Presented at PhoCusWright Live98

By Philip Wolf
President & CEO, PhoCusWright, Inc.

As you know, we strive at this conference to deliver something different to the online/internet travel industry. Something a cut above the ordinary. Not what you know already. Not just a rehash of the same tired topics by the usual suspects. Instead we try to foster an exchange of ideas that are unique, challenging and ultimately truly actionable.

We advanced that philosophy last year with the focus group presentation that served as the basis of discussion for our mega-roundtable event closing PhoCusWright Live97. This year we push the envelope further with the 1998 phocuswright travel eCommerce survey. We are going to report to you today unique, surprising, meaningful, reliable, representative consumer survey findings on the online travel industry. We are going to deliver market research of extraordinary depth and quality. And then we'll discuss its significance with representatives of the organizations that sponsored this research – Expedia, Internet Travel Network, Preview Travel and Travelocity.

First, a word about research. The world of eCommerce is swimming in survey research, most of it of dubious quality. The democratic nature of the medium lends itself to online surveys of customer wants and needs. Online surveys are quick, easy and inexpensive to produce. But they violate the first law of meaningful survey research, which is this: to be truly representative, the sample must be random. In survey research "random" is not a throwaway word. It's a term of art.

This study is based on a random-sample telephone survey of adults across the continental united states. It was conducted using the same level of methodological rigor that the national television networks, for example, use for their public opinion polls. The results can be projected confidently to represent the views and practices of the subset of the nation's population that we've chosen to study--what we call "wired travelers."

We picked this population as the market segment that represents the best prospects for online travel retailers. And we've defined it simply: adult Americans who've traveled by air at least once in the last year, and who've used the world wide web at least once in the last month.

Some of what we already thought we knew about travel eCommerce is confirmed, but there are many new revelations.

For example, even out of our group of people who travel and go online regularly, only 18% have actually booked a trip online. That means 82% have not. So where is the best place to put you marketing efforts?

According to our findings, most people who do not buy online (75%) have no plans of doing so. But, there is a large group of people who do buy online - so let's concentrate on them. It makes much more sense to go after experienced, frequent Internet users - and those who buy online - than to try to lure in people who are afraid of eCommerce, even though there are more of them.

Once those that are afraid to purchase something online do take the plunge, they become more relevant to you. So, number one, I would concentrate on the 44% of wired travelers who have bought something online at least once, whether it be software, or books, or CDs.

Number 2, take look to book ratios seriously. You (online booking services) do not exist solely to help consumers make their travel decisions, you are here to book their travel. But you are succeeding at doing the former, not the latter. To add insult to injury, our survey finds that 70 percent of those who looked but didn't book did go on to buy that ticket later on, but by another means, most likely via a travel agent or direct with an airline

And thirdly, don't discount the importance of content to sell travel. More wired travelers use the internet (68%) than use travel magazines or guidebooks to research and plan their trips.

Ok, so now for the nitty gritty…

Our first finding, quite simply, is the size of this group that we call "wired travelers". About 31 percent of adults in this country have flown by commercial air carrier in the last year. And about 57 percent of them have accessed the web in the last month. That produces a "wired traveler" population of about 18 percent of all adults, or roughly 35 million Americans.

This select group of just less than one in five adults differs from the broader population in some significant ways. They're more likely to be men. 57 percent of "wired travelers" are men, compared to just 48 percent of the general population.

Wired travelers are better educated. Compared to average Americans they're twice as likely to have earned an undergraduate degree and three times as likely to have done post-graduate work.

Wired travelers have much higher levels of annual household income. They are three times as likely as all Americans to earn more than $75,000 a year and they're also much more likely to hold executive, managerial or professional jobs. It's an upscale group to which moderately upscale products may well appeal, so long as they represent true value.

