<B> Online Sales Heat Market</B>
By Cheryl Rosen
1998 has given travel suppliers a glimpse of what is possible when the Internet meets the $3.2 trillion travel market--and they appear to like what they see.
As they closed their books on the year, many travel suppliers said they were surprised to find their online revenues running double the 1997 figures, up from 1 percent--a figure that 12 months ago many believed would never rise significantly--to 2 percent of total sales.
At United Airlines, for example, director of e-commerce Mark Koehler said Internet sales are "somewhat ahead of the forecast" predicted by analysts like Forrester Research, who had projected the Web would handle 1.8 percent of travel bookings, $1.5 billion worth in all, in 1998. United closed out the year with "slightly better than 2 percent" of its volume coming through its own electronic products, and about the same volume again through other travel-related Websites, Koehler said.
On the 1998 revenues of $4.3 billion it reported to stockholders, that would mean United's Website and automated systems sold $86 million worth of tickets, saving the carrier about $7 million in travel agent commissions.
United expects to beat industry projections in 1999 as well, and again double its online volume, Koehler said. Forrester projects an increase of 87 percent in online travel sales in 1999, to $2.8 billion or 4.2 percent of the market, and then by another 68 percent in the year 2000, to $4.7 billion or 6.8 percent of the market.
United has noted the "significant reductions in channel costs" made possible by electronic commerce. Koehler said that booking a typical $300 ticket through a travel agent costs United 17 percent of the ticket price and an airline employee sale costs 12 percent--but an electronic booking costs just 6 percent. In 1997, Koehler figured, United saved $2.6 million on customers looking for flight availability information, $461,000 on arrival and departure information, and $686,000 on general information by shifting customers off the telephone.
Into the future, United is looking at using the Internet not just to save costs, but also to get closer to its customers. Among other ideas, it is considering offering financial services as well as travel. In the corporate booking arena, it will "align with companies already in that space," as in its recent investment in Internet Travel Network, rather than develop its own system, Koehler said.
<B>Hilton Builds Global Online Strategy</B>
Hilton Hotels, meanwhile, is focused more on the global possibilities of an online travel marketplace that it estimates will reach 228 million potential customers--almost 150 million of them outside the United States--by the year 2000.
Hilton has created a corporate Internet strategy board to garner senior-level support and "develop a global viewpoint" for its online products and help "figure out how to put our toe in the water and develop competency models" for online commerce on a global basis, said marketing distribution vice president Bruce Rosenberg.
Hilton is getting 25,000 visitors, and more than 200 reservations, a month over its current English-language site.
"We're anticipating significantly less revenue from travel agencies and putting more money into" Web development, Rosenberg said. Targeting first the largest non-U.S. market, with 5.2 million Net users, Hilton is building a Japanese-language site and considering selling airline tickets in 1999. In addition, "my guess is we'll go to a simpler rate structure," with fewer rate alternatives, to simplify the online booking process, he said.
For Internet startups, though, the allure is more winning a piece of the market by providing rock-bottom prices. TheTrip.com by June will release IntelliTrip 2.0, a low-fare search product that will scan the Internet--including airline, GDS and travel agency listings as well as unpublished Internet specials--to find the lowest possible air fares. "We can integrate GDS and Web fares, and we'll even have Icahn's TWA inventory in there," said president Antoine Toffa, referring to a private inventory of TWA seats Icahn inherited when the carrier went belly-up.
Toffa said the potential for profit in breaking into a total travel market of $3.2 trillion--in which the largest distributors, American Express and Carlson, control only a single percentage point of inventory--is a huge lure for developers. "We feel the corporate market is the primary marketplace for disintermediation," Toffa said. "The largest buyers will go direct, but the smaller ones will use a functionality like IntelliTrip that allows them to see what's available on the Web."
At the GDS level, meanwhile, Amadeus this quarter is launching three products it's been promising--one for the desktop, one for corporate enterprise systems and one for travel managers. In the first category is Corporate Traveller, a public online booking site now launching in Europe. In the second, SAP this month will begin rolling out its Amadeus-linked travel module to three corporate customers, one each in the United States, France and Germany. For travel managers, Amadeus will offer World Zoom, a browser-based database they can access to manipulate cubes of data over the Internet, said vice president of product strategy Philippe Chereque.
While some may think it is coming late to the market for online travel booking, Amadeus hosts 2,000 private-labeled Websites, Chereque said, including those of Finnair, Varig and Nyman & Schultz, the Swedish agency owned by American Express.
Chereque said the GDS this year will "announce several partnerships with big players in Europe to develop online travel and full e-commerce platforms."
Also new in 1999 will be products for travel agents, including ITA, which graphically displays both airline schedules and fares at the same time on a single screen, and Project Vista, offering browser-based access to the Amadeus host with the goal of "eliminating travel agent training."
Customers also can expect to see new Amadeus products enabling agents to book cruises and sell travel insurance online.