Travelocity ups gear and merges with Preview Travel

1999-10-13

The recently announced merger between Travelocity and Preview Travel spawned the world’s third largest eCommerce site by revenue, following Amazon and eBay.

Travel ranks as one of the most appropriate services to sell over the Internet –the deal is, essentially about agreeing contracts for services which will be delivered at a later date. The Internet is a far better medium for selling travel than brochures and guidebooks could ever be – it provides an integrated service so, for example, a prospective traveller can book a hotel, rent a car and book flights and receive a consolidated, clear itinerary covering all aspects of the journey. What is more, it is much easier to provide additional information over the Web, for example sites are gearing up to providing multiple views of hotel rooms, longer descriptions of localities and information about local hotels. Coupled with this, Web operators are able to significantly undercut high street travel agents, for whom the future would appear, well, bleak.

Having said this, we see the largest growth area for Internet travel services to be in the corporate space. Thus far, Travelocity’s services have been targeted at the consumer. We expect to see partnership arrangements between Web travel companies and ERP vendors, particularly companies such as Peoplesoft who are advancing the principle of end-user self service within an organisation. The concept is simple: allow the end-user to arrange their own travel within an automated tool which knows the limits of each user, then ensure the existence of an audit trail so that any usage (and abuse) is logged and reported. In this way the inefficiencies inherent in internal company procedures are significantly reduced.

Despite Travelocity’s projected size, the battle for the online travel segment is far from over. The merging of Travelocity and Preview travel’s user communities will not be trivial and is likely to cause weaknesses in the combined company’s system architecture. Weaknesses can lead to failures, and we know how seriously these are treated by the online press and user communities alike. Also, competitor sites such as Expedia and LastMinute are unlikely to roll over and die. LastMinute, with its reverse-auction business model, is one to watch in particular. Finally we should not forget the Web presence of the “travel fulfilment” companies – BA, AA and the like. One of the prime capabilities of the Internet is to displace intermediaries unless they can demonstrate real added value. This fact will be the ultimate litmus test concerning the successful future (or otherwise) of today’s third largest eCommerce company.

(First published 13 October 1999)