Online travel soars

More consumers rely on Internet to make plans


Published: Thursday, April 1, 2004 at 6:01 a.m.
Last Modified: Wednesday, March 31, 2004 at 10:50 p.m.
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Marquita Hynes poses for a photo with a piece of luggage outside her home Saturday in Chicago. Hynes, like more and more travelers, has booked many of her recent trips online.

THE ASSOCIATED PRESS
CHICAGO - Marquita Hynes turned to online travel after a co-worker kept raving about the benefits of going it alone in trip planning. Now she can reel off her own list of Internet travel coups.
Train fare from Chicago to New York and back for $33. A hotel suite in Austin, Texas, for $26. Round-trip air fare to Denver for $100. And she's just gotten started.
"If you can pack up and go away for the weekend, you can get some really impressive deals," the 41-year-old Chicagoan said.
Consumers are taking to the Web for their bookings in sharply higher numbers, driven online by airline fare wars, high-speed Internet connections that make shopping easier and the tantalizing notion that, just maybe, a jaw-dropping bargain lies only a mouse-click away.
More than 35 million Americans purchased travel online last year, up 17 percent from 2002, according to the independent travel research firm PhoCusWright Inc. Nineteen million more researched destinations or prices there, the company said.
This year the Internet is expected to generate nearly $53 billion in leisure travel bookings alone - nearly 22 percent of the travel industry's revenues, according to a projection from Forrester Research.
"Online travel is incredibly robust; it is stronger than we expected it to be," said Henry Harteveldt, a Forrester analyst in San Francisco.
"There are a lot of incredible deals right now," he said.
Jeffrey Katz, chief executive of Orbitz Inc., the Chicago-based online travel agency, forecasts even more dramatic growth ahead thanks to a newly intensified airline competition.
Low-cost carriers are expanding to new routes and adding more planes, forcing bigger rivals to slash transcontinental fares in response.
"If you've flown from the East Coast to the West Coast or checked out prices to Florida, it is a bloodbath, with high fuel prices, new capacity in the marketplace, new lower labor costs" at major airlines, Katz told analysts recently.
Airlines may be facing their toughest year financially since 2001 because of the stiff competition, he said. But in the online travel business, "these kinds of prices, as long as it's a safe travel environment, are stimulative to the marketplace for those of us who thrive on strong volume." Katz said.
The issue of thriving financially, however, can be another matter for dot-coms. While industry leader Expedia boasts a prosperous bottom line, both of the other biggest online travel agents - Orbitz, which is backed by the five biggest U.S. airlines, and Travelocity, owned by Sabre Holdings - are still striving to achieve a net profit despite strong sales.
Profits are hard to come by because increasingly Web-savvy consumers will transact business with any site that gives them a better price. Only about 35 percent of online travelers are brand-loyal, according to Harteveldt.
As an example, Aliza Sherman's strategy when doing her travel planning is to leave no key Web site unvisited.
"If there are several competitors out there providing online travel booking, you really need to try them out," said Sherman, 36, of Laramie, Wyo. "Even though they all are supposed to be tapping into the same data, you never know what you might find."
Hynes, who is a publicist, and her husband Brian also go all over the Internet for their plane, train, automobile and hotel deals, using, among others, Hotwire, Orbitz, Travelocity, Expedia, Priceline, Hotels.com, Amtrak's "Rail Sales" and United Airlines.
"We've both found online booking easy, cheaper, convenient and fast," Hynes said.
"I'm sorry that this has hurt the business of travel agents," she added, acknowledging that agents can offer advice and avoid booking hassles for those with neither the time nor the inclination to surf for deals. "But the way I see it is if you have a computer, why would you bother with a travel agent?"
The hotel market has become one of the hottest sectors of online travel, accounting for $8.7 billion in leisure bookings in 2003. That trend helped Expedia, which also owns Hotwire and Hotels.com, leap past Travelocity for the most online sales.
"It's very difficult to make money just selling airplane tickets," said Jared Blank, an analyst for Online Travel Review. "Expedia figured that out early on, and Travelocity and Orbitz didn't."
Travelocity and Orbitz have stepped up the battle for market share, doing heavy investment spending and promoting their brands. Both also have succeeded in capturing more corporate travel accounts.
Analysts, though, say the key to success for the online agencies is the shift toward packaging air, car rental and hotel together for a single price.
"Airline tickets are going to diminish in importance" in the Internet travel market, Harteveldt said. "What's going to replace them are packages. ... The Web is becoming a great tool for savings, but in a different manner."
Orbitz sees that as just the ticket to profitability. For the first time, at least half its revenues will come from sources other than airplane tickets in 2004, according to Katz.
"This is the hot marketplace," he said of travel packages. "It's going to get hotter and much more broadly accepted by consumers than it is today."

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