Three years ago, $26 billion of leisure, unmanaged business and corporate travel were purchased online worldwide. This year, Phocuswright projects global online travel sales will reach $80 billion, with 70% of sales coming from the U.S. and the rest from Europe, Asia Pacific and Canada.
As for 2004, everyone knows an uptick is coming for the otherwise down travel, tourism and hospitality industry, but nobody knows when. We do know, however, the big shift toward online purchasing will continue unabated.
Going global The juxtaposition of online growth and overall travel weakness is profound. The implications are staggering. And one major by-product of this revolution is the emergence of national (going on global) retail brands.
An amazing thing about travel comes to light when one compares its changes to other industry shifts over the same time period. For example, other hot e-commerce verticals saw leadership battles between new entrants and start-ups: the Amazon vs. Barnes & Noble or eToys vs. Toys "R" Us or eTrade vs. Schwab phenomena. Ultimately, many of the pre-Internet companies overcame their younger competitors or became powerful online rivals.
But not in travel. Indeed, there were travel agency brands pre-Internet, such as American Express, AAA, Thomas Cook. But none of the top online travel agencies today was a travel agency pre-Internet. Think about that. There is no travel industry equivalent of Barnes & Noble or Schwab, i.e., pre-Internet intermediaries that have held their ground in the Information Age.
One hundred percent of the top market share in today's growth area, the online travel sector, is exclusively enjoyed by new entrants.
The "brand" effect Distribution planning, pricing strategies and revenue management have taken on new dimensions in a travel marketplace replete with big retail brands. As with Nordstrom, Wal-Mart, Home Depot and Staples, online entities such as Expedia, Travelocity, Orbitz and Hotels.com play a significant role in the way things are bought and sold. Their customer relationships are /considerable as is their influence on travel distribution, including vacation packages and cruise sales.
Pundits once predicted the online era would usher in a wave of supplier-direct selling. For sure, airlines have been successful in "taking control," but hotels - now 23% of the online travel market - are experiencing just the opposite, much to the major hoteliers' chagrin (but less so for the smaller or more obscure lodging brands that rely heavily on online merchants).
Many travel wholesalers, retailers and technology companies have historically been cynical about branding; too many view this time-honored discipline as fluff, overkill or a luxury. I've even been lectured on the folly of pure brand advertising by sizable travel agency owners. I don't think their approach was ever wise, but it allegedly "worked" through the years. Those days, rather years, are over.
Better hire that brand manager.
These comments first appeared in Travel Weekly, July 22, 2003.
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