Penny-pinching consumers and fierce price wars are bad news for the travel industry. Bad,
The travel industry's pain is often the online industry's gain, as suppliers push more discounted airline seats and hotel rooms to win back customers. And many of those deals are available only online. At the same time, online agencies rely primarily on leisure travelers, where traffic has rebounded more quickly than on the business side.
The two biggest players, Travelocity. Com Inc. and Expedia Inc, are locked in combat for the top spot. Both sold some $3 billion worth of travel last year, though Expedia topped Travelocity in the fourth quarter in gross bookings. And thanks in part to a greater emphasis on wholesale deals with suppliers, Expedia is more profitable. For the quarter ended in December, Expedia posted its first net profit, $5.2 million, even with noncash and nonrecurring charges, compared with Travelocity's $25 million loss.
The airlines' latest cost-cutting moves may only spur the online stampede. Major carriers are eliminating travel agent commissions in the U.S. That could lead to growing service charges for consumers at traditional agencies, driving still more travelers to the Web. Jupiter Media Metrix is predicting that online travel sales in the U.S. will jump 29%, to $31 billion this year, and to $50 billion by 2005. About half of that is from airlines' and other suppliers' own Web sites, but that still leaves plenty of room for the online agents.
This growing market is drawing plenty of competition and new players. Hotel and car rental franchiser Cendant Corp. snapped up Cheap Tickets last October. Barry Diller's USA Networks Inc. bought a controlling stake in Expedia. And a group of hotels, including Hilton Hotels and Hyatt Corp., are launching their own business this summer to market hotel rooms on the Net.
Is the field too crowded? Analysts and online agencies aren't worried, figuring that there's plenty of new business to go around. But, for now, the clear winners are consumers, who can count on finding better service and better deals online.
We can learn from the beginning that the competition in the travel industry revolves chiefly around
A.suppliers markets.
B.price battles.
C.travel stocks.
D.online services.