Traveling STRATEGIES International Transportation (67) 2 | 2015 21 Meta for the win? Success factors for meta-search engines in online travel distribution Meta-search engine, business model, online travel distribution, coopetition, intermediation The importance of digital distribution in the travel industry is strongly increasing. Virtually any travel supplier or hotel is able to market its services directly on the Internet. Web platforms, like online travel agencies (OTAs), are taking over trading functions and facilitate sourcing information for the customer. In addition to trading platforms, meta-search engines like Kayak, Qixxit, momondo and Rome2Rio have evolved and are making the market more transparent. But what is so special about ‘Meta’? Can it work in the long run? Is Meta the most important, if not the only successful kind of business model in online travel distribution? Authors: Alexander Eisenkopf, Christopher A. Haas L ooking at the international travel market, the number of web platforms for searching and booking travel-related services is huge. Meta-search engines aggregate offerings of trading platforms and travel suppliers alike, and provide this information to the user. The idea of this paper is to discuss success factors of meta-search engines. It is based on case studies, supported by interviews with decision makers of successful metasearch engines and industry experts from associations from the travel industry. The theoretical background is provided by the theories of coopetition and intermediaries. The paper is structured as follows: Following a short description of the value chain, we explain the functions and the role of meta-search engines in online travel distribution. Based on the idea of meta-search engines as an intermediary we then discuss the development of business models and market structure in the online travel market. Distribution value chain/ net The online travel market mainly provides three points of contact for the consumer with the travel product: online travel agencies (OTA), meta-search engines and suppliers’ websites for direct distribution. Figure 1 illustrates that different ways of distribution involve different numbers of players and therefore may use different pricing methods. It seems obvious that direct distribution, as long as transactional costs and customer coverage are equal, is the cheapest way of distribution for suppliers, since they do not have to share the achievable margin with any intermediaries. The fact that Lufthansa introduced a special fee for GDS bookings with the aim to foster their direct channel has just confirmed this. What does a meta-search engine-do? In general, meta-search engines fulfil the purpose of aggregating information that is available on the Internet and has already been indexed by search engines. The main advantage of a meta-search engine is the combination of search results of other search engines in a single user interface (Lawrence and Giles, 2006). In the area of travel services, the meta-search engine aggregates inventory and rates from online sources and provides these to a user via a single query. Compared to an OTA or a supplier portal, a significant difference is that a meta-search engine does not process booking transactions and fulfilment, but provides an overview of different rates for the same product. A meta-search engine redirects the users to the suppliers’ websites where the users may subsequently make a booking (Christodoulidou et al., 2010, Schaal, 2015). This implies that the users do not conclude a contract with the meta-search engine since the latter is not a merchant. They only enter in a contractual relation with the entity owning the booking engine that they are redirected to, the meta-search engine´s advertiser. Figure 2 shows the inventory flow and how a meta-search engine aggregates information from OTAs, GDSs and even suppliers’ booking capabilities on a single platform. Figure 1: Travel distribution & information value chain Source: Granados et al., 2008 STRATEGIES Traveling International Transportation (67) 2 | 2015 22 Why do travelers use meta-search engines? Meta-search engines find themselves to be more and more frequently used by travelers. One possible explanation is that the average online travel buyer has a higher demand for information before taking a decision. In total, an online booker makes an average of 32.5 visits to more than 10 websites over a period of 73 days before the booking is completed (May 2013). In 2013, 36 % of travelers in the US used meta-search engines for travel shopping. At the same time, 42 % of travelers in Germany used a meta-search engine for travel shopping (Nielsen, 2014). In the value chain of online travel distribution, the meta-search engines cover the steps ‘inform’, ‘compare’ and ‘validate’ as shown in figure 3. This means, that the metasearch engines offer the users information about available products, enabling them to compare the different offers and finally to validate them to find out whether their choice is the ideal offer according to their travel needs. The booking process, however, is still owned by the OTA or the direct supplier. Aggregator & integrator One of the strengths of meta-search engines is their ability to aggregate and integrate information and thus provide market transparency for the user on the one hand, and open up additional access to consumers for the advertiser on the other hand. It may be said that the core capability that a metasearch engine needs to create value, is the aggregation of inventory and content. This is the enabler for every further service that can be provided by a meta-search engine, be it personalization or even establishing contact with a travel companion. Thus, the meta-search engine highly depends on its suppliers. The role of intermediary For the users, the information provided by a meta-search engine is highly valuable as it helps them to find the ideal travel product matching their individual use cases and travel requirements. Trustworthiness and the provision of a comprehensive overview of the market are important. Users might move to a different platform once they become aware that the platform they are currently