Forrester’s New 2011-2016 US Online Travel Forecast: Restrained Growth Ahead

We just published Forrester’s 2011-2016 US online leisure and unmanaged business travel forecast report (if your firm is a Forrester ForecastView subscriber, you may download the complete detailed forecast here). The forecast covers spending for airline tickets, hotel/motel accommodations, rental cars, cruises, and tours, with year-by-year amounts for each in the report. The forecast doesn’t include travel spending on mobile sites or apps, nor does it include ancillary product sales (such as airline checked baggage fees or hotel Wi-Fi) and destination activities and services, like sightseeing tours.

We believe several macro factors will affect the travel industry, and thus the revenue figures in our forecast, during the next five years. These include the state of the US economy and consumer confidence, a permanently high-priced energy environment (critical to the airline and cruise sectors), industry consolidation and the resultant restraint on industry capacity growth, and pricing, which we expect to remain relatively high thanks to capacity discipline (especially in the airline, hotel, and rental car sectors) and of course those high energy costs. We developed the forecast far before the current US debt ceiling crisis had become, well, a crisis. In preparing the forecast, we anticipated that though the US economy may be uneven, it would continue to recover, albeit at an uneven pace through 2012 (we anticipated that the US economy would be more stable from 2013 onwards).

A few highlights from the forecast:

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Expedia/Groupon Create A New Travel Marketplace -- Travelers Will Love It, Travel Sellers Will Have To Be Careful

On June 1, 2011 at All Things Digital’s D9 conference, Expedia, the world’s largest online travel company, announced it and Groupon would launch a new travel deals product, “Groupon GetawaysTM With Expedia” (forgive us if we shorten that mouthful to just Groupon Getaways). Both Groupon and Expedia already offer their own assortment of travel deals. Expedia’s TripAdvisor unit has its own “flash sale” offering, SniqueAway. Thanks to the clout of both Expedia and Groupon, Groupon Getaways will pose a significant challenge to Groupon competitor LivingSocial, which offers LivingSocial Escapes, as well as other “daily deal” and “flash sale” sites like Plum District and RueLaLa.

Several factors work in Groupon GetawaysTM with Expedia favor, including:

  • An enormous customer database. Expedia and Groupon state they have more than 50 million combined subscribers – just in the US. That is a gigantic base to which the two companies can start selling (deals are expected to be published starting in late June, 2011).
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It's Too Soon To Scrap Hotel Star-Ratings In Favor Of Traveler-Written Reviews

UK newspapers reported on Monday, January 24, 2011, that UK tourism minister John Penrose stated the government is considering phasing out government-sanctioned star-ratings of various lodging accommodations in favor of traveler-written reviews.

That's an idea ahead of its time.

Currently, representatives from various UK tourism authorities like VisitEngland, VisitScotland, and the Automobile Association (known in the UK as the AA) anonymously visit and assess hotels, B&Bs, and even campsites. These reviewers grade each establishment on a scale of one to five stars, using a process and criteria discussed here.

Tempting as it may be to use traveler-written ratings and reviews -- which the UK's Department for Culture, Media and Sport considers to be more "truthful '' -- it's too soon to abandon the government-set standards. Why?

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American Airlines Cleans Up’s Home Page, But Buries A Big Point Of Differentiation

Having not updated its Web site since 2002, on November 14, 2010, American Airlines launched a new home page. Compared to the previous version of the home page, the new design is cleaner; all essential content appears above the fold. The site uses a brighter color palette as well. Site navigation has been greatly improved. Key tasks, like flight booking, account log-in, and flight check-in, now appear in the same navigation menu. The “Book Travel” tab consolidates non-air product sales, including third-party ancillary services like hotels and cruises, with flight booking. The result is a home page that looks more like a travel retailer than “just” an airline Web site.

Even so, given the long time since American last updated, it’s disappointing that American didn’t push its new home page concept further. For example, American could have used this opportunity to launch a truly pacesetting home page, allowing users to personalize both content and placement of modules. As Forrester noted in a 2009 report, more than 7 in 10 US online consumers use a personalized portal site like iGoogle or My Yahoo! A flexible, “modular” home page would have helped American further increase’s utility to its customers and allow the airline to use analytics to better understand what is important to its travelers. That insight could, in theory, be used for everything from targeting offers to product or route network development.

