Web travel companies on the back foot

2000-02-18

The US travel industry looks set for the heart of the sun, in a looming battle that looks set to generate as much heat as light. Three opposing forces are joining the fray – in one corner, we have the Web travel companies; in the second, the traditional travel agents that the Websters are so successfully undercutting. Last but by no means least are the airline companies themselves, that have risen to the challenge of the Internet and have set out to be a case study in disintermediation. When these three warring parties come together, what a battle there will be!

According to the bricks-and-mortar travel agents, the groups which are threatened the most by the Web, the last straw came when a number of airlines, not content with running ticket sales from their own Web sites, agreed to join forces and set up a travel portal. Cries of “permanent and irrevocable damage [being] done to the competitive process," were enough to see ASTA, the American Society of Travel Agents, rushing off to the Justice Department to file an antitrust complaint. Ironically enough it is not the independent travel agents that the airlines have in their sights, but the established Web travel portals such as newly floated Expedia and its main competitor, Travelocity. The question is, can the airlines compete with online companies without being accused of anti-competitive behaviour by independent travel agents? The answer is no, which leads to the inevitable collision course ahead.

The airlines may be facing a barrage of criticism from the independents. Maybe it is true that a consortium of airline companies will form, resulting in price fixing and “less value to the consumer,” as the mantra goes. However airline agreements are nothing new – OneWorld is one example, and there are undoubtedly plenty of others. Let us remember one thing above all: the airlines did not cause this. They are faced with the same set of opportunities and threats as the rest of businesses and they are reacting accordingly. Consider this: five years ago, nobody spent money on travel over the Web. Last year about 1% of the travel - $2.2B – was purchased online. This is expected to grow to $17B by 2003. The Web is anti-competitive, it breaks all the rules and, worst of all in the US, there is nobody to sue about it.

Slowly but surely, individuals and organisations are realising that online travel is cheaper than travel purchases from travel agents. Traditions are difficult things to drop: for example, when an analyst colleague was flying over to a recent briefing in Colorado, he was discussing ticketing systems with an analyst from another firm. When our man compared his agent-provided ticket price with the online cost that the other analyst had obtained, he realised he could have saved £200. Even analysts can be slow to react to the changes, but what this proves is that travel agents are living on borrowed time. Speaking both as observers of the IT industry and as consumers, we watch with interest the developments in the travel industry. The Web is creating winners and losers and, so far, nobody has been able to come up with a hard and fast set of rules as to what is going on. Not changing is not an option, which is a fact that traditional travel agents would do well to remember.

(First published 18 February 2000)