using may not deliver a comprehensive picture of the market. Thus, comprehensive information may be assumed to be the justification of existence of any metasearch engine in the online travel market. To maintain a high level of comprehensiveness, up-to-date and high-quality data interfaces are necessary. The ability to source all available information from the advertising partners of a meta-search engine is therefore crucial when it comes to offering a product that is of a certain value for the user. Hence, standardized automated data interfaces, like the one already introduced for air travel by IATA’s NDC, might be the future. This also makes it possible for the user to directly connect with suppliers more easily via a standardized interface, and for the meta-search engine to integrate a virtually limitless number of suppliers using a single API format. Meta-search engines are seeking direct commercial relationships with travel suppliers to strengthen their position in the value net. However, there might be a certain risk in this strategy. Engaging in a direct business relationship with suppliers, whether they are hotels or airlines, shifts the risk of CPC advertising to the direct supplier. Performing online travel distribution via OTAs, the risk of CPC advertising is cushioned by the OTAs since suppliers pay a commission per sale to the OTA. The OTA is the intermediary that advertises its inventory on its own behalf on the meta-search engines. In this context, the OTAs benefit from economies of scale and an extensive portfolio, which mitigate a potential loss in a small number of items. However, in a direct relationship between supplier and meta-search engine, this risk - but also the corresponding advantages - shift directly to the supplier. The future development will show whether suppliers will accept this business model in the long run or not. A further risk of connecting directly with suppliers, e.g. an airline, may be a loss of neutrality and comprehensiveness in the search results of a meta-search engine. This applies in particular to any case where a supplier connects directly to more than one meta-search engine but provides different rates to each of them. In this case, any meta-search engine would need to integrate the results of other meta-search engines to- remain a provider of true market transparency. Merger of business models Looking back to the year 2000 and the subsequent rise of OTAs, those were in a similar position as meta-search engines are today. Back then, OTAs fulfilled the role of market transparency providers by aggregating travel products on a website and thus allowing travelers to compare. When more and more OTAs entered the market, metasearch engines took over this role and restored market transparency, in this case not by comparing the individual suppliers’ offers, but the offerings of the OTAs. OTAs and meta-search engines emerged from an internet-based process of re-intermediation. Through the strong growth and the emergence of a larger number of OTAs over the years, market transparency was lost to a certain extent because too many players offered too many different prices for travel products. To restore market transparency, a new intermediary appeared in the form of meta-search engines. A certain risk for meta-search engines therefore lies in the fact that they might evolve to the status of OTAs once they have too many direct commercial relationships with suppliers. If two meta-search engines collaborate with the 6 internet-based process of reintermediation. Through the strong growth and the emergence of a larger number of OTAs over the years, market transparency may have got lost as too many players offered too many different prices for travel products. To restore market transparency, a new intermediary appeared in the form of Meta-Search-Engines. A certain risk for Meta-Search-Engines therefore lies in the fact that they might evolve to the status of an OTA once they have too many direct commercial relationships with suppliers. If two Meta- Search-Engines collaborate with the same supplier, and both show a direct offer of the supplier, why should this supplier provide the same rate to both Metas? In such a case, comprehensive information will get lost and market transparency cannot be provided anymore. Additionally, the role of fulfilment is currently not a part of the Meta-Search- Engines business model. But as the interviews we had with industry experts show, a further integration of the value net integrating booking and fulfilment capabilities is an option for a Meta-Search-Engine to further improve their user experience and the service/ product for the supplier. Fig. 3: Suppliers, OTA and Meta-Search in online distribution value chain Meta OTA Direct Supplier Following this trend, the evolution of the market may lead to a merger of the OTAs’ and the Meta-Search-Engines’ business model as shown in figure 3 so that we cannot distinguish both models anymore. In this case, OTAs would start to include competitors’ prices to enable their users to compare offers and validate decisions. At the same time, Meta-Search-Engines may move to a CPA-model. The CPA-Model (Cost-Per-Acquisition) only charges the advertiser once a booking is completed. Thus, it is easily scalable, reduces the risk for Inform Compare Validate Book Pay Assist Figure 2: Meta-search engines in online travel distribution Source: Eisenkopf et al., 2014 Figure 3: Suppliers, OTA and meta-search engines in the online distribution value chain Traveling STRATEGIES International Transportation (67) 2 | 2015 23 same supplier, and both show a direct offer of the supplier, why should this supplier provide the same rate to both metas? In such a case, comprehensive information will get lost and market transparency cannot be provided anymore. In addition, the meta-search engines’ business model does currently not include the role of actual fulfilment. But as the interviews we conducted with industry experts show, the expansion to further areas of the value net, including booking and fulfilment capabilities, is an option if meta-search engines want to further improve the experience for their users and the service/ product for their