Summer 2011

Be prepared for a challenging and value driven lates market Matthaeus Kala, Industry Analyst, mkala@google.com Insight
Travel queries and clicks continue to grow in 2011; however, showed volatility due to the extended Easter holiday period

Facts
Year-on-year Travel queries grew 24% year to date, which is a similar growth to the previous year. Clicks on Travel ads grew by 12% year to date. Following a 13% drop Travel over two weeks, queries grew +27% since the 2011 Easter break. The British public faces lower disposable income than in previous years. Third party research anticipates a 900 spending shortfall for the average UK holiday maker. Political unrest in North Africa and the Middle East has affected core summer holiday destinations. The outstanding good weather around the extended Easter holiday period has caused a significant query shortfall earlier this year. Similar to 2009, the summer 2011 is likely to show a two peak seasonality occurring around end of term and the August bank holiday. Based on historic data travel queries are expected to rise by around 12% before these dates. Generic (non-brand) keywords tend to peak before the booking season, brand related keywords become more relevant after customers have made their research and are ready to book their holidays. Query volumes change throughout the year depending on the value proposition of keywords such as cheap holidays or last minute holidays.

Opportunities/ Actions/ Conclusions

Leverage opportunity throughout the purchase funnel and evaluate attribution. Understand the dynamics and changing volumes of keywords and product demand.

2011 points to a challenging lates market with consumer behaviour pressurizing margin exacerbated by economic and political uncertainty as well as unusually good weather in the UK

Review budgets and set towards demand curve by destination and ensure full product coverage. Adjust CPA targets to prevent discounts on distressed inventory. Anticipate longer research periods and re-consider last click attribution models. Utilize multi-channel online campaigns to capture your target audience throughout the purchase funnel. Clearly articulate the value proposition in your ad creative. Prepare your accounts to capture high traffic volumes around the summer peak seasons. Seasonal campaigns should be targeted to capture generic pre-School summer holiday and generic bank holiday related queries. Try to apply strategic budget allocations for certain keyword types over time or open budget caps to capture available demand. Make sure to cover an extensive keyword universe as a travellers purchase journey becomes more complex. Reassess match type strategies to increase the chance of your ads appearing against all relevant queries during the summer months. Optimize your website for mobile use to engage your customer and drive conversions. Create separate campaigns to cover mobile queries. If you dont have a mobile site, think about creating campaigns optimized for tablets.

Expect high query volumes before bank holidays and school holidays

Use the right query composition to guide your customer through the purchase funnel

Mobile is the highest growth channel for travel searches

Year-to-date we have seen mobile travel queries increase by an impressive 133% and clicks by 300%, 2011 vs. 2010. Mobile accounts for 12% of total travel search traffic in the UK.

Summer 2011
Googles UK Travel Summer 2011 whitepaper looks at the challenges and opportunities of the months ahead. It aims to provide UKs travel advertisers with useful insights in preparation for the upcoming summer booking season. Even though travel queries have grown around 24% and clicks by around 12% year-to-date, parts of the industry were severely hit by the most recent political unrest in Northern Africa and the Middle East as well as the an extended Easter period featuring one of the best spells of sunny weather the UK has seen since recordings began. With this context in mind we have analyzed a number of factors that could shape summer query patterns and support the following hypothesis for summer 2011: Summer 2011 will be a stronger lates market than in previous years and will be heavily influenced by value as well as political stability and consumer protection

Please find below our research and analysis which are the basis for these hypothesis.

General background - political unrest, less disposable income and the good weather slowed holiday bookings Political unrest in oil producing countries and holiday destinations The UK travel industry was badly affected by the early events of 2011. The political unrest in oil-producing countries in the Middle East and North Africa caused an unexpected hike in oil prices to around USD 110 (approximately GBP 68) reflecting a 22% year to date growth. It can be assumed that increases in this very important travel cost will erode margins and will push discounting into the area of profits. Popular holiday destinations such as Egypt and Tunisia suffered from reduced demand due to the safety concerns of international travellers. As a consequence of these developments major airlines suspended routes and leading holiday package suppliers issued profit warnings. The British public faces lower disposable income and a strong Euro In addition to this most recent disruption the British media reported a number of studies questioning the financial strength and booking behaviour of British holidaymakers. According to research studies 1 2 undertaken by Experian and the Centre for Economics and Business Research , UK households are facing the lowest peacetime disposable income since 1921. Soaring inflation based on rising food, clothing and energy prices, as well as low pay rises has left the average British family with around 900 less to spend this year than they had in 2009. It is suggested that this will directly impact a UK familys 3 summer holiday budget for 2011. Similar research was carried out in March 2011 by YouGov . The research suggests that 33% of travellers who are yet to book their 2011 summer holiday will aim to spend less than in 2010, with 44% looking to 5 spend a similar amount.
4

