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e-Booking Takes Off
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Business New Haven
10/30/2000
By: Susan E. Cornell
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Online travel and related advances in travel technology are taking off faster than Marion Jones. Figures on how many of us are e-booking are soaring beyond projections, making travel the second most-frequent online purchase (following books).
The 1999 travel e-commerce survey by research firm of PhoCusWright, a research and travel consulting firm, found that the number of online bookers increased by over 80 percent last year, while those booking trips through travel agencies fell below 50 percent for the first time ever.
A few additional findings reinforce the point that the traditional travel industry is going the way of the dinosaur:
• Forrester Research predicts that, by 2003, the largest businesss-to-consumer product online will be travel;
• The online travel industry is expected to generate $20.7 billion by the end of next year, three times greater than initial predictions;
• Seventy percent of all Net surfers visit travel-related sites (NPD Research); Expedia, Internet Travel Network, Preview Travel and Travelocity, all Internet travel agencies, are now ranked in the top 50 U.S. travel agencies.
What factors are contributing to this e-commerce phenomenon? And, why is online travel so successful while other industries fail on the Internet? Three reasons seem to account for the industry's revolution:
An unsatisfactory real-world counterpart:
Traditional travel agencies can be inconvenient and slow, while the online agency is open around the clock and provides quick answers.
Unnecessary middleman: A travel agent adds an additional layer to the purchase, prevents the consumer from comparison shopping - and charges a fee for all of this.
Accessible and centrally located reservations databases: Once only the airlines and the agents accessed the information databases, but now, using the World Wide Web, the consumer accesses the same information.
What will the consumer see on Main Street over the next two or three years? Will he see his travel agent or his terminal? What are the traditional bricks-and-mortar agencies in the region doing to stay competitive? What are the pros and cons of e-booking from the consumer's viewpoint? And, how will the latest and greatest travel technology help consumers to make the most of your time and budget today and over the next couple of years?
What follows are a few answers from the real world via interviews with Chris Salafia, owner of Beacon Travel in Madison, and Allison Edwards, vice president of Century Travel and Cruise Ship Vacations in Killingworth.
How has the explosion of Internet travel sales - from hotel bookings to travel packages to airline bookings - impacted the traditional agency?
Salafia: [The Internet is] absolutely and positively having a direct impact on agency revenue [both mine and the industry generally]. That, coupled with a slash in airline commissions, makes this a very challenging time for agency owners. There are a ton of Web sites/portals that want your business. Booking on the Internet is safe, fast and extremely convenient. Agencies across the board have seen a decrease in revenue as a direct result of Internet bookings. Anybody that tells you different is either fibbing or hasn't faced facts. The net is not going away, and any agency that doesn't recognize that and modify their strategy will be out of business in two years. One big bee in industry bonnets is Travelocity. Travelocity is actually owned by Sabre, the largest network provider to travel agents. Sabre is the system that agents use to book tickets. Basically, they've opened up their proprietary network to the general public, thrown some HTML code on it and taken away travel agencies' biggest competitive advantage.
Edwards: Analysis is showing most of the reservations on the Internet are not by travelers who used a travel counselor; they already booked independently.
Are there any remaining advantages to booking through a traditional bricks-and-mortar agency? And, do agencies focus on these advantages to stay competitive?
Salafia: The net is great - until you have a problem. Ever try to change a ticket on the Web? Next to impossible. Who do you call? Try and even find a phone number on some of these sites. The role of the travel agent is to represent the customer. We have special numbers for the airlines, can change and reprint new tickets while you wait, and basically will do everything we can to assist the traveler. The Internet question is the one I am most frequently asked. My answer: 'If you know you're definitely traveling on a specific day and returning on a specific day and won't need to change your tickets, then go for it. But - if there's any danger of plans changing, or you have a complex itinerary [multiple locations, overseas, etc.] then book through a travel agent. The prices are the same and, if there's a problem, we can fix it.'
Edwards: A travel counselor provides personal qualification of the traveler's needs, budget, habits, desires, etc. He/she then matches the traveler with the best value match. A counselor also is a 'live' person to help in emergencies and follow-up. Yes, that is the focus of the agency.
When is a traveler better off booking on the Internet and when is he/she better off booking through an agent?
