The US travel industry’s advertising spending in paid digital media will hit $3.35 billion in 2013 and will rise to $4.96 billion by 2017, for a five-year compound annual growth rate (CAGR) of 11.0%, according to a new eMarketer report, “The US Travel Industry 2013: Digital Ad Spending Forecast and Key Trends.” While growth has slowed from a post-recession high of 30.4% in 2011, travel’s share of digital spending relative to other industries will remain stable during the forecast period.
eMarketer estimates that marketers in the travel industry will invest 73% of their paid digital dollars in direct-response efforts this year, an ad tactic primarily intended to drive leads. Brand-focused campaigns will make up the remaining 27%.
Paid ad spending in the travel industry is currently dominated by OTAs—notably Priceline.com, Expedia and Orbitz—which make the largest US and global ad investments. (Privately held Travelocity spends significantly less.) According to estimates from Mark Mahaney, an RBC Capital Markets analyst, that were published in a March 2013 Bloomberg article, Priceline alone—fueled by its Booking.com unit—spent $1.27 billion on internet advertising worldwide in 2012, up from $919.2 million in 2011 and $552.1 million in 2010.
Paid mobile advertising, in particular, is growing quickly. A study from The Search Agency found that between Q1 2012 and Q1 2013, the majority of US travel and leisure paid search clicks came from PC searches, but the proportion from mobile devices had risen fairly steadily.
Mobile may the newest kid on the block but search-engine marketing is the backbone of the travel industry’s digital direct-response efforts, with online and mobile paid search and SEO making up a large segment of many travel advertisers’ budgets.
During the past several years, travel search has undergone significant changes. While OTAs and suppliers have long been mired in intense competition for the same customers and visibility, they are now facing additional challenges as companies such as Google, Yahoo! Bing, Microsoft and others move aggressively into the travel arena. These companies are seeking to control the direction of more travel traffic and become consumers’ search mechanism of choice.
Travel advertisers looking to drive bookings from the middle-to-lower purchase funnel have also found success with “hybrid” search and display performance-based formats—such as retargeting (sometimes known as remarketing) and keyword targeting across display networks.
And while travel industry marketers rely on direct-response ads to drive leads and conversions, a post-recession renaissance in digital brand advertising is also taking place. Display investments are growing across the board, though the mix is slowly evolving away from standard banner units to rich media, video, mobile-social display and hybrid formats that can integrate more tightly with traditional branding workhorses like TV and print.
The full report, “The US Travel Industry 2013: Digital Ad Spending Forecast and Key Trends,” also answers these key questions:
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