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of travel sites
Expedia and Travelocity, with Orbitz coming up
By Marty Beard
The dot.com meltdown may have charred much of the internet landscape, but there's one sector that not only survives but is experiencing burgeoning growth.
It's online travel, led by nose-to-nose rivals Travelocity and Microsoft Expedia, with Orbitz, the partnership between the Big Five airlines, coming up rapidly.
So successful have the leading online travel sites become that Forrester Research believes they are poised to become market-makers, setting the agenda for off-line travel and partnering up with or even buying up some of their leading off-line rivals.
"The web market-makers will extend their presence to the off-line world, and the off-line agencies will enjoy the improved clout," a recent Forrester report concludes.
Travelocity.com and Expedia.com already rank among the 10 largest travel agencies, and the struggle between the two leaders is intense indeed.
"For more than five years, Travelocity.com and Expedia.com have fought a spirited battle to dominate web travel, much as Coke and Pepsi do in soft drinks," the Forrester report says.
These days, Expedia is the No. 1 online travel agency, having eclipsed Travelocity by logging 12 percent more bookings in 2001. Travelocity retained its lead in total dollars booked, at $3.1 billion for the year, versus $2.9 billion for Expedia
In January, 10.2 million unique visitors logged onto Expedia, versus 9.4 million at Travelocity.
Forrester credits several factors in Expedia's edging ahead.
Key was Expedia's ability to retain more business in the wake of the Sept. 11 hijackings, its bookings dropping just 2.6 percent versus a 20 percent dive for Travelocity.
Expedia has also achieved greater marketing efficiencies, which have translated into lower acquisition costs per booking: $10 as compared to $13.35 for Travelocity.
In the meantime, however, as these two jockey, a new contender has emerged that, while still much smaller, makes both their positions seem suddenly less secure.
Orbitz.com, launched just last June, has already booked $1 billion in gross sales, much of it through the unique leverage of its marketing partnerships with the five major airlines that are its backers.
It has also emerged as the top web advertiser for the category, in December accounting for 44 percent of impressions, versus 13 percent for Travelocity, the No. 2 advertiser that month.
All three players are uniquely positioned to take advantage of the growth of online travel bookings, and Forrester predicts that growth will be substantial, projecting that the number of online leisure travel bookings will increase by 37 percent between now and 2006.
That growth is certainly understandable, considering the advantage to consumers of logging onto the internet to hunt for the cheapest fares.
Yet Forrester doesn’t predict that the internet will make off-line travel agencies obsolete.
Rather, the big online brands like Expedia and Travelocity will make inroads into the off-line world through partnerships with old-fashioned travel agencies, hotels and transportation companies.
Online agencies, the study predicts, will become so dominant that they will be able to buy up leading off-line agencies.
"The web agency market-makers will extend their clout and marketing position by snapping up offline agencies on the cheap--but only in the top markets," says the report.
Candidates for acquisition, according to Forrester, include American Express and Carlson Travel Group.
Market-makers will also be able to leverage their size to advantage in dealing with the airlines, car rental companies and other travel suppliers.
"It used to be that agencies had to take what suppliers dished out. As market makers, the web agencies, not the suppliers, will choose suppliers to work with and then set leisure travel pricing."
February 22, 2002 © 2002 Media Life
-Marty Beard is a staff writer for Media Life.
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