As you'll note here, older Americans are notably absent among wired travelers. Only 11 percent are older than age 55, which is much less than half of this group's share in the general population. Every other age category is over-represented, and this is a point worth noting. It's not so much that this population is overweighted with the youngest adults as it is underweighted with the oldest. This clearly is not the best place to aim appeals to the mature market. But keep in mind that they're not all 18, either.

What do these people do online? How do they travel? How do they respond to the proposition of buying travel over the Internet? All the answers, of course, are broader and deeper than we have time for here. They're summarized in the conference executive summary, which will be posted on PhoCusWright's web site.

Wired travelers have relatively long experience on the web. A plurality, 48 percent, say they've been using web sites for longer than two years—"long term users." Another third are middle-range users who've been using the web for one to two years. The rest, about 20 percent, have used the web for less than a year.

Along with web experience, wired travelers frequently use the Internet. 50 percent of wired travelers visit web sites just about every day. Forty percent use the web every few days or week and about 11 percent less often than that. And longer-term users are more frequent users

This is very significant for online travel services. Daily use of the web is dramatically higher among those wired travelers who have the most web experience. If new users follow this trail, their frequency of web use will rise sharply as they gain online experience. And as we'll see, the more they use the web, the better the chance they'll buy on the web.

We define buying strictly as selecting an item online and entering a credit card number to pay for it. Among all wired travelers, 44 percent have bought something online at least once. And the key point here is that the very best predictors of online buying are web experience and frequency of web use.

First experience among people who've been online less than a year; only about a third have made an online purchase. But among those who've been online more than two years, more than half have bought something online.

The effect of frequency of web use is even more striking. Among wired travelers who use the web less than weekly, only 23 percent have ever made an online purchase. But among those who use the web just about daily, far more - 56 percent - have bought something online.

Again, these data show that more experienced web users are more frequent users and more frequent users are more apt to be buyers. It's possible that some new users won't follow this pattern. But it seems likely that many will, and that online retailing indeed will blossom as users gain experience.

What are they buying now? Among wired travelers who have made online purchases, three items are far and away the most popular. Forty-four percent of current buyers have bought computers, computer supplies or software online. Forty-two percent have bought books. And forty percent have bought airline tickets or other travel products or services. Other products follow at some distance.

To do the math for you: 44 percent of wired travelers have bought something online. And 40 percent of them have bought a travel product or service online. Compute it out and that means that 18 percent of wired travelers have bought travel online. Eight-two percent have not.

Among buyers you'll recall the top three products were computers, books and travel. The same three products are the leaders in interest among current non-buyers, but in different order. Among wired travelers who have not yet bought anything online - and that's a majority of this population - the no. 1 product they'd be interested in buying online is travel. Good news for this group. Number two is books. Number three computers.

The sobering news is the level of resistance to buying among current non-buyers. Fully 75 percent of current non-buyers say it's unlikely they'll buy anything online any time soon, and 55 percent call it very unlikely.

What's the source of this resistance to buying online? Not surprisingly, 94 percent of non-buyers cite credit card concerns. Nearly as many cite privacy concerns. And nearly as many also say they desire the intermediation of a knowledgeable salesperson.

The issues of privacy and credit card security are nothing new. What's interesting is that the data suggest that other concerns are at least as significant. The bottom line is that most buyers as well as non-buyers report credit card and privacy concerns. The difference is that buyers get over it.

The reasons seem to be that buyers feel they have more control over the process. They're persuaded that there is help available if they need it. They find online buying more convenient. And they think online prices are better. All these factors seem to mitigate their credit card and privacy concerns. By stressing these points, online merchants can win customers.

Our key concern is the point at which travel and web use come together. Some encouraging numbers. A remarkable 80 percent of wired travelers say they've visited web sites that specialize in travel information and reservations. Among the rest, six in 10 say they'd be interested in doing so.

