News for the Hospitality Executive
Orbitz's Storm in a Teacup and Lessons Learned
Ritesh Gupta and Pamela Whitby
July 11, 2012
In-Depth: In recent weeks the online travel company Orbitz has been in the news for supposedly directing Mac users to more expensive hotels than PC users. Ritesh Gupta and Pamela Whitby investigate and find that others may just have something to learn from this experience.
If Mac users have deeper pockets than PC users is it really a discriminatory pricing ‘scandal’ if they are targeted with advertisements of high-end hotels? Or is it in fact good business practice and something that travel companies should be making much more of?
These were among the questions we were left pondering after reading the recent report by the Wall Street Journal. The article - as you will already have heard – reported that online travel agent Orbitz had discovered that Mac users spend as much as 30% more than PC users a night on hotels and, as such, was targeting them with different and sometimes costlier travel options. Needless to say this sent a flurry of outraged Apple fans onto Twitter and sparked a media storm condemning Orbitz for its marketing tactics.
In response the Orbitz PR machine kicked into action and pointed out that the publication chose initially to hide the full story behind a subscription pay wall. This was misleading and caused many readers and bloggers to react initially to an “attention-grabbing yet confusing headline and a snippet of the story that didn't include the most important points about what Orbitz was doing”.
So Orbitz is using predictive software to better target its customers. And by doing so it had discovered, for example, that Mac users are more likely to book 4-or 5-star hotels and that families traveling with children are likely to book different hotels to couples. As Orbitz Worldwide chief executive Barney Harford explained these are just two examples of the many insights the company considers as it works to improve its hotel recommendation algorithms.
Such practices are certainly not new. Amazon has been using collaborative filtering for many years to personalize shopping recommendations, based not only on past purchase history, but also on similarities in purchasing behavior among groups of like-minded consumers. If Customer A likes Product 1 and Product 2, then Customer B, who likes Product 1, may also like Product 2, and so on.
As Max Starkov, president and chief executive at HeBS Digital says: “Selling the right rooms to the right customer at the right time for the right price is the very definition of revenue management in hospitality. I do not see anything out of line in Orbitz targeting a customer segment that is perceived as more upscale with more upscale hotel properties”.
To back up this point he cites an example: European airlines or travel suppliers publish adverts in Wine Enthusiast Magazine with the presumption that if the magazines subscribers like wine, they are more ‘worldly’ and have the means and desire to travel abroad. Another example: only high-end, luxury travel suppliers and intermediaries advertise in Departures, the American Express magazine for platinum and gold card members.
In fact some would argue that what Orbitz is doing is not even that advanced. “By utilizing state-of-the-art web analytics tools, many travel marketers are already far more advanced than this Mac story from Orbitz,” says Starkov. “Multi-variance testing tools such as Adobe Omniture Test & Target, today’s travel marketers can quickly analyze different nuances in user behavior and adjust product descriptions and pricing to achieve higher conversions and better user experience on the site.
In the travel industry such personalized recommendations are primarily focused on loyalty program members, and with a different rate of success, on the general user population. “All of the major travel suppliers and OTAs have extensive web analytics departments tracking and analyzing user experience and purchasing behavior, and constantly optimizing the user experience and conversions on the site,” he says adding that “some suppliers and OTAs have achieved a level of sophistication that dwarfs Orbitz’s device-centric technique”.
Survival of the fittest
“What we are talking about here is, of course, ‘big data’,” says Paul Richer, a founding partner at the travel consultancy, Genesys. And what is perhaps surprising, he argues, given the vast amount of data many travel companies have on their customers – and in particular the legacy players - is that they are not doing more with it. “Customers book with you, they tell you if they are traveling with kids, they might be taking a cruise or go regularly on beach holidays and so on. If they have booked a luxury holiday this will give an indication of how much they can afford and so on,” he explains. With all this information you can build up a very clear, focused picture about what a particular individual might want.
Many more travel companies should and could be “doing an Amazon”, he says, which very successfully drives targeted offers to its customers. In the UK one hurdle, says Richer, is that travel executives tend to move within the industry and he argues that firms could perhaps think of recruiting people from other sectors but with expertise in predictive data analytics.
As Starkov points out this has absolutely nothing to do with OTAs or travel suppliers such as hotels, airlines or car rental companies. “It has everything to do with smart and not-so-smart digital marketers,” he stresses, adding that many travel suppliers are in fact taking this very seriously. “There are very smart travel suppliers that are targeting the right customer at the right time for the right price. The same applies to some OTAs. It’s a very competitive market out there and only the smartest digital marketers will survive.”
But when it comes to data analytics we are only just scratching the surface. Many hotel brands, airlines and major OTAs are already customizing search/ availability/ price results based on the user’s preferences or their IP address and GPS location. For example, location-aware mobile websites already serve different sets of content based on the GPS coordinates of the mobile user. But they could go a step further. “Why not provide a different set of pricing options,” asks Starkov who says that with the proliferation of electronic distribution channels in travel and hospitality there are a wealth of opportunities for travel marketers. “In fact not why not target iPad users with a suite special versus a room special tomorrow?”
Hebs Digital is already experimenting with serving different sets of rich media and user experiences to iPad users with the new retina display.
So in concluding what are the lessons from this story? Make more of your data, look to other industries for expertise and think carefully before choosing who to tell about your marketing tactics – that could backfire. Have you ever heard Amazon bragging about using collaborative filtering?
OTAs and suppliers must use all the resources at their disposal to capitalize on the rapidly evolving online landscape and consumer and we will be talking about this in some depth at TDS North America in Las Vegas September 13-14. See the full mobile agenda and speaker line up here
EyeforTravel is a leading business intelligence provider for the online travel and tourism industry. As well as providing some of the most in-depth research into global online travel markets and trends, EyeforTravel produces a series of senior executive travel conferences on a diverse range of topics including travel distribution, online marketing, social media, mobile and revenue management. For more information visit www.eyefortravel.com.
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Director of Events & Industry Analysis, EyeforTravel
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