The airline ticket is almost the perfect virtual product.
With the increasing popularity of electronic tickets, nothing needs to be shipped. Prices are always different, so tickets take advantage of the Internet`s strength as a research tool. What`s more, because the airline industry has long been computerized, the technology infrastructure doesn`t need to be built from scratch. For Travelocity.com
, the largest online travel site, the question isn`t whether plane tickets make sense online. It`s whether the company can attract a significant enough share of a burgeoning market to meet its goal of profitability by the end of next year. “We`re a different kind of dot-com, though right now, we`re painted with the same brush as all of those that aren`t making it,” said Terrell B. Jones, president and chief executive of the Fort Worth-based company.
Across what until recently was optimistically called the new economy, dot-coms are gasping their last breaths. Some recent failures raise doubts about the viability of selling certain products over the Web, from shrubs to furniture to automobiles. “This is one of the handful of dot-coms that`s going to make it,” Jones vowed. “That`s our message.” Today, travel is both the biggest and fastest-growing online sector.
“Travel is definitely a killer app,” said Gary Arlen, president of Arlen Communications Inc., an interactive research firm in Bethesda, Md. The key to putting Travelocity.com in the black is in driving up revenue while holding costs steady, Jones said, a challenge that doesn`t necessarily require bringing new visitors to the site.
Jones is counting on a lot of new business coming from people who are already browsing for tickets on the Travelocity.com site but are going elsewhere to complete their purchases.
Only 6.8 percent of visitors to Travelocity.com during the summer months made a purchase during the period, ahead of rival Expedia.com`s 4.8 percent, but still a relatively low figure, Jones conceded. About 70 percent of the people who don`t book with Travelocity.com actually do make a trip, he said.
Many go to a physical travel agent, he said, because they still fear making a credit-card purchase over the Internet. Others choose to go to neighbourhood agents because they assume they will get a better price. “We have to build trust,” Jones said. Consumers are more cautious on the Web, he said, because it`s harder to tell when they`ve stumbled on a bad part of town. “Burned-out cars and lousy-looking stores don`t exist on the Internet.” So, like a lot of other Internet companies, Travelocity.com is focusing its efforts on making the virtual experience of purchasing travel better than it is in the physical world.
One way has been to make daydreaming about travel more tempting to the window shoppers. Travelocity.com has created a feature it calls Dream Maps. Customers enter their airport of origin and how much money they want to spend on a plane ticket. Then, a map displays different cities and available airfares for North America or Europe. A related feature can match up airfares and snow conditions on a map, specifically to help plan ski vacations.
Eventually, Jones said, he would like to be able to use customer information in the company`s databases to make travel recommendations, just as Amazon.com suggests books, music and other products.
“When I was a travel agent, I used word pictures to describe a hotel,” said Jones. “Here we have the Internet, which means images, audio and video, and graphics that can explain this stuff.”
Market research increasingly shows that customers are guided by the quality of content at travel sites. Travellers are flocking to niche travel sites for information about their specific interests, presenting a potential opportunity to the bigger sites such as Travelocity.com and Expedia.com, said Joan Lambe, an analyst at cPulse LLC, a research firm in New York. “To win and keep the best travellers, marketers will turn their attention to delivering the right content to the right customer at the right time,” according to a report from Forrester Research Inc. in Cambridge, Mass. Travelocity.com intends to remain intensely focused on travel services and information. Although Jones used to talk about commerce opportunities such as selling bathing suits to Florida-bound passengers, these days the emphasis is on sticking to the basics.
“People want destination-specific information,” said Steven Vonder Haar, an analyst at the Yankee Group, a market research firm based in Boston. “What should I do once I get to my destination? Where should I eat?” Plane tickets were first proven as viable products online back in the mid-1980s through easySabre, a predecessor to Travelocity.com, which was available to early interactive computer services. Several years ago, Sabre Holdings Corp. created Travelocity.com to capitalise on the Internet boom. The World Wide Web has made online reservations far easier to perform while vastly expanding the potential reach of electronic travel services. In March, Travelocity.com merged with Preview Travel Inc., and the combined company began trading under the symbol TVLY. Sabre, which has been spun off from AMR Corp., parent of American Airlines, retains a 70 percent stake in Travelocity.com. The company announced at an investment conference in August that it aimed to be profitable by the end of 2001.
In the third quarter, Travelocity.com reported a net loss of $12.2 million on revenues of $53.4 million. Gross travel bookings reached $649.5 million. Travelocity.com has the financing in place to meet its target, Jones said, noting that the company had $71 million in cash and marketable securities at the end of the last quarter, from $69 million at the end of the second quarter. Amid the dot.com shakeout, the stock market hasn`t been kind to Travelocity.com. The issue traded as high as $51.88 on the day the merger was completed, and more recently has been in the mid-teens. Yesterday, Travelocity.com shares were trading at $11.
To be sure, Travelocity.com has tough competition. Software giant Microsoft Corp., based in Redmond, Wash., retains a 70 percent interest in Expedia Inc., which it spun off in October 1999. The airlines themselves have their own sites. In addition, a new site called Orbitz is in the works, representing a cooperative effort by United, Delta, Continental, American and Northwest airlines.
Moreover, because finding the lowest fares can require complex mathematical computations, consumers have grown accustomed to comparison-shopping between different online services to find the best deals. But Jones said his staff has the practice and creativity to retain its leading position. Technology itself remains important, he said.
Much of the attention in the travel business is shifting to mobile devices, and Travelocity.com has a feature for purchasing a plane ticket from the screen of a cell phone.
But the mobile service is best for making revisions to an existing itinerary, Jones said, such as switching to the next earlier or later flights. Starting a reservation from scratch can be cumbersome on the small screen of a cell phone.
In the end, Jones said, no player can rely on software features alone as a competitive advantage because they are so easily duplicated. “You have to keep working, finding other ways to build loyalty,” he said.