And the Winner Is – Online Travel

E-commerce is alive and well online. Those who want solid evidence need look no further than the online travel industry.

As one of the few consumer industries that has established itself and shown measurable growth on the Internet, online travel is no longer focused on basic survival. Instead, the industry is concentrating on its quest for the ingredients of longevity: market share, saturation and profit.

Exhibit A is Travelocity (Nasdaq: TVLY), which last week reported fourth-quarter earnings of US$4.9 million or 9cents per share. Last year at this time — long before terrorist attacks threatened to put serious dents in the online travel industry — Travelocity reported a Q4 loss of $2.4 million or 5 cents per share.

Reflecting the impact of terrorism on online travel, Travelocity reported that gross travel bookings dropped by $60 million from the year-ago period. But fewer sales apparently did not affect the company’s ability to boost its profits.

Now, there’s an equation that’s easy to live with.

Personal Power

So, what is it about the online travel industry that continues to allow it to emerge as the poster child for e-commerce hope?

Some might say it has everything to do with convenience and cost savings for consumers — and they would be partly correct.

But as one who has booked all of his own travel online for the past two years, I believe online travel’s pull goes deeper than that, especially since the September 11th terrorist attacks.

Booking travel online gives consumers a greater sense of control — especially compared with placing their trust in a travel agent or a faceless phone sales rep from an airline company.

Need for Speed

In addition to its ability to make consumers feel like they are in control of their own destiny, online travel caters to customers’ongoing love of instant gratification — such as printing e-tickets minutes after purchasing them.

Airlines apparently sense this trend and are making moves to capitalize on it. Several airlines have begun charging extra fees for some paper tickets in an aggressive move to persuade consumers to go the e-ticket route.

Too much too soon? Not at all. According to Forrester Research, by 2003, 70 to 80 percent of all airline tickets will be issued electronically.

Watch and Learn

Another reason online travel continues to flourish is that it never gets too comfortable with its own progress.

Even now, with a growth spurt in full force, the top three players — Travelocity, Expedia (Nasdaq: EXPE) and Orbitz — continue to vie for position and innovate.

Expedia, for example, is expanding its operations to include passport and visa services. Users will be able to research travel access requirements for most countries on the Expedia site, then download necessary document applications and send them directly to Expedia’s new partner, Express Visa Service.

Travelers also can check the status of their travel documents at any time.

Redefining ‘Full Service’

The new economy calls for new definitions of old consumer services.

The online travel industry is doing it right by giving consumers total control over their itinerary and by providing self-directed and comprehensive trip planning.

For example, before a journey to London, a traveler can update or initiate travel documents, research promotional rates, book a flight, find hotel packages, buy a Eurail pass, arrange to be met at the airport by a driver and have a rental car waiting at the hotel.

Isn’t that what e-commerce promised us in the first place?

What do you think?

Let’s talk about it.