Connect with us

Travel

The dream of a travel one-stop-shop: what comes next?

Published

on

The dream of a travel one-stop-shop: what comes next?

For several decades, travel executives have been chasing the idea of building a one-stop shop where customers book flights,
hotels, transfers and even entertainment in one place. While this sure sounds
like the ultimate convenience, in reality, does it work or is it merely a
logistical nightmare?  
 
Global online travel agencies like Booking.com and Expedia have been working to evolve from
just accommodation-focused platforms to offer comprehensive travel services to
position themselves as one-stop shops. However, to this day, particularly in
the United States and western Europe, we do not have one dominating truly end-to-end
travel platform for travelers. Why?

Fundamentally different businesses 

The concept of the all-in-one platform is, of course, alluring. The
idea has been simple: to be able to book anything the modern traveler might
theoretically need in a matter of minutes in one window.  

However, there are three undeniable drawbacks of an all-in-one
travel platform: 

  • Complex integration: managing fundamentally different travel
    services in one platform leads to challenges, integration issues and increased
    complexity.
  • High amount of investment needed: building and maintaining an
    all-in-one platform requires skyrocketing investment.
  • Pricing matters: the customers will mostly sacrifice
    convenience for a relatively minor price difference.  

For example, Booking.com offers a choice of more than 29 million
property listings, including accommodations, flights, car rentals and
activities, but for some reason, less than 10% of its transactions are
“connected” trips. Despite years of investment, this segment remains
small compared to their hotel division, with its growth having declined over
time.

In my vision, the core issue is that travel sectors – flights,
hotels and activities – are fundamentally different businesses that require
specialized expertise. Each of these segments has its own operational and
financial model, networks and customer journey that don’t easily blend with
the others.

Trying to do all of them in one place often leads to mediocre user
experience since there are companies that already dominate each niche with
their brands, finely tuned systems, and optimized services and prices.
Consumers prefer to book with trustworthy providers in separate categories
instead of settling for a platform that tries to be everything but masters
little. 

The complexity of building and maintaining such a platform also
demands extensive resources. Running end-to-end travel business units across
verticals requires an army of experts with skills in each area, as well as a
tech infrastructure capable of bringing it all together.

Even if a company
manages to get everything in place, the initial investment is staggering. Even
if today’s best-known names in the industry, who manage huge resources in human
and financial capital, were able to build the processes and operations, they have struggled to make the additional travel services as profitable and successful
as their core business.

And, they still offer them as upsells to customers who
came to buy the core product. That is, in fact, the ultimate goal for the big
holdings, including Booking.com, Trip.com, Expedia, etc., while most mid-size
and small companies also aspire to implement this strategy at some point.

Companies that have pursued this model face another issue:
travelers want the best prices and experience across all parts of their
journey. Even to this day, customers prefer searching for flights and
accommodations separately to find the best quality-price ratio and tend to be
skeptical of the offerings of one-stop-shop platforms without a comprehensive benchmark.

The idea that travelers will opt for convenience over savings is overestimated;
price comparison is ingrained in modern travel behavior. If a customer can find
a better deal for a hotel on one site and a cheaper flight on another, he will
happily use both, no matter how convenient a one-stop-shop platform may claim
to be. 

The solution lies in specialization, not generalization 

Rather than chasing an impossible vision, small to mid-size travel
companies should focus on what they do best: specialization. The most
successful travel brands focus on a single vertical – they know it inside and
out.

What should companies do? First, look for natural synergies between
their core strengths and customer needs, focusing on strategic partnerships
where they can add value. A company that excels in flight bookings can expand
into adjacent services, such as travel insurance or ancillary products like
baggage protection and seat selection. These services are aligned with the core
business and don’t stretch the company’s resources thin trying to compete in a
field they aren’t suited for.

Second, instead of cramming every service into one platform,
companies should focus on interoperability. Partnerships with hotels or car
rentals make more sense than trying to own everything and do everything on
their own. The goal should be an ecosystem of specialized services. 

There is also the matter of cost-effectiveness, because by focusing
on what works and partnering for the rest, companies can reduce costs while
still offering a comprehensive travel experience to their customers. Basically,
it’s not the consolidation that matters, it is the integration. 

A business can perfect one vertical and then expand by adding
related services or partnering with other platforms. This creates a scalable model that doesn’t require the
massive infrastructure of a one-stop shop. 

In summary, the truly one-stop-shop model in travel has not been
realized due to its complexity, resource intensity, and failure to meet
customer preferences. Only a few
companies are in a position to even try.

Could Google do it? Sure. Could
Booking.com pull it off? Probably. But here’s the catch: all that brand trust
and pure convenience doesn’t mean much when a traveler can save $100 on their
family vacation elsewhere. Even with the time and money to build these
platforms, the giants might find themselves on shaky ground.

Travelers are
already comparing a dozen websites to find the cheapest option. So even if one
of these companies succeeds in creating the ultimate one-stop-shop, will it
really be as profitable as their core business? Or worse, will it start to
cannibalize their base profits? That’s the multi-billion-dollar question no one
seems ready to answer. Yet.

About the author…

Gulce Karsli Rozenveld is the CEO of Oojo.

 

Continue Reading