Aggregators: Changing the Way Consumers Book Travel Online

A new breed of travel sites is making airfare, hotel, and car rental searches easier, and more objective

For many travelers, booking a vacation online is like going on a virtual scavenger hunt. They pick up a hotel at one site, search two others for a good airfare, and then turn to two more to compare rental car costs. Phocus Wright, an industry research organization, estimates that consumers check an average of three websites before ever making a booking.

But all that may be about to change thanks to a new breed of websites that have been making inroads into the way consumers research and book travel. Called "aggregators," they're the bloodhounds of the web, travel commerce sites that don't actually sell anything. Instead, they "google" travel offers, scurrying from site to site to find the best rates. If the consumer ends up booking a flight, hotel, rental car or (soon) cruise through one of these aggregators, that site gets a commission from the website that made the sale.

Sounds like a simple concept, right? But as more and more engines join this increasingly crowded field, they're bringing to it a wide range of services and user interfaces; and raising the hackles of the more established players.

Bad for the "big boys," good for consumers?

The larger, more established sites have good reason to worry about these new players; according to PhoCusWright, of the $40 billion dollars spent on online bookings in 2003, 75 percent were made through Expedia, Travelocity and Orbitz. These giants want to keep their customers right where they are.

"Customers trust us and they know that they can do it [book their vacations] on one site," contends Stewart McDonald of Expedia. "We believe that our business is about providing the whole trip."

But that model may be shifting as these new sites achieve prominence. Just today, Kayak.com (one of the newest of the aggregators) announced a partnership with AOL that will give it a much-needed infusion of cash and a serious dose of credibility. The other three we profile below all have plans in motion to expand their offerings and are picking up new users on a daily basis.

Just as importantly, these sites are much more cost effective for both the suppliers of travel and consumers. The New York Times recently interviewed Henry Harteveldt, of Forrester Research, who explained that airlines typically pay $10 to $17 for tickets processed by the global distribution systems travel agents use; with aggregators, they pay on average $5 or $6.

Consumers also pay a significant price for booking with one of the big boys. Users of Expedia, Orbitz and Travelocity are shelling out, on average, an additional $5 in service fees for airfare bookings (on top of taxes and security fees); for hotels these charges can be much higher. This is on top of rates for hotels and airlines that are inevitably higher (at least in our searches) than the ones found through aggregatores.

The aggregators also tend to offer a more objective search. Unlike many big online agencies, which give a more prominent position in their searches to the airlines, hotels and rental car companies that pay more for placement, most of the aggregators don't play favorites. "We all saw that online travel is broken. Consumers are cross-checking incessantly because they know they can't trust the first price they get," says Steve Hafner of Kayak. "It's a frustrating shopping experience. So we decided to change it with a site that offers comprehensiveness of rates and information, is easy to use and objective. We're a technology company, not a travel agency. We don't care what you buy or where you buy it."

Trying to hold onto their market share, the largest sites have been fighting back in the area that they can control: searches of their sites. Says Stuart McDonald of Expedia, "We have informed all of those small scraping sites that we will not be working with them and we do not wish for them to scrape [search] any of our prices. That's not just Expedia, but Hotels.com and Hotwire." Michelle Peluso, CEO of Travelocity, told the New York Times that her site would be doing the same, and two weeks ago Orbitz made a "low fare promise" that anyone who finds a lower fare than on their site will be eligible for a $50 coupon from Orbitz towards their next trip. (The pledge is so full of caveats and deadlines that we doubt many consumers will be able to catch them on it. Still, it's a potent PR move.)

But it may turn out that the aggregators don't need the biggies; they may be able to carve out quite good business models simply searching the airlines', car rental companies' and hotel chains' booking engines directly.

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Note:This story was accurate when it was published. Please be sure to confirm all rates and details directly with the companies in question before planning your trip.
 

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