suppliers. Following this trend, the evolution of the market may lead to a merger of the business models currently used by the OTAs and the meta-search engines, as shown in figure 3, so that we cannot distinguish both models anymore. In this case, OTAs would start to include competitors’ prices to enable their users to compare offers and validate decisions. At the same time, meta-search engines may move to a CPA model. Under a CPA model (Cost-Per-Acquisition), the advertiser is only charged once a booking is completed. Consequently it is easily scalable, reduces the risk for advertisers and opens the door for meta-search engines to integrate booking and fulfilment into their service range. Market consolidation A further topic is the conceivable future consolidation of the market. Today’s metasearch engines in online travel distribution often belong to an OTA or even to a travel supplier. In theory, consolidation leading to a duopoly market may clear the path for a new approach of disintermediation and reintermediation. Looking at the current process of market consolidation, we may assume only two large OTA-focused companies will still be in the market in a few years. However, the market for online travel distribution is still highly vulnerable and constitutes a fast changing environment. GDSs like Amadeus may suffer from disintermediation once meta-search engines and OTAs unfold their full potential in setting up direct commercial relationships with suppliers, bypassing the GDSs’ services. However, meta-search engines entered the value chain of online travel distribution to provide market transparency and easy access to a comprehensive overview of the market. This opportunity arose in particular when the increasing number of OTAs made it difficult for the user to compare travel opportunities and prices. Meta-search engines recognized a certain demand for market transparency by the potential users and created websites that would offer the possibility to compare offers by providing the best possible information in an easy-touse way. Looking at OTAs, which initially entered the market to fulfil a similar role - provide information and market transparency - the re-intermediation through the establishment of meta-search engines and their increasing number may lead to a repetition of the re-intermediation process of the late 1990s and enable further business models to evolve. This parallelism is underlined by the fact that meta-search engines have started to enter the direct distribution channels by enabling travel providers to bypass OTAs and provide rates and availability directly to a meta-search engine. In e-business, this step of disintermediation is not surprising, but having suppliers providing rates and availability directly to metasearch engines may give rise to the need for an intermediary that compares the direct offers of the metas and thus restores market transparency. This potential new player, let’s call it a ‘Square-Meta’, may collect and compare the meta-search engines’ (direct) inventory. In case that meta-search engines keep their strategy of focusing on one specific product type, such as transport, the Square-Meta may even take the role of an integrator offering on-demand bundles, thus combining the most suitable results of a transport meta-search engine with the optimally matching results from an accommodation meta-search engine or even sourced from a meta-search engine that offers both verticals. Doing so may enable each player to concentrate on their core capabilities and deliver an even better product. Open future The question ‘Meta for the win? ’ can only be answered with ‘it depends’. It clearly depends on how meta-search engines and OTAs decide to evolve their business model and how the business models of their suppliers will develop. The only thing that is clear is that the current model is not here to stay, because pressure for change in the industry is strong. The whole industry is in a constant state of flux, and further intermediaries are likely to enter the market. ■ SOURCES Christodoulidou, N., Conolly, D. J. & Brewer, P. 2010. An examination of the transactional relationship between online travel agencies, travel meta sites, and suppliers. International Journal of Contemporary Hospitality Management, 22, 1048-1062. Eisenkopf, A., Geis, I., Haas, C. A., Enkel, E., Kenning, P., Jochum, G., Schulz, W. H. & Grotemeier, C. 2014. To Develop and Validate a European Passenger Transport Information and Booking System Across Transport Modes. Granados, N. F., Kauffman, R. J. & King, B. 2008. How Has Electronic Travel Distribution Been Transformed? A Test of the Theory of Newly Vulnerable Markets. Journal of Management Information Systems, 25, 73-95. Lawrence, S. R. & Giles, C. L. 2006. Meta search engine. Google Patents. May, K. 2013. Deep dive into travel research activity by online and offline bookers. tnooz [Online]. Available from: http: / / www.tnooz.com/ article/ travel-research-google-online-acitvity [Accessed Jan. 6 2015]. Mielsen, S. 2014. Expedia’s trivago acquisition raises advertising revenue growth [Online]. marketrealist.com. Available: http: / / marketrealist.com/ 2014/ 04/ expedia/ [Accessed Mar. 7 2015]. Schaal, D. 2015. The State of Travel Metasearch in 2015. Skift Trend Report. BACKGROUND INfORMATION Meta-search business model The most popular business model for metasearch engines is Cost-Per-Click (CPC). An advertiser (supplier or OTA) placing their offers on a meta-search engine pays a specific amount of money each time a user clicks on the related advertisement. By providing aggregated information to a user, the click is perceived as a ‘qualified lead’. This means, the referral has a certain value, because the interest of the user is rated high, as is the likelihood that the user might make a booking. A meta-search engine does not charge the users for the service, but only the partners that advertise their inventory in order to reach the broad audience provided by the meta-search engine. Alexander Eisenkopf, Prof. Dr. ZEPPELIN-Lehrstuhl für Wirtschafts- und Verkehrspolitik, Friedrichshafen (DE) alexander.eisenkopf@zu.de Christopher Haas, M.A Düsseldorf (DE) christopher.a.haas@gmail.com