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Internet Bookings Develop Towards All Inclusive Services
(Capital Weekly, Aug. 30 - Sept. 5, 2003)
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E-trade, online services and their low prices make up part of the benefits of the Internet. Their natural outcome is the emergence of a new type of low cost carriers like EasyJet and RyanAir, which offer return tickets from London to Rome for only EUR 20. Automated airline reservation systems have evolved into Internet booking solutions reducing the cost of air travel in terms of dollars and time.
The income generated by online booking sales in 2002 is estimated at USD 28.4 billion for the US market, according to PhoCusWright. 15% of all overseas travel this summer was booked through the Internet. In the first quarter of the year one of the industry leaders, Expedia, gained a profit of USD 26.9 million, as reported by Bloomberg. For the last year, the online sales industry has generated a profit of USD 66 million and revenue of USD 591 million.
The basic differences between online booking and the conventional distribution channels are:
Price and Choice
Travel agencies act as intermediaries between the end user and the airline or hotel chain. The ticket price is fixed in advance, while the agency earns a fixed commission for the service provision. Airlines use a GDS (Global Distribution System), created by themselves, to distribute fares to the travel agents. Each GDS cooperates with big online brokers such as Orbitz.com and Expedia.com, which cooperate with Worldspan. The online service providers offer all the possible options from the GDS to the end consumers, ensuring choice and saving customer time and money.
Two thirds of users who have purchased a booking online visited at least three web sites before they paid, according research conducted by PhoCusWright. The behavior of clients who look for the cheapest price every time is another reason why online booking companies try to offer a complete
Service Package
including an air ticket, a hotel booking and a rental car. Users pay less if they buy the complete package. This is the so-called dynamic packaging. Expedia applied this method of trade for the first time two years ago, and presently more and more sites are focusing at this pattern of complex service provision. Through these 'integral solutions' online agencies are trying to stir the loyalty of their clients.
The big GDS - Galileo, Sabre, Amadeus and Worldspan - have been taking measures to stay in adequacy to the current situation. The next stage of the market competition will bring the next generation of software dedicated to corporate customers. Using special web applications a company will be able to buy online tickets at discounted prices and with a greater choice. It will hence be able to save financial resources by centralizing the management of travel expenses of its officers all over the world.
In spite of the fact that online selling airlines like EasyJet and RyanAir do not fly to Bulgaria, and online bookings in our country are done only by the small number of credit card holders, there are companies involved in this specific business. Since 2000 Worldspan, one of the four majorGDS, has been investing in the Bulgarian-American Company TravelStoreMaker.com (TravelStoreMaker.com). The company is basically involved in the development of an
Internet Booking Software Solution
for air tickets, hotel accommodation and car rental to sell to travel companies.
One year ago the Company worked with affiliate sites offering travel services. Any site owner could create virtual stores based on TravelStoreMaker.com technology and services. Since 2002, however, the Company has been working with travel agencies and airlines, says Alexander Grigorov, Marketing Manager of TravelStoreMaker.com. Air Malta and AIItalia have been using TravelStoreMaker.com's Internet Booking Engine (IBE) to execute online air ticket requests. The TravelStoreMaker.com IBE can be customized to work with restricted destinations, carriers, currencies and so on as requested by the travel agency or airline. TravelStoreMaker.com has also built a network of seven fulfillment centers - USA, Great Britain, Greece, Germany, Holland, Italy, Sweden and Bulgaria - to issue the online bookings made through its affiliate web sites. Currently, the software solution is utilized by over 30 online agencies in 21 countries worldwide. It also powers more than 2500 affiliate sites providing access to 455 air companies, 200 hotels and 44 car rental companies. As a further stage TravelStoreMaker.com will continue to develop the features and functionalities of the software in order to support corporate travel solutions.
Internet booking sounds optimistic, especially after the President of RyanAir Michael O'Leery announced in March the expansion of the business scope of his company to the ex-Soviet Union countries. The low cost carrier has held negotiations with most of the Eastern European airports and probably next summer will fly 'to this destination' as well.
By Alexander Boychev
Published in Capital Weekly
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