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Online travel agencies trip but don’t stumble - yet

June 23, 2008 | Online Travel

Concerns about a bummer summer are forcing sites like Expedia and Priceline to offer creative, if risky, new incentives like rolling back booking fees and offering passengers more guarantees.

It’s already looking like a bummer summer for the travel industry. At the start of the season the Travel Industry Assn. predicted a 1.2% decline in trips domestically, but that now looks overly optimistic. Since then, gas prices have continued to climb and airlines have cut back on flights, raising fares and baggage handling fees to make up for rising jet fuel costs. That’s forcing online travel agencies to get even more aggressive, rolling back booking fees and offering passengers more guarantees. “We’ve eliminated fees on airline tickets, reduced fees on hotel rooms,” says Priceline.com Chief Executive Jeffrey Boyd. “We think customers are concerned about high prices and we’re trying to give them a little bit of a discount.”

The online agencies are in a bit of a bind. Not only are they wrestling with cash-strapped consumers, they’re also competing against airline, cruise line, and hotel companies that have accelerated their online marketing efforts in recent years. These “supplier” sites offer bonus frequent-flier miles and other perks for booking directly with them. According to market researcher comScore (SCOR), 59% of online travel shoppers stop at the agency sites first, presumably to comparison shop. But the majority of online travel revenues go to sites such as Marriott.com (MAR) and Continental.com (CAL). Last year the suppliers’ share of the $77 billion in online travel expenditures was 64%, up from 53% in 2003.

Get the full story at BusinessWeek

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