The Web Pays: New Market Recasts Industries - Page 4

Flying High

By Teri Robinson, Special to Interactive Week

Another sector thats really taking off is the online travel market. A whopping "$12.2 billion of consumer leisure travel will be bought online [this year], while $4.7 billion in business travel" will be purchased via the Web, says Henry Harteveldt, an analyst at Forrester. "The Internet will represent 7 [percent] to 8 percent of the total" travel market. And according to an online travel study by Gomez Advisors in Lincoln, Mass., "Thirty million people have bought travel online," says analyst David Provost, with another 18 million new online travelers expected in the next year.

But in the midst of all this fervor and opportunity, some pioneers and past moneymakers are seeing their stars fade or even disappear altogether. is a perfect example. While travelers initially flocked to the discount supersite seeking the lowest-priced tickets, unfathomable restrictions and poor customer service have conspired to erode the companys stronghold. " is weak. It has lost its edge," Harteveldt says.

The company can attribute its fall in large part to increased competition from the airlines themselves. Now that the transaction processing and site building issues have been sorted out, the airlines and online "travel agencies," such as Expedia and, have had a chance to take a good look at the Priceline model, take a few pages from its book and make their own discounted offerings, with one major difference - the focus has shifted to the customer. "The [airline] companies are saying, Its my brand, and if anyone is going to discount it, its going to be me," Harteveldt says.

At a time when airlines are trying to boost revenue by filling seats, they need to build the type of loyalty that keeps fliers coming back time and again.

Airlines are also offering more travel and vacation packages, as are travel agencies, which, according to Harteveldt, have seen their ranks diminish as less-value-inducing agencies fold or merge with more stable entities.

As they cater to the customer, airline sites are becoming more sophisticated. "Airlines are increasingly placing traditional customer service capabilities on their Web sites," says Provost, who expects that travelers will soon be able to check themselves in and get boarding passes from airport kiosks, or from their computers at home or in the office. And one day soon, Provost believes, travelers will fill out a series of data fields at a travel site so the system can match their desires with the best travel options.

Harteveldt says travel companies will get closer to a one-to-one marketing model, delivering offers tailored to the individual traveler. Hotels and car rental companies are finally starting to get on board, he says, with only one hotel chain listing online "hotels where rooms are available and letting [you] make reservations for multiple rooms."

Airlines have begun to pool their resources, finding that there is greater strength in numbers. Six of the major airlines, including Delta Air Lines - which, according to Interactive Week research, logged $850 million in online revenue for the year ended June 30 - have joined forces to build a supersite, Hotwire, that promises to deliver the best fares and packages to online travelers. Would-be travelers will be blind to the airline and departure and arrival times, and will simply select their flights based on fares.

While travel and transportation companies will continue to expand offerings to leisure travelers over the Web, "they will also provide the tools to the self-managed business traveler," Provost says. Harteveldt predicts that much of the focus will center on small businesses whose requirements differ from leisure travelers and that dont have a whole travel department doing their bidding as corporate travelers do.

Like other industries, travel and transportation are looking at ways to marry wireless technology to the Internet. Early attempts to join the two in this market have fallen short on the usefulness meter. "There are a lot of neat Dick Tracy things being done, but theyre useless," Harteveldt says.

Despite the shortcomings, Provost expects wireless to play a prominent role in online travel and transportation strategies in the future. "There will be a whole realm of wireless services - [from] checking schedules through a PDA [personal digital assistant] and rebooking a flight [to] receiving proactive pages to alert you when a flight arrives," he says.

While the Web has given rise to many features that were never before offered directly to the customer, the travel and transportation industry has yet to fully tap its online potential. "Next year and in the year after, it will be a whole different world," Provost says.