Is the connected trip the next big thing?
Recently, in their Q3 2024 financial results, Booking.com reported that the connected trip transactions (a trip that includes booking more than one travel vertical) increased by over 40% year over year in the third quarter and represented a high single digit percentage of the company’s total transactions.
Booking has been working for five years to add air, experiences, car rental and other travel components, which in their view provides a better experience for travelers and better returns for the company.
How promising is the connected trip concept?
First of all, this concept is not new. For 175 years traditional tour operators have offered “connected trips” in the form of tour packages, and in the last 60 years - beach and ski vacations with charter flights.
Booking.com’s main rival - Expedia - has been pushing the so called “connected trip” (a trip that includes booking more than one travel vertical) since 2004. Guess what percentage of their overall bookings fall into the connected trip category? 50%? 40%? 30%? 20%? 15%? Nah!
My estimates, based on Expedia’s SEC filings, this percentage is less than 10%.
There are many reasons for this low adoption rate, in my view the following are the main ones. Online travel consumers:
- are accustomed to the transparency provided by the Internet: they want to see how much is the air, how much is the hotel, price of local activities, etc, before making up their mind what to book,
- book different travel segments at different times ex. air first, then lodging, then local transportation and activities, and
- want to use points or miles from their loyalty memberships for part of the trip payment or for an upgrade, and also want their trip to be acknowledged by the airline or hotel and generate loyalty points or miles, which is not the case with most OTA bookings. Ex. Both Marriott and Hilton now have more than 200 million loyalty members each and have made solid gains in the leisure market.
Fact: less than 10% of Europeans travel abroad on packages and packaged vacations. In the U.S. this percentage is way below 5%.
As mentioned, connected trips are nothing new or revolutionary. There will always be a part of the traveling public who would feel comfortable booking a tour package, a charter flight beach vacation, or an online connected trip. The question is what percentage are these travelers?
