While the chorus line of new e-tailers grows in anticipation of Christmas, online travel has quietly become the largest segment in online retail–larger than sales of books and music or electronics. Jupiter Communications estimates the segment will do US$4.2 billion in business this year and US$16.6 billion by 2003.
The major online travel retailers in Australia are travel.com.au, NineMSN Getaway, the airlines (Qantas & Ansett) Big Pond Travel, and Ozemail’s iTravel. According to Richard Noon of SmartTravel Solutions, most Australian users still judge the quality and capabilities of these online services by checking a return airfare to London. Travel.com.au, which listed earlier this year, have recently launched a new site infrastructure and have been demonstrating considerable growth in revenues and traffic. Currently 15 percent of Travel.com.au’s customer interactions are completely automated, while 85 percent of customers still choose some form of human interaction (email booking form, email request, fax, or telephone).
|Statistical Snapshot — www.travel.com.au
|Number of visitor sessions per day:||10,000|
|Number of bookings per day:||250+|
|Monthly page impressions:||8 million|
|Projected revenues (1999):||$102.2 million|
The worldwide travel market is significant, and growing. According to the United States Department of Transportation, there will be over 700 million air passengers worldwide in 1999, rising to 1 billion air passengers in 2010. In the first eight months of this year, 2.1 million Australian traveled overseas, spending on average AUD$5000 each (Tourism Council of Australia).
The World Travel and Tourism Council estimates that spending on travel and tourism worldwide will reach US$3.7 trillion in 1999, growing to US$7.5 trillion in 2010. The size of the Australian air ticket market is approximately AUD$8.0 billion, AUD$5.0 billion of which is sourced through travel agents and about AUD$3.0 billion direct by airlines (Concorde).
There will be an increasing trend to online transactions in the sector. In North America, online bookings for air travel, hotels, car rentals and other travel services jumped from $276 million in 1996 to $827 million last year (Travel Industry Association of America). Travel.com.au estimate that currently 5% of all travel transactions in Australia are completed online.
In terms of the Australian industry structure the main players are principals (airlines, hotels, car hire companies), wholesalers (air ticket aggregators, tour operators), and retailers (online and offline travel agencies). For some categories of travel, where information about routes is not complex, (e.g domestic airfares), a significant proportion of flights are already booked online via principals (e.g Qantas & Ansett). The market opportunity for new emerging online travel retailers and consolidators is largely in the Australian outbound market.
There are a number of structural differences between the Australian and US market, which has to date affected the transferability of foreign technologies and business models. In US, 90% of flights are domestic, and all ‘net fares’ (a term preceding the web, referring to discounted fares) are loaded onto the Computer Reservation Systems (CRS). In contrast, about 50% of all ticketing is domestic, and net fares are not on the CRS. These differences mean, for example, that there would be less scope for online consolidators based on the Priceline.com model to operate in Australia, compared to the US where the variety of hubs and possible route structures allows such players greater flexibility in managing price and load factors.
As the local marketplace shakes out, the two interesting business models to watch are those of the online vertical portals and the B2B airfare content aggregators.
In the vertical portal space, Travel.com.au currently earns revenues from a combination of commissions, advertising revenue (e.g One World, Ford, the Banks, Star Alliance, E*trade etc), Affiliate relationships, Web currency programs (beenz), and Technology Sponsorship (e.g. Intel).
On the B2B side, companies like Concorde, which issues one in four of all tickets in Australia, aggregate airfare content (including net fares), and supply database and turnkey web solutions for online operators for both large operators such as BigPond, Getaway and iTravel, and newer players such as travelshop.com.au.
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