1 2 3 4 5

2,000 middle-class respondents who took part in a survey http://www.telegraph.co.uk/finance/economics/8441607/UK-disposable-income-falls-to-lowest-since-1921.html http://www.e-tid.com/News-Home/Holidays-scrapped-as-middle-Britain-feels-the-pinc.aspx A research project on behalf of Thomas Cook UK & Ireland, as part of YouGov's online Omnibus survey of over 2,000 adults http://www.e-tid.com/News-Home/Three-out-of-ten-%E2%80%98still-to-book%E2%80%99.aspx

This relatively weak economic purchase power encounters a currently strong Euro/Pound exchange rate making the classic European holiday destinations less affordable for UK travellers. Country specific holiday costs, as highlighted in the UK post office report, become more and more important for price sensitive travellers. The weather will set the scene Even though the latest good weather trend, which continued since mid April 2011, was welcomed by the British public, it promises to become a serious challenge to the UK travel industry for the upcoming summer. Despite the overall year on year travel queries growth, periods of good weather have not only a negative impact on query volumes, but also on destination preference. Our destination analysis over the most recent weeks has shown query increase for domestic destinations. The good weather has made the UK a more desirable vacation alternative. However, such shifts can quickly be reversed by periods of bad weather and remind holidaymakers that classic European beach destinations will promise them a greater guarantee of sunshine! Value and engagement will be king to win the lates market customer through the research and purchase phase The above mentioned Experian study highlighted that 68% of all respondents will demand better customer service and value for their money spent. Nigel Wilson, MD of Experian Marketing Information Services, summarized that the companys research made clear that Britains modern consumers will be more demanding than ever before and will expect more for their hard earned money. According to Wilson, the winning brands will be the ones which best understand customers and how to engage with them both 6 in store and online. Googles customer journey study 2010 , which was conducted by Nielsen, supports Wilsons statement about research habits of travel customers. The study underlines the fact that a customers booking process has become more complex, with the average travel customer spending over 63 days doing research, comprising of 60 site visits over 27 web sessions before they made their first purchase. Thus, for an online advertiser it is crucial to interact with customers along the entire path of the customer journey. Ultimately the success of an online advertising strategy has to be measured in a different context since models based on last-click-attribution, the last click before a customers purchase, wont be able to measure the actual impact of an advertising campaign.
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Summary insight from our Industry Heads

Be ready to offer good value for your customers hard earned money. With a greater likelihood for consumers to focus on domestic holidays, foreign travellers will look for good value. Customers will be willing to spend but their expectations must be met. Be where the users are. Think outside the box and interact with your customers where they actually spend their time. Think Content Networks, YouTube, Mobile and Social Networks as well as desktop search. Research to book timescales may reduce and competition intensifies. Prepare to react quickly to positive uplifts in conversions and look to attribution models for signals of positive upturns in consumer behaviour. Be prepared to reach your customers at all times. Capture the users attention throughout the entire research cycle dont focus your strategy on two or three weeks of the booking season.