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Gogobot Leverages Social To Enhance Travel

Forrester estimates that in 2010, $80 billion of leisure and personal travel will be bought online – an amount that will increase to $110.7 billion by the end of 2014. Our research also shows that more than 7 in 10 online leisure travelers in the US use social media. Naturally, we’re seeing many firms begin to offer social trip planning solutions. The latest group looking to make a run at the prize is “Gogobot,” a self-described “social recommendation platform for travel” scheduled to launch in beta test on Tuesday, November 16.

Gogobot recently briefed Forrester. In opening up the conversation, Gogobot’s CEO Travis Katz (a MySpace alumnus) stated that “friends, not strangers” are what help to make a trip enjoyable. Hokey, but he has a point: we value advice from people we know. Gogobot allows us to leverage not only the wisdom of the crowd, but also our existing social networks in order help with the discovery and inspiration we value, but is often lacking from most mainstream travel sites, including those belonging to major online travel agencies and travel suppliers.

The key to Gogobot is its ability to help a user find not just advice and content, but relevant advice and content. Gogobot users can sign in via their Facebook account – making Gogobot convenient – and discover which of their friends have recommended a particular restaurant or hotel in one of thousands of locations. Yes, I know –pass the popcorn, we’ve seen this movie before.  Where Gogobot’s true benefit becomes apparent is the control it extends to its users.

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Google Launches July 4 Fireworks Early, Buys ITA Software

In a move that had been speculated about since April, on July 1 Google announced  it had entered into an agreement to buy Cambridge, MA-based ITA Software for $700 million — thus launching its own round of business fireworks ahead of the US July 4 holiday.

As an analyst, I believe this deal makes sense because:

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Continental Airlines Merges With United -- The Proud Bird Soars Into The Friendly Skies

On Monday, May 3, two of the “founding fathers” of the US airline industry, Chicago, Illinois-based United Airlines (it of the iconic ad slogan, “Fly The Friendly Skies”) announced a "merger of equals" with Houston, Texas-based Continental Airlines (once known as the “Proud Bird With The Golden Tail”). The combined airline will form, at least for the time being, the world’s largest airline. At the time the merger is expected to close (that’s currently estimated to take place in Q4 2010), the “new” United will:

  • Have a combined fleet of 692 mainline aircraft (as of 3/31/2010)
  • Operate 10 hubs: Newark Liberty (EWR), Washington Dulles (IAD), Cleveland (CLE), Chicago O’Hare (ORD), Houston George Bush Intercontinental (IAH), Denver (DEN), Los Angeles (LAX), San Francisco (SFO), Tokyo Narita (NRT), and Guam (GUM).
  • Account for about 21% of the US available seat miles – a key airline industry capacity metric – and about 7% of global capacity.


Though the merged airline will keep the United (UA) name, it will use Continental’s livery and logo (CO). I’ve got to admit: Personally, I prefer UA’s “tulip” logo and livery to that of CO’s (though I don’t think anyone’s bought a ticket based on an airline’s paint job since Braniff’s “end of the plain plane” campaign).

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End of an era: AMR Corporation to shift from Sabre to Hewlett-Packard

How can travel companies benefit more from user generated content?

Henry Harteveldt [Posted by Henry Harteveldt]

Hello again.

I'm wrapping up my report on why travelers post their ratings and reviews. This was the winning topic that we asked our eBusiness blog readers to vote on. Thanks again to those of you who voted.

The good news is that travelers are more likely to post content like ratings, reviews, and pictures on travel Web sites to share good news with their fellow travelers, rather than bad news. I hope that's because more travelers interact with travel firms that exceed their expectations, rather than travelers having low expectations and simply pleased that nothing went wrong. The reality is likely a mix of both.

If you're a travel eBusiness or marketing professional, I'd sincerely value your opinions about user generated content (UGC) -- primarily ratings and reviews -- for one simple reason. I want to be sure that we write the most useful possible report. Among the questions we'd appreciate your input on are:

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Travel social media: What vendors do you like?

Henry Harteveldt   [Posted by Henry Harteveldt]

Hi everyone,

A couple of weeks ago, we asked you to vote for what you'd like us to write on for our next travel eBusiness research report. The winning topic was "Why travelers write ratings and reviews." I'm working on that now -- which leads me to today's post.

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