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Author: PhoCusWright Inc.

Published: July 30, 2003


30, 2003

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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

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.