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Online Reservations - Why Still Bother Do It Offline at All?
(HoReMag Magazine, November, 2003)
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Written by Alexander Boichev
Published in HoReMag magazine
specialized publication for
professional travel and tourism
It is Tuesday. Suddenly you discover you need to fly to Frankfurt for an important business meeting next Monday. The procedure is clear: contacting a travel agency by phone or fax, a few conversations to clarify the details - airline, price offers, departure and return dates, transfers, type of hotel, hotel room, package price, package discount - then waiting for the courier, paper-based tickets, potential risk for last minute changes, payment via bank transfer or in cash. During the next few days you will be devoting several hours of your precious time to arrange the details of your important trip. Are you still wondering why online reservations are gaining popularity?
Buying airplane tickets over the Internet is especially popular in the US. The income of online travel companies reached USD 24.8 billion for the past year according to PhoCusWright. After the skepticism of the first years of e-commerce today we can observe a mini euphoria - people have come to enjoy online shopping. They do it because they know they won't be cheated. They also know that it will save them time and in many cases money, too. They visit online stores for books, video, music, and travel because they can take their time to look through the offers, to read additional information if they wish, and to decide when they are going to pay - without the risk of meeting an impolite salesperson or the need to waste time visiting the office of a tour operator or an airline. The current situation can be characterized as
Highly competitive
There are several big players on the market, who are also the big winners from the boom: Expedia, Travelocity, Orbitz and the low-cost airlines Ryanair, EasyJet and SouthWest. The last three sell their seats exclusively through the Internet, saving from office rent, logistics and personnel costs. Selling tickets at a lower online price is not the only key to success. The companies in this branch have lately been going for complex solutions offering hotel, air and car at a significantly lower package price. Number one in applying this so called dynamic packaging is Expedia, who is also the market leader in the area with its nearly USD 600-million income for the past year (data from Bloomberg). The next step in selling online reservations is
Selling travel packages to corporate clients
Over the past year nearly 11 million people in the US traveling on business have made their reservation over the Internet spending USD 2300 on average for travel and hotel, according to the latest research of the Travel Industry Association of America (TIA). According to data from Forrester Research quoted in www.nytimes.com, travel business income from online reservations in 2002 comes to USD 13 billion, which is about 10% of the USD 150-billion annual income for the industry. Forrester predict doubling of the amount by 2007. In full awareness of this the three big players - Orbitz, Expedia and Travelocity, launched their software solutions for corporate needs. On the outside these specialized applications do not differ from the established reservation systems. The difference is in the type of offers and the discounts applied, which depend on the agreements a company has with the airlines or the hotels.
The solutions of the new online players are not revolutionary but only an attempt to take away a piece of the market share of the established tourism companies. American Express, for example, has had an online tool for its major corporate clients for several years. The income from online reservations is still a small part of the total and cards are still to be shuffled. Besides, an opposition of online to traditional agencies does not make sense.
As perfect a technological solution can be, traditional travel agencies will remain competitive. The availability of online solutions allows any travel agency to broaden its market through these new distribution channels and to simultaneously reduce its transaction costs. On the online travel market there is also
Bulgarian player - TravelStoreMaker.com
(www.TravelStoreMaker.com). An investor in the company is Worldspan one of the major global distribution systems (GDS). TravelStoreMaker.com specializes in the development of an online reservation system for airline tickets, hotel rooms and rental cars. The system is offered to various websites with travel content - from portals to consolidators. Up to now no agency in Bulgaria is using TravelStoreMaker.com's software because Bulgarian agencies operate on the competitor GDS Amadeus, comments Bobby Manev, Business Development Manager of the company. What travel agencies - TravelStoreMaker.com's customers - do is create a virtual storefront, behind which operates the TravelStoreMaker.com software customized to the specific needs of the agency. Our single requirement is that the agency uses Worldspan as a GDS, adds Bobby Manev. The company is currently servicing 30 travel agencies in 15 countries around the world as well as 2 airlines.
The next step in TravelStoreMaker.com's cooperation with Worldspan is the development of a TravelStoreMaker.com travel reservation solution to be offered to small and mid-size companies. The benefits for such companies are in saving service time, the ability to compare alternative routs and flight prices, various discounts and 24-hour customer support over the phone provided by TravelStoreMaker.com's travel agents, explains Alexander Grigorov, Marketing Manager of the company. Corporate travel comprises a significant share of the market in Bulgaria and we expect an increase in the number of companies and travel agencies to take advantage of this new service of TravelStoreMaker.com, Alexander Grigorov adds.
Additional Information:
Research indicates that if in 2000 each 3 of 10 reservations were made online, in 2003 their number is already 7. According to Jupiter Research, online reservations worldwide will rise from 3.9 billion USD in 2003 to 5.6 billion in 2008. This made many ask about the fate of travel agencies in a few years. A brief phone poll with several Bulgarian companies showed that there is no reason for such worries in our country at this time. Currently the number of errors during online reservation is so high that it would rather discourage the potential customers. Undoubtedly, however, the number of customers will increase with future improvement of the system - a challenge for hotel owners and an opportunity for increased sales.
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