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http://www.e-tid.com//News-Home/Holidays-scrapped-as-middle-Britain-feels-the-pinc.aspx The research study analyzed online consumer trends in Q1 2010

General market dynamics 2011

Despite the challenging market, most recent query patterns draw a more positive picture showing a healthy uplift in travel queries following this years extended Easter holiday period. This development suggests a rising lates market of consumers who are due to book their holidays and searching more to find the best value. In general, travel queries have continued to grow strongly in 2011 - on average travel queries grew by 24% year-to-date. This suggests an extension of the path to purchase and also higher adoption in online buying behaviour by the British public.
Q4

Q1

+24% YoY

Q2

Q3

Indexed query volumes

2008 2009 Extended Easter peak 2010 2011

11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

Weeks
Figure 1: Indexed travel query volumes January 2008 to date; Source: Google internal data

The latest week on week data shows that travel query volumes have strongly recovered, +27%, from a 13% decline throughout the extended Easter holiday period. As already suggest in our spring whitepaper, query volumes saw a peak before this Easter/ bank holiday period due to travellers taking extended holidays. The strong recovery of travel queries suggests that the Easter holiday break has shifted query volumes to a later point in time. As already mentioned in the previous section, a significant number of UK families have not booked their holidays yet but are likely to do so before school holidays start on 25 July. The preEaster sale is a strong indicator of consumers booking closer to date of departure or a lates driven market.

Upcoming summer seasonality 2011

Different to 2010, demand for 2011 summer bookings will not be delayed by the success (or otherwise!) of the English football team. It is likely that customers will not book before or around their traditional booking periods but will wait until they are confident they have found the right offer for their family. We also expect the weather over the coming months to be a key factor for the upcoming late booking season. One or two consecutive weeks of bad weather can be enough to remind the British public to take their families abroad for their well deserved summer holidays.
Indexed 1.80 1.60 January 2010 Summer 2010 Indexed Forecast

Summer 2011

+24% YoY growth

Indexed query volumes

1.40 1.20 1.00 Easter break 0.80 0.60 0.40 0.20 January 2011

Figure 2: Indexed travel query volumes vs. forecasted travel query volumes July 2009 to date. Disclaimer: This isnotaGoogleprojectionoffutureperformance; itissimplyanextrapolationofhistoricaltrends. Source: historical data based on Google internal data.

The model in figure 2 compiles a forecast based on historical trends and suggests a ~24% growth YoY in queries for this year's summer peak weeks. Recommendations Align budgets to increasing demand and be guided by positive upturns in traffic as well as conversions. Asset owners should balance discounting, by being flexible in CPA assessment prior to the periods where distressed stock demands discounting. Equally aggregators should have access to keen pricing and should promote accordingly. Anticipate longer research periods and re-consider last click attribution models. Utilize multi-channel online campaigns to capture your target audience throughout the purchase funnel. Clearly articulate the value proposition in your ad creative.

Mobile continues to be the highest growth channel for travel

Travel queries on mobile devices have continued to gain popularity showing a 133% year on year growth, with clicks rising by around 300%. Currently mobile queries account for almost 12% of all travel related queries in the UK. However, our data shows that mobile CPCs have not followed this query growth averaging around 50% of the desktop average. This offers an ideal opportunity for advertisers to test their mobile campaigns without too much risk or cost. Please see the chart below summarizing the mobile opportunity in the UK travel market.
% Mobile queries 100% % Desktop queries Mobile vs Desktop % CPC discount Indexed Travel queries 2.00 1.80 1.60 1.40

% Market share of travel queries/ % CPC discount

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 28/12/2009 11/01/2010 25/01/2010 08/02/2010 22/02/2010 08/03/2010 22/03/2010 05/04/2010 19/04/2010 03/05/2010 17/05/2010 31/05/2010 14/06/2010 28/06/2010 12/07/2010 26/07/2010 09/08/2010 23/08/2010 06/09/2010 20/09/2010 04/10/2010 18/10/2010 01/11/2010 15/11/2010 29/11/2010 13/12/2010 27/12/2010 10/01/2011 24/01/2011 07/02/2011 21/02/2011 07/03/2011 21/03/2011 04/04/2011 18/04/2011 02/05/2011 16/05/2011

50% discount on Mobile CPCs

1.20 1.00 0.80 0.60

12% 5%

0.40 0.20 -

Figure 3: Indexed travel query volumes, % share Mobile vs Desktop travel queries and Mobile vs. Desktop % CPC discount, January 2010 to date; Source: Google internal data

