In OpenTable Deal, Signs of Deeper Convergence in Travel and Local
It’s been a screwy few months for the travel industry. In May, TripAdvisor bought La Fourchette — a small booking site most widely known as the French equivalent to OpenTable. Then, Priceline, TripAdvisor’s much larger competitor, went ahead and spent $2.6 billion to buy OpenTable itself.
But the two deals represent more than an idiosyncratic blip. They offer an early look into a logic that could drive a more comprehensive consolidation of the travel and local technology sectors. The growth of a slew nationally-scaled services that help us explore and interact with cities in previously unforeseen ways means that many of the structures built to help visitors navigate new cities —and implicitly for marketers to reach tourists — might quickly become obsolete.
A big market, out of reach until now
With travelers, there’s a lot at stake. In the U.S. alone, travel and tourism spending accounted for $450.2 billion in 2013, representing 2.7% of U.S GDP, according to the World Travel and Tourism Council.
But the online travel agencies, or OTAs — sites like TripAdvisor and Priceline that let you book airline tickets and hotel rooms online — only touch a small portion of that market. The bulk of spending happens as travelers shop, eat, and move around their destinations. Together, travelers in the U.S. funnel nearly $700 billion every year into local retailers, restaurants, public transportation systems and taxi services, according to the U.S. Travel Association.
“What we’re seeing in the OpenTable acquisition is a move by travel companies from the pre-trip booking process into the trip itself,” says Jeremy Kressmann, a travel analyst at eMarketer, a research firm. “There’s a broader consolidation process [between local and travel] with the blending of online travel agencies in the travel segment as well as local search providers and ecommerce as a whole.”
Success has driven these companies outward. Priceline has doubled its stock price since January of 2013, and revenues have jumped 40% since 2011 in response to a substantial growth in gross profit as the online booking model has started to bear fruit. However, that operating leverage could also be seen as the model maturing, and a need to set a new plan for tomorrow.
In addressing the future, the online travel companies face a more existential question about the nature of the industry. Do the very characteristics that once defined the traveler —the substantial gap in what one knows about a foreign place — remain relevant when we have nearly constant access to such a depth of information about the world around us? Transportation and lodging might be unique to travel, but the rest — what we buy when we’re there — often are not.
Ad spending shifts from local and travel to location
Cree Lawson has worked in nearly every crevasse of the travel industry. The forty year-old, who now heads up the analytics startup Arrivalist, spent his early years as a travel writer, working as transportation editor at a small Nashville, TN. newspaper and then with quick stints at both Fodor’s and the Associated Press. In the 2000’s, he left journalism, and entered the ad tech industry, running business development at a travel guide shop followed by a five year run as CEO of a travel ad network.
“The whole notion of travel as this separate consumer vertical is kind of a fallacy. You’re the same person with the same behaviors regardless of what market you’re in,” said Lawson. “When traditional travel marketers have looked at the desktop internet, they saw a big cash register. We’re at a point where the traditional travel marketing paradigm has shifted. “
His New York-based startup analyzes data from mobile ad networks to identify when users move from one place to another. Arrivalist got its start helping travel boards measure the success of tourism campaigns by identifying when a user who saw an ad also appeared within a region weeks later. Its latest product identifies users who have newly entered a city, and allows marketers to message them on their mobile device
U.S. travel marketers spent about $4.5 billion on mobile advertising in 2013, with OTAs spending the bulk of the spending. They effectively serve as massive lead generation engines for the airline, hospitality, and car rental industries, passing the advertising costs to the service providers in the form of transactional commissions. It’s a model that has become increasingly popular in the local services industry, among companies like ThumbTack and Handybook.
Google still accounts for the lion’s share of travel advertising spending, but advertising technology firms could find a a small, but potentially lucrative, opportunity in the hospitality industry. Naturally, service providers want to bypass the online travel agencies, and their costly commissions, and drive consumer directly to a branded mobile application.
Mobile might provide an opportunity. Thinknear, the mobile advertising wing of navigation giant Telenav, uses location data to identify users who frequent travel related destination such as airports or hotels and then groups them as “travelers.” Eli Portnoy, general manager at Thinknear, says the company is working on a tool that allows marketers to identify and message users who are more than a 100 miles from their home.
