Does the auction model work for travel?

Bit of discussion recently regarding eBay moving to form a travel marketplace.

This maybe because eBay’s management have determined that online auctions have reached the limit of their natural growth. (or so says Matt Rogers - in a very interesting post published by Found|Read)

I haven’t really thought too much about the impact of running an auction model on travel product revenue management - but the following would surely have to be solved before the auction model actually works for travel.

• By placing a specific product (on a specific date) on an auction website - this inventory then is tied to that auction for the period of the auction (one week, two weeks etc). Currently, if you have 5 “spaces” available on a particular flight or tour - you could, without allocation, sell these through multiple channels - like your website, an agent, a partner etc. With the auction model - it would be like selling on allocation - but without the guarantee that the allocation will be underwritten by the auction house. You will end up with inventory that is neither guaranteed sold - nor available for sale via other channels.
• A customer, unless they book immediately, may have to wait until they are the confirmed “auction winner”. This delay may not be what the customer wants - especially if there are other companies who can offer a similar product, at a similar price, but with instant gratification
• Before a customer places a bid on a product - they will probably wish to get a “feel” for the market value of the product being bidded on. This may create a desire to visit more competitor websites (in order to determine market rate) than they currently do……
• In the UK there is a problem of over supply of travel product - rather than over demand - I am not sure how the auction model works to get good prices for travel companies where supply is not the issue.
• A specific product will have many many listings - all for different date combinations…. therefore customer demand for any particular date will be tricky to drive demand for - and also it will make navigation of available auctions tricky to design as there will be many very similar products on the auction listings….
• Does the travel industry really want to keep reinforcing the idea that customers must always buy on price in the Internet age?

So no - not sure the auction model works for travel very well…. but may do for specific events or one off trips.

If you want to be notified next time something is published sign up for email alerts or subscribe to the RSS feed. Thank you for reading!