Anybody searching on a cashback website such as Quidco or TopCashback.co.uk for travel suppliers will come across some of the biggest names in the UK travel industry, including Expedia, Thomson, British Airways and Thomas Cook.
For many in the industry the sites, which offer consumers a cash payment in return for using the sites, are little more than an abstract issue as opposed to a real threat, although this might not last for much longer.
Quidco has more than 4,300 retailers offering cashback in the UK and more than five million members, while TopCashback, which first started operating in 2005, now has more than four million members who received £25 million last year.
Travel companies are among the most prominent brands featured on these websites: a quick glance at TopCashback’s daily deals last week showed offers such as 12.6% cashback from Hotels.com, 5.25% from Royal Caribbean and 14.7% from car rental firm Europcar.
These eye-catching deals are often tactical, short-term offers as travel firms look for an alternative to traditional discounting. Many operators and online travel agencies add that having a presence on cashback sites is often more important for branding and marketing purposes than driving a huge volume of sales.
There are signs that more travel companies are considering the cashback market with Celebrity Cruises becoming the latest big name to start trialling the use of this type of affiliate site.
Toby Shaw, Celebrity’s director of marketing for the UK and Ireland, said: “Ensuring that we are available to buy in the channels that holidaymakers trust and are familiar with is part of our distribution strategy. This is a new activity for us and we will continue to monitor its performance over the coming months.”
Olympic Holidays also began using cashback sites last year - mainly because its main competitors already had a presence on them.
Commercial director Photis Lambrianides said: “It’s not really generated much business so far and we see it as more of a branding exercise than anything else. We don’t think it will be a major distribution channel for sales.
“We noticed others were doing it such as Thomson and First Choice, and their banners were coming up on these sites, so we thought we should be there too.
“The advantage is that it is very cheap and costs a lot less than other advertising. Some of these sites have a huge consumer following and it’s good to have our name up there. But for booking, I think a lot of people will still go to their travel agents.”
One area of travel where cashback sites are having more of an impact is the online sector as part of the myriad affiliate sites, which also include price comparison and “meta” search websites, where holiday companies pay a fee or commission for every click-through booking.
Victoria McQuillan, head of partnerships and product at OTA On the Beach, said: “You should be under no illusions that people are becoming more savvy and they know that there is a deal to be found online. We have been using the cashback sites for several years as part of our affiliated programme.”
But even though the assumption might be that cashback sites are just for consumers wanting cheap deals, McQuillan said that these clients were likely to spend more on their holiday than through other online channels, although she wouldn’t say by how much.
“We find that by offering the incentive of cashback, then people are tending to spend more on their holidays,” adds McQuillan. “But obviously we have to pay the cashback and that adds to our costs. The challenge is to make sure that this channel is cost-effective.
“You have to be fully aware of what your competitors are doing - if they are selling a similar product, you have to look at what cashback they are offering.”
Like any area of online travel, there is intense competition, which means that the level of discounts for different travel products tends to settle around certain percentage levels, except for short-term discounts and promotional campaigns.
McQuillan said that the average cashback paid for holidays was around 3% but that this was higher for “lower-value” products, such as airport parking, insurance and add-ons.
While the sites have become well established, they seem to have had little impact on traditional travel agents, with Advantage Travel Partnership’s head of commercial John Sullivan saying he has heard little member feedback on them. “These sites could be aimed at an alternative type of customer because cashback seems to work like a back-handed discount and is a bit like a loyalty scheme,” he told TTG.
“Our members’ customers are looking for the convenience and service offered by an agency. These customers are often looking for more complex itineraries, so it’s not the same kind of business. Cashback sites are not straightforward.”
But despite this view, Sullivan warned that it was important to “be aware of things going on under the surface - sometimes these things suddenly catch momentum and take off like a train”.
Certainly, the companies behind the cashback sites have got the travel sector firmly in their sights - and are hungry for more.
Graham Jenner, head of partnerships at TopCashback, said in the first quarter of 2015, the site had seen £80 million worth of sales generated via travel in the UK with members earning £4 million.
He believes travel sales will further rise in the summer, with July predicted to generate 110,000 transactions alone and the sector, which is a “key area of the site for us” will only see more growth as consumers increasingly shop around.
Jenner also argued suppliers will increasingly use the sites as they work more closely together, adding: “A good example is using the data we have to allow effective customer targeting.
“A hotel provider might email a database of members who have just purchased a flight with a higher cashback rate. We have seen hitting a relevant audience with a good offer normally results in additional sales and revenue for partners.”
Quidco chief marketing officer Nic Wenn also believes the travel sector offers good growth opportunities, after the site saw a £47 million increase in travel spend from 2013 to 2014.
He argued the sites will also be driven by the fact they offer operators the chance to seize market share; its loyalty programme can be used to reward customers for multiple purchases while consumers enjoy the bigger rewards that more expensive purchases such as holidays give them.
Wenn said: “About 28% of all customers use a price comparison service before booking online and this will continue to increase as customers become more price sensitive.
“For that reason, in addition to developing more services on Quidco, we have invested in a new venture called ‘EarnAway’, an e-commerce platform focused on the travel market.
“In a space [the hotel meta search market] that is delivering little value to the consumer due to price parity agreements, the key objective of the product will be to unlock the maximum value from their hotel booking using cashback.”
With such statements of intent coming from both companies, travel businesses should ensure they understand both the potential threat and opportunity they represent.