In a lates booking market it can be assumed that mobile devices may play a larger role when the research to book phase shortens. According to our easyJet study, 38 per cent of bookings on mobiles were for flights that departed within 10 days, while with desktops its about 13 per cent. The above outlined trends can be expected to continue throughout out the upcoming summer holiday season. UK travellers will increasingly utilize their mobile and tablet devices to research, book and share their summer holidays. Recommendations Create separate campaigns to cover mobile queries Build a mobile optimized site to engage your customer in the best possible way. If you dont have a mobile site, target tablet devices as desktop sites render well on those. Leverage lower CPCs and position your brand on top of mobile search results as they have higher user engagement; average CTRs are 11.5% higher than on desktop. Consider your mobile strategy as part of your customers purchase funnel. We know that mobile search is incremental and complimentary to desktop search. Desktop CPA targets should be relaxed for your mobile strategy.

Indexed travel queries

Individual travel product types - what happens around the peaks? As mentioned in the previous section, key dates advertisers should focus on this summer will be the run up to school holidays and the August bank holiday. Figure 3 below shows the trends as they occurred in 2010.
Hotels 125 School end 120 Flights CarHire Packages Cruise

Indexed query growth

115 110 105 100 95 90 85 80

Average increase +12%

Queries start to peak one month before school holidays start

Average increase +13%

Figure 4: Indexed query growth May 2010 to September 2010. Travel query volumes split by category types: Hotels, Flights, Car Hire, Packages Cruise; Source: Google internal data

Similar to 2009 data we presented in last years summer white paper we saw a two peak seasonality during the core summer months of 2010. The first peak occurred one month before school ends in late July, showing an average travel query growth of around +12%, package holiday related queries +24%. The second peak started to appear one week before the August bank holiday. It peaked two weeks later with an average query growth of +13% over the respective period. Traditionally this second peak is more focused on short haul city breaks. Key dates to keep in mind before the upcoming summer 25 July - 31 August 2011 School summer holiday 1 August 2011 Summer bank holiday (Scotland, Ireland) 29 August 2011 Summer bank holiday (England, Wales, North Ireland)

Please note that school holiday dates may vary depending on school types and regional legislation.

School start/ August bank holiday

Query start to peak during the weeks before and after school start/ the August bank holiday

Recommendations Review or micromanage campaign budgets to exploit rising query volumes. Campaign budgets should be driven by conversion data but ensure that you do not miss out on the increased search volume across the summer season. Prepare seasonal campaigns to capture generic pre-School summer, such as family holiday, and value related queries, such as all inclusive family holiday. Keyword examples could include: All inclusive family breaks, family friendly hotels, and holidays for children. Prepare seasonal campaigns to capture generic bank holiday related queries. Keyword examples could include: Short breaks, weekend mini-breaks, bank holiday deals.

Query composition has remained similar to previous years Brand vs. Generic
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Travel queries can be separated into Brand and Generic (non-brand) queries. Our internal data suggest that these two groups are distributed in a: 65% brand and 35% generic ratios. Whereas for the majority of the year this ratio remains constant, the trend changes in the lead up to peaks in the market. For the travel industry these peaks usually occur in late December to January and the summer months, June, July and August.
Indexed Travel Queries 80%
Summer 2009 January 2010 January 2011 Summer 2010

Brand Queries

Generic Queries

3.00

70%

2.50 Indexed query volumes

% share of query type

60%

2.00
50%

40%

1.50

30%

1.00
20%

0.50
10%

0%

Figure 5: Indexed travel query volumes April 2009 to 2 May 2011. Travel query volumes split by query types: brand and generic;
Source: Google internal data

Historical data shows that the percentage share of brand queries decreases during the months before travel queries start to peak. This is due to a volume increase of generic queries driven by the pre-booking research period. Once travel queries start to grow, brand queries do the same. The exact opposite can be observed for generic queries. These query types are particular popular before queries start to peak. Thus, we can summarize: Generic queries tend to peak before the market peaks. This period can be described as the research period which starts around two month before the booking season. During the main booking peaks, brand queries regain popularity as customers have identified which company they want to book with.

