, cruise lines and travel agencies are the players. Ever since the 1990s when airlines first cut agency and tour operator commissions down to zero, the players involved have had to reorganize and reinvent themselves in order to survive. Only now, a new player has emerged: social media. And although social media is still in its infancy, the travel partners involved have decided it’s a tool worth embracing. The tricky part, however, is doing so without offending one another. Otherwise, it may end up starting a new war: The Social Media War.

Over the last 20 years, Ron Algood has seen a lot of changes in the travel industry, including distribution channels like the internet and now social media.

Although the players still refer to each other as “partners in travel,” anyone familiar with the travel industry will tell you their relationship is a fine balancing act, one that Houdini would have envied. Tour operators, hotels, cruise lines, and travel agencies still depend upon their relationships for revenue. However as distribution channels change, and customers seek the best “deal,” so do the partner’s relationships. They have become so fragile that they borderline between partners and enemies. Take for instance when one such entity, Delta Airlines, used technology in the 1990s to gain market share through its own distribution channels; the tour operators and travel agencies affected united and threatened to revolt. Many agencies consolidated and used technology to launch their own reservation systems and reclaim their lost revenue. Some called it a travel industry revolution, but regardless of what one called it, it worked.  Several experts said that the airlines didn’t see it coming, much the same way Tunisia and Egypt didn’t see their revolution, deemed the “Twitter Revolution” until it was too late.But now, social media is prevalent in almost all aspects of business, so being blindsided by the competition is less likely to happen. Still, since profit margins in the travel industry are so small (sometimes less than 10 percent), competition will gain traction as they become familiar with using social media as a sales tool.

Of the big four, tour operators have the most to gain or lose. Because tour operators include airlines, hotels, and cruise lines in their wholesale products, they are the most sensitive to the slightest change in the customer distribution channel. Hence, they were the first in the travel industry to embrace social media. For example, TripAlertz’s innovation went beyond typical tour operator sites, like Orbitz and Travelzoo, and synthesized a flash-sale website with a site similar to Groupon. As a result, TripAlertz created a two-way symmetrical model that offers its customers travel deals that are deeply discounted. The catch, however, is that regardless of whether it’s a hotel, airline ticket, or cruise, the trip is non-changeable and non-refundable. Obviously, those penalties are much stiffer than if one were to book directly with a hotel, airline, or cruise line.  Still, TripAlertz’s maintains a loyal following via its new social media platform, so its customers must believe the low prices offset the stiff cancelation penalties.

When a hotel sells a room via a deep discounter, like TripAlertz, the hotel often loses money. It is betting on the fact that the customer will return another day and pay full price for the room, or even better, the customer will tell someone else, and they will purchase a room directly from the hotel. More and more, however, hotels are realizing that they must increase their direct bookings; otherwise, their profits will be diminished from paying out commissions to travel agencies and discounted flash-sites. Social media is now becoming their tool of choice. Recently at a hotel conference, David Godsman, the vice president of global web services for Starwood Hotels, unveiled his company’s 1000 unique Facebook pages, one for each of Starwood’s properties. Starwood is placing booking engines on all of its Facebook pages, so the customer can book directly with Starwood’s hotels. Hence, Starwood keeps the commission it would otherwise lose to a distributor. According to Godsman, it’s a win-win because customers will not have to track down a booking engine; instead, the booking engine is where they are, on Facebook. One would think that would solve the lost commission problem, and hotels would no longer face competition problems; however, that assumption would be wrong. Hotels still have competition between themselves, and now new websites that utilize social media only enhance the customer’s bargaining power. Tingo is one such website. The new website includes a social media platform that allows for hotels to actually bid “against” each other, which forces room prices down. Tingo is new to the arena, and no one really knows if it will last. But already they are stealing market share from Expedia, Priceline, and Travelocity. Only time will tell if it will survive, and eventually, hotels may decide that they are losing too much of their slim profit margin to remain profitable. Instead, they may take their cue from the cruise lines, which have chosen not to embrace Tingo.

Of the big four, cruise lines have remained the most loyal to travel agencies. Hence, in this new war, one could say they are allies. They realized a long time ago not to bite off the hand that feeds them. As a result, social media has changed their relationship much less than their adversaries. Whereas tour operators and hotels are using social media to direct business away from agencies and into their own booking engines, cruise lines are using it to enhance their partnership. For example, the only obstacle worth noting was when Carnival Cruise Lines enforced a social media policy that prohibited travel agencies from placing “any” of the cruise line’s trademarks on travel agency Facebook pages or Twitter pages. As a result of that policy, customers that booked cruises through travel agencies, and that’s about 80 percent of all cruise passengers, were prohibited from posting on their travel agency’s Facebook page any message that contained the name of the Carnival ship they were sailing on. Carnival quickly learned a valuable lesson. They were losing word-of-mouth advertising, so they changed course and reversed their policy. For this reason, the cruise lines and the travel agencies are best friends again. And there does not appear to be any new form of social media on the horizon that will become the next catalyst for The Social Media War. But don’t count on that.

One thing about social media is certain: it’s much like the weather. If one doesn’t like it, just wait awhile, a new form will come along. Here comes Pinterest, a photo scrapbooking website. Patrick Evans, the social media manager for STA Travel, recently claimed that Pinterest is going to surpass Facebook and Twitter for usability within the travel industry. According to Evans, it’s because of the visual aspects Pinterest offers its customers. He claimed that unlike Facebook or Twitter, Pinterest is more like a digital version of one’s vacation photo album. He may be right. But one has to wonder, will this innocent, digital photo album be the next social media tool that sparks the next conflict? Because in the travel industry, even the most innocent of entities can become the next tool worth fighting over, or in other words, an excuse to start a new war, the Social Media War. Only time will tell.

References

Bly, L. (2011, April 29). Here today, gone today? USA Today, p. D4. Retrieved from http://web.ebscohost.com.ezproxy.lib.usf.edu/ehost/detail?vid=3&hid=112&sid=490e87ca-c566-45ad-969b-586becbe1d67%40sessionmgr4&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=aph&AN=J0E133765920811

Chou, E. (2011, February 14). The Twitter Revolution Debate is Dead. The Atlantic. Retrieved from http://www.theatlantic.com/technology/archive/2011/02/the-twitter-revolution-debate-is-dead/71185/

Jainchill, J. (2012, April 9). Travel Companies see Potential in Scrapbooking site Pinterest. Travel Weekly, 8-9.

Jainchill, J. (2010, March 4). Carnival Amends Social Media Policy. Travel Weekly. Retrieved from http://www.travelweekly.com/Cruise-Travel/Carnival-amends-social-media-policy/

King, D. (2012, April 2). New sites bet hotels will bid for bookings. Travel Weekly, 1,38.

Weed, J. (2011, April 19). Getting closer to guest. New York Times, p. B8. Retrieved from http://proquest?.umi?.com?.ezproxy?.lib?.usf?.edu/pqdweb??did=2323329251?&sid=3?&Fmt=3?&clientId=20178?&RQT=309?&VName=PQD

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Comments
  1. Betty Lee says:

    Good paper…and love the tie too! You look good in blue!

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