Salafia: I think booking hotels, cars and air on the net is fine. With an average commission of around five percent, sometimes it's cheaper for me to say no to that business so I can pursue higher-profit sources (groups, cruises, etc.). Where I really think people shouldn't book the Web is cruises, overseas trips, Disney or excursions. Travel agents almost always can get a cheaper-than-published rate. Our agency, for example, books a ton of business through Carnival [Cruises]; our customers will usually sail cheaper. The Web is basically what-you-see-is-what-you-get. Our agents make the phone calls and negotiate package deals that are typically better and cheaper. Also, we've heard horror stories regarding 'cheap deals.' Usually, you get what you pay for.
Edwards: A traveler may find a 'lower' buy if indeed it has been the same purchase' and feels it is worth being price-only driven.
What will the traveler of the future who wants to shop for travel through the traditional agency down the street find?
Salafia: I promise over the next two to three years you will see a survival of the fittest. Closings and consolidations will be commonplace. Travel agencies that aren't run economically or have a strategic business plan will not survive. Sad, but true.
Edwards: Great buying power, expertise, experienced travelers, personalized service, extras added such as maps, local updated information and a human who is there each step of the journey.
What does this mean for the New Haven area? How many agencies do you think will survive over the next couple of years?
Salafia: I can tell you the mom-and-pops are and will be in real trouble. The 'old way' of running an agency won't work in the New Economy.' They will either consolidate with other small agencies, be absorbed by the big guys or shut their doors. The numbers just don't equate to profitability. The big guys [e.g., Worldtek] and the franchises (American Express, AAA, Carlson, etc.) have big-company backing, will be fine and probably grow. In my opinion, ten percent of the agencies in New Haven County will close or consolidate in the next two years.
Edwards: Studies are showing that two out of five agencies will close. Many can't function due to the airline-commission cuts, and also they don't want to deal with the new technology.
The other arena in the travel industry which is and will continue to face remarkable changes with a positive affect on the consumer is in wireless services. Travelocity.com and Saraide, a top provider of Internet based services to wireless devices, have teamed up and now deliver real-time flight information to wireless users. This means that, via mobile phones, PDAs and pagers, the traveler can readily access real-time departure and arrival times and obtain gate information and flight schedules. Imagine the time and money you can save knowing before you leave the office that your business trip has been cancelled. And, Saraide's Travel Services provide customers with other neat productivity perks such as providing traffic updates, local driving directions and lodging information. The technology you will soon use - if you're not already doing so - will increase productivity and reduce frustration. The reports sound like technological heaven, but how well do wireless advances really work?
Have you or any of your customers used pagers, PDAs, etc. to update travel itineraries? If so, what's been your experience?
Salafia: I travel all over, and just upgraded from a Palm III to the new IPAQ pocket PC. Great technology with a great future. Problem is, we are in the present. Wireless access is simply not available on a broad enough scale. The best I can do right now is download my itinerary from e-mail, and get directions onto my PDA. Both require me to be connected either to the company network or an analog modem. Nothing is real-time, because there simply is no readily available connectivity. I know they are coming out with new wireless modems to link to cell phones, but again, until there is a decent network in place, it's not going to take off. SNET, Sprint PCS and the others all talk a good game, but when the rubber meets the road it's usually intermittent service and big phone bills. Palm VII has built-in connectivity, but you're on a proprietary network and the fees are steep. Having the itineraries and directions on my PDA is great, but that only whets my appetite for what I should have. The technology is certainly there, we're just waiting for the infrastructure.
First, stock brokering moved online as, like the travel industry, investors sought to avoid unnecessary middlemen. Next, the consumer drove the travel industry to a successful metamorphosis.
The new travel industry may soon be followed by other sectors which share similar challenges: insurance, mutual funds and mortgages may be the next industries to follow suit, as their profiles resemble that of the travel business. What, however, does this mean for traditional businesses as we move to an electronic Main Street? While the consumer has clearly benefited in terms of convenience, efficiency, monetary gains and productivity from the latest and greatest in technology, we will undoubtedly see consolidations and closings of businesses - impacting the local communities around us.
To E-Book or to Call the Agent
Which model works better? A first time “e-booker” shops for round-trip flights between New Haven and Orlando using Travelocity. Then, she calls her travel agent with the same request. Here are the results:
Travelocity: Time to obtain the information: two minutes. Cost of airline ticket (round-trip): $334.00
Traditional Travel Agent: Time to obtain the information: five minutes (plus 12 hours, since the agency was closed at the time the customer wanted to inquire). Cost of airline ticket (round-trip): $376. Of course, traveling between New Haven and Orlando is no big deal. So, the online model is the winner. If you wanted to make more complicated arrangements - such as travelling to Machu Picchu, for example - it probably would behoove you to call your travel
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