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Dot-Com Success in Travel

  |  July 12, 2001   |  Comments

So why does the travel industry make such a great case study for online success? A number of critical factors about the industry have allowed it to make a more natural transition to the Internet than others that are struggling.

Amid all the dot-com turmoil, a few industries have made a smoother, more natural transition online than have others. The travel industry is one that has sustained itself fairly well online thus far, with a few players approaching or achieving profitability.

So why does the travel industry make such a great case study for online success? A number of critical factors about the industry have allowed it to make a more natural transition to the Internet than others. Those factors have made the industry so successful that it has grown at a monthly rate of up to 10 percent at times.

Internet travel companies have yielded strong results thus far, and as a new-economy industry the travel industry has come closer to profitability than most (Expedia has been profitable for a few months now). Next time you are checking your stocks, have a look at the nice recoveries of travel stocks over the past six months compared with the overall Nasdaq index.

One of the critical success factors is that travel is a big-ticket product that consumers enjoy researching and spending their disposable income on (we're only talking personal travel here). People enjoy researching destinations, accommodations, and arrangements in their free time. The Web has enabled consumers to research their trips at the time they choose rather than waiting on the phone with call centers and travel agents during the workday when there is very little time for it.

A second key contributor is that airfares are highly price-sensitive items, and those people booking travel online are generally looking for economy fares rather than business or first-class fares. The Internet has facilitated comparison shopping at tremendous speeds, particularly for standardized, price-sensitive items.

A few skeptics still question the value of brand building on the Web, through both online ads and company Web sites. Airlines and travel agencies have, in many cases, leveraged their presence on the Web to allow users to not only purchase on their own but also actually immerse themselves in the company's brand: learning about their routes, fares, planes, pricing, rewards programs, and more. The efficiencies in terms of eliminating call-center staff and travel agents is obvious, but online travel is often overlooked for its value in generating loyalty and brand comfort.

The Web is an outstanding vehicle for airlines to promote their products and services and develop relationships with customers.

The "Web saver" has proven an extremely efficient product for airlines with excess seating that needs to be liquidated. Because travel is fairly standardized and completely "spoilable," permission-based marketing has proven to be the ideal way for airlines and agents to dispose of these fares quickly to recoup some of the loss on tickets that could not be sold at full-fare prices.

The Web has added so many efficiencies to the industry that an estimated 50-75 percent of travel agents' jobs could potentially be eliminated by 2006. It is unfortunate from that perspective, but you can't argue with the efficiency, ease of use, and speed of delivery. With $13 billion spent in the U.S. in online travel bookings in 2000 (up from $7 billion in 1999), some forecasts are predicting sales to reach more than $20 billion by year's end. The growth has been tremendous.

Airfares are a perfect example of standardized products that are price sensitive and purchased on impulse at times. Those are contributing factors to one industry's fairly smooth transition online. Travel makes an outstanding case for Web efficiency and consumer satisfaction, and it has been recognized to be among the most successful Web industries today.

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Adam Posman

Adam Posman is a strategic planner with BAM Strategy, a leading digital agency with offices in Montreal and Toronto. BAM's core services include strategic planning, media buying, creative production, online contests, email marketing, and customized marketing technologies.

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