What is the outlook for online airline ticket sales over the next five years, and what must companies do to establish a leading position?
Travel, especially airline ticketing, continues to have a leadership role in ecommerce due to several converging factors. The ease of substituting one remote channel for another and the lack of physical fulfillment have made the traditional visit to a travel agency or to an airline ticket office obsolete for the purchase of airline tickets. Today, the phone call has given way to the Internet as the next step in this evolution.
Many airlines are battling nonairline-affiliated travel agencies (aka partners) for total domination of online distribution as the country hovers over an economic slowdown that would soften airplane loads. The adoption of the Internet for booking airline tickets will continue regardless of how this channel war plays out, but the possible lack of competition will not be positive for customers.
Smart online and offline travel agencies should prepare for a future without commissions, if they have not yet done so. At the same time, they must continue to increase airline ticket sales or they will risk losing sales of hotel rooms, car rentals, and more profitable travel packages and cruises. Online agencies cannot charge for mass market services because the majority of travelers would most likely go either directly to the airline or even back to a traditional brick-and-mortar agent. At this point in the development of Internet travel, the value in charging a fee is not warranted.
The outlook for travel ecommerce, especially in the airline segment, remains very good. At this time, the following factors apply:
á The online population, including travel buyers, is growing with demographics favorable to the travel seller, however at a slower pace than IDC predicted last year. IDC has revised its 2004 projection of the overall home Internet user population from 184 million down to 176 million. This population will be 194 millionin 2005.
The consumer is becoming much more comfortable conducting transactions via the Web. Whereas only 42.0% of the wired population purchased online in 1999, by the end of 2000, approximately 50.0% of home Internet users bought products online. This number will increase to 60.8% by the end of 2005. Total spending per U.S. home Internet buyer will also increase, from $1,100 in 2000 to $2,100 in 2005.
á The airlines are driven to experiment with many new electronic distribution channels in an effort to control costs. Hotwire, partially funded by six major U.S. airlines, launched in October 2000. Orbitz, the industry`s biggest and most controversial experiment to date and fully funded by five U.S. carriers, is scheduled to arrive in the next couple of months after multiple delays and much negative publicity.
á Competition among online agencies is intense. Airline sites now offer hotel rooms and car rentals, and hotel and car sites now sell airline tickets. To benefit from those factors and increase the percentage of online air ticket sales, travel sellers must take the following actions:
á If you plan to charge service fees, be sure you provide commensurate value . However, IDC does not believe that the online industry can support fees for airline ticketing at this time.
á Speak to your two major demographic groups. These are the heavy Internet users between the ages of 35 and 54 and newly wired seniors aged 55 and older.
á Empathize with your customers. Analyze your site and if you don`t truly have a customer-focused strategy, then create one. Travel sites must become more intuitive and more highly personalized, particularly to appeal to inexperienced users in the 55 and older age category. The technology must surpass the best human travel consultant or be able to work in harmony with consultants, depending on the business model. Consider the following: Is the Internet sale your ultimate goal, or is the Internet a conduit to the travel agent?
á Offer the full range of products and services based on value, not necessarily on price or other parameters. Do this by using the Web`s total functionality, including mobile, wireless, video, photos, and interactivity.
á To grow the market, firms that sell corporate travel booking software should concentrate on easier booking solutions. At the same time, corporate travel managers should take advantage of available software that facilitates compliance with corporate travel policy.