What Revenue Per Search Tells You That Look to Book Doesn’t?
Intermediaries such as wholesalers, bedbanks, and metasearch engines play a pivotal role in travel product distribution. Their vast networks of travel agents and access to buyers offer travel product suppliers such as hoteliers’ unrivaled breadth of destination expertise and global reach across regions and interest groups. If you are in this business then you know that sales volume delivered with quality and value lies at the heart of the supplier/distributor relationship.
Search requests and their responses are routinely exchanged via XML interfaces that are made available under agreement between suppliers, their chosen wholesalers and between the various intermediaries. This interface or API is designed to enable real-time communication between the websites of the travel agents and the servers of the hotel wholesalers by using XML formatted data, which can easily be read by the different systems handling online travel. This type of access allows affiliated sites to tailor the hotel information, destination lists, profit margin as well as room availability.
Thus the API plumbing for requests and replies is set so that inventory can flow around the ecosystem. Intermediaries sit in the middle of this complex supply chain dealing with millions of searches made by hundreds of travel organisations every day, made possible by Internet browsers and XML APIs.
Look to Books a Useful Benchmark with Limitations
Today’s consumers traverse many websites to compare prices and value before making a booking and this has a knock-on effect throughout the travel supply system. Each and every search needs to be responded to quickly (and accurately) to stay in the game. Timeouts, errors and performance issues as well as relevance of offer and pricing are all contributing factors to whether a search meets with success or failure. The rule you have to be in it to win it clearly applies. As search levels increase there is a corresponding burden on the whole inventory management and booking system infrastructure. Add seasonal pressures to the mix and systems are often strained to cope with the volume.
This is where Look to Book volumes get noticed. An industry benchmark giving visibility into the level of searches in relation to bookings actually made. A booking made (and hopefully not cancelled) is where the revenue flow begins, up to that point everything including searches is the overhead for being in this business. Everyone in this industry has seen their look to book ratios rise.
Revenue per Search Lens – Digging Deeper
So if this resonates with you, what are you doing to:
- Monitor and manage your inventory profitably?
- Protect your infrastructure from overload?
Do you know, for example which agent or distribution channel delivers the most revenue for the least number of search queries or indeed the one that interrogates your systems with many queries but delivers bookings that are few in number or low in value or indeed both?
When your API is connected to many different distribution agents big and small then you need to look beyond the simple look to book relationship with each one. The number of searches by the number of bookings tells you how often they are coming for data before they deliver the booking. But looking at the same relationship with a ‘revenue lens’ can tell you the value of the relationship. Real insight comes from measuring the volume of searches not by number of bookings but by value of bookings.
Real World Example
To find out the best performing channels and conversely which are your worst you should have a look at the number of searches against the total net revenue delivered by the same channel. Having this finer point of detail can help enormously in how the relationship is managed and incentivised.
The following is a simplistic example to illustrate the relationship between searches, bookings and revenue. Each channel is making the same number of search requests but the revenue picture is very different. It shows that while A delivers more bookings, B actually delivers more revenue for the same number of searches. Relying just on look to book figures would not have given you the same view into profitability of the channel.
Below is an example of what an analytics dashboard or chart might look like showing the trend of agent Look to Book against the actual revenues per search value achieved. It clearly shows which agent is delivering the least searches at one end with the most revenue and the most searches with the least revenue at the other end, as well as everything in between.
Look to Book trend line against Revenue per Search
In a world where look to book ratios continue to rise across all devices, consolidators, intermediaries and distributors have to be clear about their value in the travel supply chain and demonstrate how they differentiate. Monitoring their distribution and supplier relationships becomes key in this process. This is where The Trio analytics platform, a robust analytics platform capable of processing millions of search and replies every day becomes an essential tool for doing business in online travel. Not only can it provide the real-time insight into where the requests are coming from, in what quantities and with which value, but can also deliver alerts if thresholds are being broken.
But using a revenue per search approach is just one of the measurement dimensions that can be applied. The Trio analytics platform is highly versatile and comprehensive analytics platform. The revenue per search metric can further be sliced and diced to identify which hotels in which cities/countries are bringing the most revenue in what period of the year by which customer segment and so on. You’ve got the point. Reports and dashboards can be created and customised to let you know what you need to know to manage your business.
Where such granular detail into what works well and what doesn’t work so well is extremely useful is the sales department. Take the example of an average performing distribution channel, lets say an OTA who sends out accommodation requests for premium hotels in prime locations along side beach resort requests to a wholesaler that specialises in cities rather than resorts, or a Bedbank that specialises in beach resorts rather than cities. This degree of specialisation does exist among travel outlets and providers.
There is often a considerable degree of mapping that takes place to try and get the right requests to the right places and get back the right responses. But these mappings can be set up poorly or get out of synch for other reasons. If the sales department can spot the good requests from those that clearly don’t match their portfolio then they have the data to pursue productive conversations with their customers to help them fine tune their searches in keeping with the product range that can be provided. Overnight the average or even poor performer on the performance scale can be transformed into a high performer – simply be looking at the data and taking some of the steps to cut out the unproductive noise.
Overall the Look to Book measurement is an indicator of level of activity but as a stand alone metric it is weak because it is cost-centric rather than revenue-centric. Look to Book on its own cannot tell you the relative profitability of a particular channel. In that sense one channel would be much like another, except when it isn’t. Looking at searches using the revenue lens gives a much more accurate picture of relative value. An even deeper way of comparing channel performance would be to task the finance department to come up with an analysis of what searches are costing the enterprise. The Trio analytics platform can then be used to look at the profitability of each search per channel. Looking at the two numbers together will make visible the loss makers and the profit contributors. This could be called data-driven differentiation of the channels you do business with.
Knowing who is loading your systems with high volume searches but poor bookings empowers you to manage the channel relationship to achieve optimum results for your business not theirs. In some cases this may mean turning away that business by switching the channel off altogether in order to free resources and capacity for others. Making data driven decision to focus on your best customers is a practice few players in the travel industry have mastered, but could make all the difference to their margins.