Online travel companies projected to hike marketing budget

Online travel companies will rely more on marketing to boost growth in the near future, according to Merrill Lynch.

According to a media report, Merrill Lynch noted that Cendant plans to boost marketing for its online travel segment by 30-40 percent year-over-year this quarter as the company works on differentiating its brand from other online travel agents.

“Competitive margin pressures seem to be building,” Merrill analyst Justin Post reportedly wrote. “And we are somewhat concerned that industry leaders are relying on marketing to drive growth.”

The analyst said Expedia is likely to join Cendant in raising its marketing spending. “Price is not a differentiator in online travel,” said the analyst, adding that service initiatives help distinguish providers in the eyes of users. The analyst noted that Expedia offers consumers the “Expedia Promise” and Travelocity is promoting its “Customer Bill of Rights”.

Recently, Merrill Lynch analyst Justin Post maintained a “neutral” outlook on the online travel industry after February traffic data showed supplier-direct travel sites taking share from online travel agency sites.

“Traffic data for February [indicate] that travel suppliers continue to capture increasing user attention, which could continue to pressure online travel industry growth,” wrote the analyst in a recent research note.