Britons take advantage of “heavy discounting” to book last minute holidays

The travel sector stood out for its online retail sales performance in July as consumers took advantage of heavy discounting by travel companies to book last minute holidays.

Published: 23 Aug 2010

The travel sector stood out for its online retail sales performance in July as consumers took advantage of heavy discounting by travel companies to book last minute holidays.

The latest results from the IMRG Capgemini e-Retail Sales Index reveal that shoppers spent £5 billion online in July, the most in any month this year. With Brits spending an average of £81 per person, online retail has shown a marked turning point since the lows of the last two years with consistently high growth levels throughout the first half of 2010.

IMRG stated that a “true British summer materialised” in late July, with over twice the average rainfall for the time of year recorded. Growth in travel sales rose by a third as a result, with Brits escaping the drizzle in favour of last minute deals in hotter climes.

The travel sector grew by a greater amount compared to June than any other sector analysed in the Index, as consumers took advantage of heavy discounting by travel companies to book last minute holidays.

David Stratton, head of Partnerships at HolidayExtras.com, said that July was a month of positive growth, with parking bookings up by seven percent; hotels up by four percent and overall growth of five percent.

“These figures, while in line with our forecast, are behind our yearly budgeted expectations due to the volcano activity in April. We are delighted to be in a positive growth situation, particularly in the current economic climate. This is due to the savings that we offer our budget-conscious holiday travellers and our focus on customer support. August to date has seen record booking days,” said Stratton.

Customer behaviour

In its analysis this year, EyeforTravel has found that over the last year or so, given the challenging economic scenario, the customers have searched more extensively for better deals and customers shopped multiple channels before booking. Some customer segments increasingly became more brand agnostic and price sensitive.

There are a lot of influential variables in the customer decision making process. A reality of the Internet Age is that consumers now have much greater ability to compare shop across online channels, and so hotel pricing has become much more transparent. This has required the entire travel industry to evolve the way it approaches pricing and targeting. For their part, OTAs have helped consumers by making it easier to find and book the travel options that are right for them, for instance by providing tools that help them discover value as a function of the benefit that matters to them.

A section of the industry believes that offering the most compelling offers exactly at the time of searching continues to be the biggest opportunity.

In a recent interview with EyeforTravel’s Ritesh Gupta, Nigel Pocklington, VP global marketing and strategy, Expedia, said, “Selling travel well has always been a mixture of creating excitement about the trip and reducing anxiety about the product itself – with the growth of online increasing customers’ expectations of speed. I agree that it’s important, but so is offering the best possible description of the product, and making sure the customers feel that they are getting the best deal possible at the time of booking.”

OTAs have introduced new offerings for consumers to find the best travel deals based on their preferences and flexibility. For instance, Travelocity this year introduced its customised deals engine, featuring several filters allowing customers to personalise and sort deals by price, date range, theme, destination and travel product. This desktop application gives consumers direct access to the best vacation package deals without using a browser while tracking the customer’s preferred information for a completely personalised shopping experience.

“We are moving towards slowly towards personalisation and there are some clear reasons for this,” said Pocklington.

“Travel isn’t bought all that frequently, possibly only two or three times a year, so our ability to build up an accurate picture of travellers’ needs – which may change in any case between business and leisure travel for example – is much lower than other industries. We are seeing this begin to change though, and within the constraints of increasing concerns about user privacy, I’d expect more investment in this. This is certainly the case for Hotels.com,” Pocklington said.

Discounting

Discounting, when applied in a targeted and strategic manner, should positively impact occupancy and revenue.

OTAs are all too often associated with “last minute” production. However, most of their partners have strategies spanning 365 days a year, making use of such channels to secure a base of occupancy at longer booking windows. This allows them to yield up the last rooms on high demand dates.

According to OTAs, the transparency of the online channel, and consumers’ desire to comparison shop online for travel product, make rate parity a necessary part of delivering a good consumer experience. Very simply, it helps customers in believing that they will find the best available prices, which also benefits hotels given the tendency for some consumers to browse on sites such as Expedia and book on hotels’ direct sites.

Jump

The IMRG Capgemini e-Retail Sales Index has grown by 18 percent compared to last July, in the biggest annual jump for the month of July since before the recession in 2007. As retailer promotions drew shoppers online, an impressive growth rate of 14 percent was recorded compared to June – the highest monthly growth of 2010 so far.

David Smith, MD of IMRG said, “With over half of the UK population online at least once a day it is no surprise that online sales continue to grow impressively year on year.

Smith said the evidence mounts that high street retailers will need to invest more in their online business and put it at the heart of their retail strategy. Online retailers, on the other hand, will need to continue to innovate as they strive to close the growth gap.

The performance of retailers with a high street and an online presence continues to outshine that of online only retailers, according to IMRG.

Multichannel retailers witnessed growth of 18 percent compared to last month, while online only (‘pureplay’) retailers showed month on month growth of only 8 percent. Multichannel retailers are also managing to convert more browsers into actual sales, with an average conversion rate of 4.49 percent, compared 4.35 percent for online only retailers.

   

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