Phocuswright Europe: Rail vs cruise vs packages and the challenge of frequency of purchase

Phocuswright Europe: Rail vs cruise vs packages and the challenge of frequency of purchase

The contrasting challenges and opportunities for OTAs that enjoy high frequency of transactions and those that have to cope with the much less seldom booker was put under the spotlight at the recent Phocuswright Europe conference.

On the high frequency side was the Trainline while representing those firms challenged by low booking rates was cruise.co.uk. Sitting somewhere in the middle was German OTA Invia Group.

Seamus Conlon, chief executive of cruise.co.uk, said its success in becoming one of the UK’s leading cruise agents lies in how it has invented reasons to engage with customers on a weekly basis.

It has done this by capturing the UK cruise market on its heavily used forums where customers answer each other’s questions and in its use of Facebook by a sales force empowered and given budget to build a social media profile.

“The average cruise customer takes one cruise every two years,” he said. “You cannot build up data based on purchases or research transaction. But they are going to take multiple cruises over a number of years. We have to go out and find reasons to engage with those customers every week of those two years.”

Conlon said by making its concierge service its product it is seeing reduced marketing costs and high repeat customer rates of 65%.

Clare Gilmartin, chief executive of Trainline, said this contrasted sharply with the specialist rail OTA’s experience which has lower it to develop highly functional tools for them to use.

“The benefit of focusing on coach and rail is they are big sectors, worth $250 billion globally. But you really get to know your customers. On average they take 28 trips a year. It’s much more of a frequent interaction and consequently it’s much more mobile.

“We are constantly capturing a lot of data on our users, capturing information on them and making the experience more enriched and personalised. That’s the benefit of focusing on a high frequency travel vertical.

“We have more active users in many big cities than Uber does. So we build out global content on destinations and routes. There is a lot of features we have built off our data like price prediction, delay prediction, advice on where to find the best seat. That allows us to give relevant offers and alerts. It’s a form of marketing but it comes off the back of being a high frequency travel brand.”

Boris Raoul, chief executive of Invia Group, parent to fluege.de and reisen.de, said its customers typically book once a year but that it tries to engage them by inspiring them to try other forms of travel like weekend packages.

“We keep in contact by creating content, giving added value. We might tell our customers when the best time to visit Barcelona is. But we have the same issue [as cruise], the core product is only being booked once a year.”

One of the other marked differences between the cruise and rail industries is the consolidation on the side of the supplier in the former and the extreme fragmentation on supplier side in the latter.

Conlon said: “One of the challenges of the niche we have picked is we are in a market where actually there is just four or five big companies and they control all the cruises.

“They have multiple brands but it’s a very different supplier set up. Suppliers are consolidated and distribution is hugely fragmented. It’s both a challenge and an opportunity.

“It’s a challenge in terms of the supplier power. You are against big consumer brands. Most customers who visit our site will visit their sites, we know our direct competition is the cruise lines.

“However these are huge organisations and they want everything streamlined, they do not want anything messy, we can exist in that messy awkward area that is not economic for them.”

Conlon added: “The size of the market is precisely known. There are so many cruise ships, this many cabins and so many people.

“At the moment it’s about 25 or 26 million people who cruise a year, they generally cruise in twos and threes so that’s 11 or 12 million transactions spread all over the world in many different markets. It’s a very high value market.”

Conlon said he expected see consolidation of distribution over the next few years. Cruise.co.uk last year announced its third private equity backer which invested £52 million taking the amount the agent has raised to about $100 million.

“We see more consolidation in the marketplace,” said Conlon, “the top five or six cruise OTAs are all PE owned at the moment.”

Gilmartin said in rail the pace of technology development was “super fast” but that 70% of the market remains offline and there is huge customer frustration due to the fragmentation of suppliers’, product variables and ticket types.

“There is no common data sets,” she said. “There are 60,000 train and bus stations, 350 to 400 carriers, all use different variations of product descriptions. There are 400 different types of e-ticket.

It’s very messy, no one has been able to bring it together online under one experience. Our biggest challenge is bringing offline to online. Our job is to deliver a real world class experience.”

Raoul said digitising the package market, particularly complicated multi-centre trip holidays, was also a challenge in Invia Group’s sector.

“More than 60% of packages are sold offline. There is a huge challenge of offline to online. There’s huge room for improvement and growth. Taking a customer centric approach pays off in an environment where customer acquisition gets more and more expensive.”

Raoul said he fears Google entering travel but feels it won’t want to form a transactional relationship with users and remain very much focused on the inspirational phase of travel.

He said this means there could be a good ongoing partnership with the search giant, as well as its big rival Facebook which “has its role in the customer journey”.

“Our customers are unfortunately locked into these platforms and we have to deal with that and play with that. Will they go into travel? That’s a big question always. They are very good in the upper funnel, when it comes to lower funnel even Google’s has recognised it’s not their business.”

Raoul added: “We are moving from bring an OTA to an OTO [online travel organiser]. You have to bridge that gap between customer experience and third party suppliers so we have bridge that with our own services. We have a substantial part of our business being done by ourselves as a tour operator.”

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