Online Travel Titans Brace for Holy War

The quest for dominance of the online travel bookings industry began in earnest this week, as Travelocity.com announced that its marketing agreement with Priceline.com — in the works since late last year — is now final. The announcement anticipates the scheduled June unveiling of an airline mega-site by an alliance of 28 major airline companies.

Travelocity.com’s partnership with the “name-your-own-price” company, Priceline.com, is intended to offer travelers seamless access to both companies’ airline ticket services at each of their Web sites. Travelocity.com is banking on the new alliance to bolster its competitive edge against the airlines’ mega-site.

Mega-Site Set for Summer Launch

Though no chief executive has yet been announced and the alliance has reportedly run into difficulty purchasing rights to a domain name, plans for the $100 million (US$) airline mega-site are reportedly progressing rapidly. According to Boston Consulting Group, launch coordinator for the site, development is on schedule for an early summer debut.

Known among its participants as “T2,” widely rumored to stand for “Travelocity Terminator,” the site has already been the subject of an American Society of Travel Agents (ASTA) complaint to the U.S. Department of Justice. ASTA charges that the new site represents unfair competition for both online and offline travel agencies, but according to Ben Burnett, vice-president of Boston Consulting Group, the grievance is unfounded. The DOJ has not yet acted upon the complaint.

“There is no merit to ASTA’s allegations,” Burnett said. The site will be independently operated and will, in fact, increase competition, he added, by providing travelers with more choices and more information. With the Federal Trade Commission turning up the heat on new alliances among competitors, it remains to be seen whether the site will be subject to the agency’s scrutiny.

A New Travel Business Model

Microsoft’s Expedia.com is another formidable contender whose potential dominance of online travel bookings is not to be dismissed. However, regardless of which of the major travel sites takes the lead, the real significance of the online battle may lie in the substantial shift in how consumers make their travel plans.

For example, Southwest Airlines, which currently handles 25 percent of its reservations online, expects to increase Web transactions to 75 percent of its total bookings by 2004. To advance that goal, Southwest is offering its customers a free round-trip ticket for every four round-trip flights booked online.

Travelocity.com claims to have reservation capabilities for 95 percent of all airline seats offered for sale, and puts its membership at 17 million. As reported in the E-Commerce Times, Travelocity.com’s user base grew significantly when it merged with Preview Travel — to the tune of $68.2 million — in March. That deal followed strategic agreements with major Internet companies including America Online, Excite@Home and Lycos, among others.

All the signs point to the overwhelming likelihood that most consumers will routinely make their travel bookings online in the next few years — even if it is not yet clear which of the travel sites will attract the most traffic. According to PhoCus Wright Inc, $7 billion in travel was booked online in 1999, and sales are expected to skyrocket this year and next.