Bright Outlook for Web Travel

28th Dec 2001

Directly jolted by the Sept. 11 attacks, online travel agency Orbitz evacuated its headquarters near the Sears Tower that morning and watched its business plummet for weeks.

Thanks to bargain-hunting leisure travelers and the growing use of Internet sites for more than just airplane tickets, the Web travel business is strong, and the outlook is brighter than that of the industry as a whole.

“All of a sudden consumers are realizing this isn`t just something for the most technologically advanced. It`s for everybody,” said Henry Harteveldt, a travel analyst at Forrester Research.

While overall industry revenues are expected to finish the year down 20 percent from last year, online leisure travel sales will wind up at a healthy $14.2 billion, according to Forrester.

That estimate is scaled back from the $16.7 billion forecast before the weakened economy and the attacks took their toll, but still 16 percent higher than a year ago.


The primary reason: Nearly 3 million more U.S. households, or 17.8 million in all, bought travel tickets online this year.

While experts say the long-term prosperity of the Web business depends on the quality of service, consumers have been flocking to sites largely because the price is right.

That`s certainly the case at 6-month-old Orbitz, the newcomer on the list of five busiest travel sites—behind fellow full-service sites Travelocity and Expedia and ahead of deep discounters Hotwire and Priceline.

Backed by five top U.S. airlines, Orbitz suffered through some early hiccups with customer service and post-Sept. 11 falloff in travel before recovering by early November to a new sales high of 30,000 to 60,000 tickets a day.

Antitrust complaints made during its launch faded as the other travel portals logged increases as well.

For a few days or weeks in September, Orbitz`s debut seemed ill-timed. Now it seems the opposite.

“Since Sept. 11, people have been really hungry for a deal. And they come to the Internet to get it,” said Jeffrey Katz, who was chief executive at Swissair and an executive with American Airlines before becoming Orbitz`s president and CEO.

More than prices have changed since Sept. 11. Sites are meeting customer demand by providing more information about travel conditions, weather, security requirements and potential snags.

The airlines` own sites, where bookings have risen dramatically lately, are doing the same thing—a development travel analysts suggest may ultimately put the agencies at a disadvantage.

“The airlines are really pushing people to check their sites now for flight status, the latest sales, etc., because market conditions have changed so quickly since 9/11,” said Jared Blank, an analyst with Jupiter Media Metrix. “This is going to give them a bit of an advantage over the agencies like Orbitz, because they`re providing all of this information in one place.”

From its Travelers Care Center, an electronic command center located in a downtown Chicago high-rise, a former air traffic controller and other specialists have been pumping out thousands of daily flight alerts and other information for customers.

To help reach its goal of turning a profit by mid-2002, Orbitz took the risky step in early December of imposing a service fee of $5 per ticket, a move its chief competitors may be tempted to follow.

The extra charge hasn`t scared off customers so far. Industry-watchers say they`ve seen no evidence of a drop-off in ticket sales.


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