The tactics used by both firms underscore the importance of consumer data in the way advertisers buy digital audiences, and the subsequent decline of media as the currency of online advertising. The growth of programmatic marketplaces, in which advertising impressions are bought and sold algorithmically, has created an environment where the value of a publisher’s inventory is determined primarily by the consumer data attached to each impression.
For advertisers, a shift away from the traditional categories is a matter of complexity. Today, the media-buying process has been reduced to a math problem, with algorithms capable of understanding the complexities of one’s relationship to a given place that span well beyond a “local” or “traveler.”
In travel discovery, the baby went out with the bathwater
Even amid a corpse-strewn print industry, the travel guide book industry collapse stands apart in its totality. At its peak in 2007, the top five guidebook publishers, which controlled over 80% of the market, generated a little over $125 million in revenue. Six years later, the top two publishers — Frommer’s and Lonely Planet — sold for a combined $100 million.
While the growth of travel-only reviews sites like TripAdvisor and the explosion of online travel content undoubtedly started the process, the story runs deeper than a standard “content industry decimated by the web” narrative. What’s exceptional is that much of the travel-related content industry has seemed to vanish. Whereas news and lifestyle content has rebounded, with a new batch of companies fetching investment, projects with travel-related content and discovery have been less successful.
In 2011, Marissa Mayer, then the VP of local, maps, and navigation at Google, led her first acquisition at the search firm, snapping up one of the iconic travel brands in Zagat. In a blog post published at the time of the acquisition, Mayer, now the chief executive at Yahoo, said that Zagat content would be “a cornerstone of our local offering… enabling people everywhere to find extraordinary (and ordinary) experiences around the corner and around the world.”
The “glocal” approach was shared by the startup community as well. In the fall of 2011, Gowalla, the one-time competitor to Foursquare, announced a major pivot, repositioning its product from place sharing service to a mobile travel guide. The company partnered with a number of of publishers and destinations to build interactive guides to national landmarks and amusement parks. By the end of the year, the company was sold for scrap to Facebook, where Josh Williams, the company’s founder, would serve as a product manager of the pages, location and events products before departing earlier this year to to take another crack at local discovery with a new startup, Last Guide.
I asked Williams whether he thought the concept of a travel-driven search product could have legs, and he seemed skeptical: “Travel-related discovery is a once or twice a year event at best, so you’re simply starting with an uphill climb to gain traction,” he told me over email.
In data, a sliding scale of near and far
Like most movements in the technology industry, the consolidation of travel and local sectors begins and ends with information. More and more, there’s a belief among technology types that the barriers which kept information about one aspect of our lives from the goings-of another, or from locals to travelers, should be broken down. A traveler should be able to find the best places a city has to offer. He should, as they say, “live like a local.”
For Gowalla’s one-time competitor Foursquare, that level of personalization has proven an advantage in its efforts to enter the local search industry. The company can identify when a user is out of their home market and suggest a museum, restaurant or coffee shop based on the types of places he or she visits at home.
“We really think of travel as a state of mind,” Jon Steinback, head of user interface at Foursquare, told me in an interview. “When I’m in Paris, I certainly want to discover a great local restaurant for a romantic dinner. But even when I’m walking around the neighborhood I live in New York I still want to go to someplace new and delicious.”
For both consumers and marketers, the surplus of information about the world around us has begun to erode the once-rigid line of demarcation between a “local” and a “traveler.” As travelers, we can now live in the same apartments, frequent the same restaurants, and find those experiences “local” experience, which once were reserved only for a long-time resident. The result is a single industry aimed at helping people — whether travelers or locals — explore, discover, and buy in the real world.
“Information is power, and there’s a huge amount of data being generated by local searches and local bookings with OpenTable,” said Kressmann, the travel analyst at eMarketer, speaking about the Priceline deal. “I’m sure they have a wealth of data that could help give Priceline an edge in suggesting restaurants or targeting ads.”
The way we explore communities — both at home and afar — has changed dramatically in recent years. The growth of user-generated content in the form of reviews, tips and check-ins, as well as improvements in navigation software, and the ability to access that content in any location has made cities far easier to navigate. The information problem, which once defined the traveler — the lack of knowledge about the world around them — is less and less an problem.
Steven Jacobs is Street Fight’s deputy editor.