First stop, KaDaWe, the store that once was the beacon of capitalism when the Berlin Wall was still a Wall. It’s been upgraded and refreshed but essentially the layout’s still the same.
The sixth floor is where, during ITB week, you will run into the world’s travel industry professionals who come here for their annual fix. Everyone has their favourite. Mine is Chicken & Co.
Everyone has their favourite story. One staple is Tegel Airport and how over the last four decades of ITB Berlin, it hasn’t changed much. Just like KDW.
Everyone also has their favourite hotel. I met someone who’s stayed at the same hotel for 20 years. “It’s easy,” he said when I asked him why.
Planet’s biggest travel show draws thousands of visitors to Berlin, and to this popular site – Checkpoint Charlie. (Image credit: Kimberley Chee)
For us humans, old habits die hard. Yet great winds of change are buffeting Europe’s travel industry, not least Germany, the biggest market on the continent and that has enabled ITB Berlin to grow and become the biggest travel industry show on the planet.
The headline of the week is TUI Group closing down Asiarooms.com. Hardly surprising – rumours had been flying for the last year or so that it was bleeding and staff had been laid off – but it underscores several points.
One, it is hard for a traditional travel company to make the leap to online. TUI Travel bought the Asia Rooms brand in 2007 for US$67.5 million, hoping it would buy the company some foothold in the online market.
Here’s the statement from the spokesperson about the closing. “In a highly competitive market, AsiaRooms.com has struggled over the years to perform in line with expectations and we have not seen the improvements needed in order to support further investment.” (In other words, let’s cut our losses while we can.)
“Coupled with ever-changing consumer habits, this has meant that AsiaRooms.com no longer represents our biggest opportunity for growth …” (In other words, we can’t keep up and we no longer know what to do with it.)
Two, even if you have your roots in online travel, it is still hard.
I remember Timothy Hughes, vice president of marketing for Agoda, speaking at a WIT conference a few years back when he had just joined the Priceline-owned OTA. “It’s hard,” he said and he kept repeating that during a panel.
Many thought Hughes was just trying to warn off competitors but he really meant it – it’s hard building an OTA business of consequence
And from this year on, we will see that difficulty and complexity mow down many players.
Remains of the Berlin Wall – the east side gallery. (Image credit: tupatu76/iStock)
Wotif.com had promise until it hit a wall. Now it’s owned by Expedia. Travelocity was acquired by Sabre, an owner from the traditional side of the business that didn’t know what to do with it. It sold to Expedia. Orbitz too was bought by Expedia.
In this difficult space, scale absolutely matters and technology is that Berlin Wall others have to climb. The rulers of the OTA universe – Booking.com, Expedia, Agoda – they operate with ruthless precision.
There’s an army of people behind the scenes testing, converting, tweaking – things we don’t see but things that absolutely matter in whether a customer keeps coming back to click and book.
AsiaRooms tried to build a brand. It hired a marketing team and they spent millions buying billboards, doing offline activities, painting trains, creating blogs – but there’s no point driving people to your door if that door doesn’t open onto a store that offers choice, value and ease of use.
For Booking.com, product was the brand. Build a great product, bring them in and they will buy. Agoda followed a similar strategy.
Beautiful age-old buildings like the French Cathedral in Gendarmenmarkt still frames Berlin’s skyline, unaffected by changes. (Image credit: Kimberley Chee)
It’s changing now of course – the big online travel players are now investing in other ways to acquire customers given the skyrocketing costs of search. For the first time, Google is no longer the default switch.
In Bangkok, for a couple of months in the new year, a yellow train bearing the Expedia logo came past Agoda’s office windows every so often.
The OTA market is consolidating and will further change in the years ahead. Years of building scale and investing in technology to get the product ready for the changing market in Asia will come home to roost in 2015 and will separate scale from niche.
Booking.com’s new app, Booking Now, brings its scale to play in the niche but fast-growing last minute market. Expedia’s Scratchpad brings technology to play in having customers stick to its product.
On a side note, Airbnb’s latest fund-raising which values it at US$20 billion is an indication of the serious scale of these new business models that didn’t exist till a few years ago, and it makes the OTA business look almost old tooth in a world of new monsters.
Meanwhile back in Berlin, the traditional brands can’t even figure out what to do with the businesses they have built – Kuoni’s tour operating business remains on the block after the company announced it would sell off its tour operating interests in Switzerland, Benelux, Hong Kong/China, India and Scandinavia. The move affects about 3,800 staff in total and business that generated turnover of CHF 2.2 billion last year.
It looks set to be an interesting few days at ITB indeed.
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