Among leisure travelers, nearly seven in 10 use the web to research and plan their personal travel. Using the web is the second most-prevalent method of travel research in this group, led only by advice from friends. Next is use of a travel agent. And a bit farther down we find that nearly half don't only search the web but return to one or more favorite travel-related web sites. Advertisers take note: that is more people, in this population of 35 million, than use travel magazines to research and plan their trips.

Now that's research and planning. Obviously a lot fewer people actually book or buy their tickets online. 26 percent of wired travelers say they usually use an online travel site to check prices and availability, and fewer still, just 10 percent, say they usually buy their airline tickets for personal travel online.

This hurts all the more because a lot of people, regardless of their usual booking habits, are looking online. Fully 57 percent of wired travelers say they have used travel booking sites to check into ticket prices and availability, but not gone ahead and bought the tickets then and there.

These are the infamous lookers, not bookers. There are a lot of them. And to add insult to injury our survey finds that 70 percent of those who looked but didn't book did go on to buy that ticket later on. Most of them either bought it from a travel agent or directly from the airline.

Ouch.

What is their problem? This chart helps explain. Look at the number one and number three reasons - they were unsure whether they'd take the trip, and they were unsure when they'd take the trip. A desire to have a travel agent or the airline double check the booking is lower on the list.

This suggests that for many of these "lookers-not-bookers" confidence in online booking is not the problem. It's more that for them checking fares and availability online is a pre-commitment activity. They're only shopping. They're not buying because they're not sure yet whether or when they want to go. By they time they've decided, they're no longer online using the site, and presumably they find it simpler or more comfortable at that point to call a travel agent or the airline.

There may be ways to resolve this. Promoting the 24-hour hold may help. Maybe an automatic e-mail reminder asking if they're ready to book, with a link back to the site if so. The point is that when they use the sites most "lookers-not-bookers" are still researching, not yet buying. Turning them into buyers will require some creative intervention or attractive deal-making.

As I mentioned earlier 82 percent of wired travelers have never bought any travel product or service online. What are the concerns they cite? Number one again credit card security. By the way this concern is considerably higher among women than among men. Next is having a travel agent. And there's a fear of missing the best available price.

Fortunately the biggest of these may be self-correcting. Credit card concerns are much lower among people who have made online purchases. Get them to try it and this concern subsides.

How to draw them in? We asked wired travelers what it would take to raise their interest in buying travel online. Look at the results. Save them money. Give them better choices than they can get otherwise. Ease the credit card worries. But number one, especially in intensity; save them money. That's the payback the most people want if they're going to buy travel online.

We asked also about site features and you'll note that the features that gain the most interest are ones that most sites already offer. An easy way to check lowest fares. Easy-to-use airline booking tool. 24-hour grace period. Live operators to handle questions or problems. These all cut to ease of use and cost savings. The bells and whistles are much lower on the list.

Those are current non-buyers. When we look at online travel buyers what do we see? A strong sense of confidence--confidence that they can execute the booking without making a mistake, and above all confidence that they can find the best available price. They don't demand additional savings as much as they do demand to know they're getting the best deal available.

A key question is whether current non-buyers can be satisfied with the best available price, or if they really will demand a deal that's better than they can get elsewhere, not just "as-good-as." It may be that current non-buyers want in effect a cash payback to buy off their credit card worries. That could be a good investment because once they've bought online, those credit card worries subside as a barrier to eCommerce.

Indeed this study shows that current online travel buyers, though still relatively scarce, are almost unanimously satisfied with the experience. Among people who've taken the plunge, 99 percent say they were satisfied with the experience of buying travel online--a level of unanimity that's rare on any subject. And 73 percent were "very satisfied" buying travel online, another unusually strong rating.

In summary, it's clear that there's plenty of work still to be done to draw consumers to the proposition of buying travel online. This study shows that there is great interest in this proposition among consumers. It suggests an almost natural growth in online booking as the online population matures. It defines consumer concerns and suggests a variety of approaches that might overcome those barriers. And it shows very clearly that once they do try it--they like it.