Favorable offers in online travel: myths and reality

In any market, price plays a key role in determining the demand for a product, but not everywhere it is equally important for consumers. Somewhere people are willing to pay much more than the minimum possible (for example, drugs), but somewhere they are stingy to stimulate dumping and price wars. It is hardly surprising to anyone that the travel market falls into the second category.

It is interesting, however, that it was the Internet that made people extremely sensitive to the cost of travel.
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Value of price

In economics, there is such a thing as the elasticity of demand. This characteristic determines how much the demand for a product changes if its price is changed. For example, if bread goes up by 50%, then the demand will remain almost the same. Hence, bread is an inelastic product. But if the airline does this with the cost of a ticket for the flight Moscow-Bangkok, the number of people who want to buy it will be sharply reduced.



The elasticity of travel industry services in general and air tickets in particular has become so high after the online travel market. In the good old days, a person came to an agent of a travel agency or airline and announced his desire to go on a trip. He picked up the option and voiced the price. He could adjust his requests, trying to gain a cheaper option, but in general, in this way the client made a choice between two or three sentences.

But when OTA (online travel agencies) appeared, such as Expedia or Orbitz, which immediately issued at least 50 offers for a search query on airline tickets, the customer’s awareness increased dramatically. A similar shift happened in the hotel industry. According to a study by Singapore University of Management, it was a revolutionary leap in transparency of market interfaces that led to a sharp increase in consumer attention to price. Simply put, people had the opportunity to look for where it is cheaper, and they did not neglect it.


Screenshot Expedia.com

Despite the minimal margins of the business, the price has become paramount to all marketing communications of the travel market. Special offers, last minute trips and discounts filled magazines, banners and TV channels. In a recent interview, the founder of the travel agency “Biblio Globus” noted that the price difference for clients is $ 5-10, and in Russia it is 200 rubles.

This fully applies to the most “advanced” market segment, which became noticeable after online travel flourished - independent travel. According to a HSE study, for 73% of independent travelers, price is a determining factor when choosing a destination. For comparison, reviews are critical only for 65%.

Here, in practice, it is even more difficult for independent travelers than buyers of ready-made tours to find the desired route at the best price.

Calculation difficulties

When buying a tour, at least the hotel and the flight are already “wrapped” in the package. The user simply compares the prices of all available packages during his vacation and selects the right one. And here, of course, there is also room for maneuver: changing the dates, the resort, the country, the requirements for the hotel, but on the whole the choice of the finished product is always simpler than an independent assembly of components. Another thing is that in most countries it is more profitable to go on your own than to buy a tour, and in this case the freedom of planning is much higher.



Airlines, hotels and other travel market players are quite familiar with the desires of independent leisure buyers and announce “special offers”, regulating demand in the low season or when the hotel / lounge is not sufficiently full. For example, they promote -15% on a flight in a certain period of time. Having come across such a proposal, you begin to consider this particular flight as a starting point for planning your trip, although hotels at this time may be more expensive, and you were not originally going to go on vacation at this time. At the same time, it is possible that, given the cost of the hotel, and on more convenient dates, greater savings could be made in the total cost of the trip.

Let's make a reservation that this is possible theoretically, but in practice it is extremely difficult to determine reliably optimal final cost manually. After all, you will have to take into account a huge number of conditions: the cost of tickets and hotels for the whole range of possible dates, the minimum quality requirements of the hotel, only certain airlines that charge you miles, and many, many other things.

For example, if you want to go to Vietnam for 7-10 days in December-February, you need to calculate the cost of flights on each of the possible arrival / departure days + the cost of a night on each of the days to be spent at the hotel. This is 652 searches . Agree, it sounds not very realistic? And if you want to visit more than one city or country? Therefore, in practice, few people resort to such meticulous analysis. It turns out that although for the overwhelming majority the determining factor is price, in practice people act roughly and at random.

Scientific approach

It would seem, what is not a task for a separate service, which would collect all the wishes of the user, analyze all combinations of offers from carriers and hotels in the desired time range and send back the finished trip plan.



However, there are no such services, but to be more precise, they were not. We at IQPlanner want to fix this. And here you may have three questions at once: why did nobody do such a service before, how did IQPlanner do it, and why should we help the user save money?

Let's start in order: what is the problem to sum up all possible combinations of prices for the components of travel on different dates in order to identify the best route? The problem is in the source data. To plan a route you must initially have all possible options. For example, if a user wants to fly to Ho Chi Minh within a month, you should already have at hand data on flights there / back on all days of this month. This means that you need to make 30x30 = 900 requests to the OTA. Each such request takes ~ 10 seconds, which means the user would wait 2.5 hours for an answer to his question. However, he would simply not have waited for him, because not a single OTA partner would have sustained such loads. Needless to say about more serious things: not only the flight, but also accommodation; not one city, but three; not a month, but six months, etc.

How do we want to deal with it? The IQPlanner team has developed its own forecasting module that will allow us to reliably predict the cost of a ticket over long periods of time. This means that the system without any pre-load OTA will be able to identify the period of favorable prices from the entire month, six months or a year, and only then read the requests to the partner to clarify the cheapest option in this period. So IQPlanner can reduce request processing time by determining the optimal route of any complexity as quickly as possible (from a few seconds to a couple of minutes) for a user.

Thus, if OTA made the first breakthrough in consumer awareness, opening up quick access to the entire spectrum of market offers, IQPlanner is focused on the second leap — the user will have a tool to effectively select these offers.

Why do we need it? IQPlanner does not sell tickets, hotels, excursions and other services. We create a comfortable environment for planning trips. In a previous post, we talked about McKinsey's view of the evolution of the online travel market. According to this study, in the coming years, a new group of players will appear on the market on top of suppliers, tour operators and OTA, which in the study is called COST (Convenient Organizer Service for Travel, that is, a convenient service for organizing travel). We view IQPlanner as a COST player.



Our task №1 is to build an optimal plan for the user, and only then to offer on the basis of this plan to book a route with our partners. Therefore, the key to a successful business for us is above all to ensure an effective planning process. If you created a plan, but simply saved it for the future or shared it with others, we have already reached the most important metric.

We recently made IQPlanner open for beta testing. We plan to change the interface, add new partners, and the price forecasting module will work better - it uses machine learning, and the accuracy of the results will increase as the number of users increases. Therefore, we would be grateful if you try IQPlanner in business and let us know about your ideas and impressions on the forum and in the survey .

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