PhoCusWright analyzes online cruise and vacation package sales

Selling cruise and vacations online presents both the greatest opportunity—and the greatest challenge—for the travel industry today, according to the The Online Travel Marketplace 2001-2003.
For the first time, PhoCusWright has taken a close look at the online cruise and vacation package market, devoting an entire chapter to this compelling segment. It found that cruise and vacations represent a minimal amount of total online travel sales, accounting for just $420 million of the $14.5 billion of travel booked online in 2000. Online cruise and vacation package sales account for a miniscule amount of all (online and offline) cruise and vacation package sales.
But, those numbers understate the importance of the Web in selling cruises and vacation packages. Essentially, according to the PhoCusWright report, the cruise and vacation package industries have been waiting 20 years for a technology with the sophistication and graphic capability to manage complex combinations of multiple components and to present a rich experience in living, interactive color. The Web is that technology. While it has yet to manifest the capability to fully automate cruise and vacation package bookings by consumers (and the day when 100% of all cruises and vacation packages are booked online is far away—and may never come), the Web has already become a powerful marketing tool for the industry.
Cruise lines sell less than 1% of their product online. Yet their Web sites are impressive decision influencers. It’s hard to track the impact of the Web on purchasing decisions but Royal Caribbean, long a leader in automating cruise distribution, sees a strong correlation between its Web visitors and bookings, according to the report. Royal Caribbean estimates that 60% to 70% of all travelers are using the Web for data collection.
The Web is increasing the cruise and vacation slice of the pie. Consumers who never have used travel agencies—which account for almost all cruise sales—learn about cruising from the Web and become new customers. The Web is making new segments of Americans aware of the accessibility (both physically and financially) of all the glamorous and adventurous possibilities of a vacation travel, be it an African safari, a balloon trip over the Arizona desert or a perfect crescent of unpeopled beach in the Seychelles.
The Web is a dream-maker; its streaming videos of parasailing can obliterate stereotypes of passengers beginning to line up at 11 p.m. for the midnight buffet. It is a place where consumers can find much of the basic and comparative information they need to make informed purchase decisions.
However, these online consumers continue to execute that decision, by and large, over the phone, with a human being, according to PhoCusWright. But a sale that has begun on the Web and then is completed offline has a far higher and faster close ratio than sales originating in other distribution channels. The Web already is adding huge cost-efficiencies to the sales process for cruise lines, vacation packagers and the online and offline travel agencies that sell them.
The Online Travel Marketplace identifies ways in which the Internet is helping cruise lines and vacation packagers work smarter and more effectively to grow the marketplace (last-minute travel is one such area). It also discusses the game of technological catch up being played by both cruise lines and vacation packagers and the inhibiting effect that it has had on the industries` development. The role of the GDS and the importance of human interaction are also explored.
The PhoCusWright report projects a positive future online for the cruise and vacation packaging industry. Online vacation/cruise sales are expected to jump 460% in three years to reach $2.4 billion by 2003. However, it also identifies problems the industry must deal with and briefly analyzes the problems of grand plans that failed.
The report concedes that technological development is slow due to the incredible complexity of these products. Yet, it is clear that the Internet is bringing great benefits to many players—both old-timers and newcomers—as it presents opportunities to reach new customers.