Please note: This analysis has been based on a static set of 10,000 travel related keyword sets. These sets comprise of brand and non-brand keywords. 9 Brand represents commercial brand queries such as Thomas Cook or Virgin Holidays. Generic queries related to non-brand queries such as summer holidays 2011 or flights to spain

Please find a summary of these trends in the table below: Brand Down Up Generic Up Down

Pre-peak season Peak season

For the upcoming summer month we shall expect a similar picture. May and early June are likely to see, and are already showing signs of, an increase in generic queries. As from mid to the end of June travel queries are likely to rise in line with an increase in bookings and also show a growth of brand queries. The data suggests that compared to previous years the popularity of queries related to generic terms has increased, whereas queries related to brand terms have slightly decreased. The above query analysis re-iterates the complexity of a consumers path to purchase. Consumers tend to start their research journey with broad generic query terms, such as holiday in the sun. Once they have chosen their desired destination, their research becomes a step more granular, such as Hotels turkey. This dynamic process continues until consumers have met their objectives and selected a brand which offers product to fulfil their requirements. Recommendations Online advertisers should build brand awareness during the whole search funnel of a consumer, driving brand search increase closer to point of purchase. Build out your advertising campaigns to engage your customer on every stage of his research and purchase journey. Brand awareness should be developed as early as possible in the research funnel. Value attribution models should recognize value of generic terms, leading to increased brand demand. Design your ad creative in accordance to the customer journey. Use display campaigns to capture the customers attention early in the research funnel and target customers based on learned preferences. Enable cookies to track a customers journey over a 30+ days period.

Seasonality of keyword types A similar picture to the query growth of brand and generic terms can also be seen on a more granular level. The table below summarizes our observations for query sets relating to Cheap/Budget, Last Minute/Late, Luxury and All inclusive. Please find a summary of these trends in the table below:
Indexed Travel Queries
Summer 2009

Cheap/ Budget
January 2010

Last Minute/ Late

Summer 2010

Luxury
January 2011

All inclusive 3.50

60.00%

3.00

% share of query type

2.50 40.00% 2.00

-15%
30.00% 1.50

20.00%

1.00

10.00%

0.50

0.00%

Figure 6: Indexed travel query volumes April 2009 to 2 May 2011. Travel query volumes split by query types: cheap/budget, late/last minute, luxury and all inclusive; Source: Google internal data

During summer 2010, queries related to Last Minute/ Late grew within the period by around 21%, whereas queries related to Cheap/Budget fell by around 15%. Queries related to Luxury grew in query share by around 15%, queries related to All inclusive fell by 30% but saw a slight peak towards the end of the summer. The data suggests that a brands value proposition, not necessarily price, will become an increasingly important factor within the customer purchase journey. Year on year summer 2009 vs. 2010 queries related to Last minute/ Late grew by around 13%, whereas queries related to Cheap/Budget fell by around 11%. Queries related to All inclusive grew by around 16% and for queries related to Luxury remained constant. In the run-up to this summer we expect a similar picture for queries related to Cheap/Budget. All inclusive, and Luxury already show a stronger growth compared to queries related to Last Minute/Late. The data suggests that compared to previous years the popularity of queries related to terms such as Cheap/Budget have decreased, whereas queries related to Luxury have increased.

27/04/2009 25/05/2009 22/06/2009 20/07/2009 17/08/2009 14/09/2009 12/10/2009 09/11/2009 07/12/2009 04/01/2010 01/02/2010 01/03/2010 29/03/2010 26/04/2010 24/05/2010 21/06/2010 19/07/2010 16/08/2010 13/09/2010 11/10/2010 08/11/2010 06/12/2010 03/01/2011 31/01/2011 28/02/2011 28/03/2011 25/04/2011

Indexed query volumes

50.00%

+21%

Pre-peak season Peak season

Cheap/Budget Down Up

Last Minute/ Late Up Down

Luxury Down Up (peak later than other queries)

All inclusive Down Up

Please note that the observations stated above relate to the travel industry as a whole, trends might be different for individual sub-categories. Recommendations Try to apply strategic budget allocations for certain keyword types over time, or open budget caps to capture available demand. Make sure you cover an extensive keyword universe as a travellers purchase journey becomes more complex. Generic keywords will become more and more important as customers research period becomes longer and longer. Reassess your match type strategies to increase the chance of your ads appearing against all relevant queries during the summer month. Clearly articulate the value preposition in your ad creative it is not necessary the low cost which will convince your customer.