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Bear's Market
Kirby's Korner · May 19, 2000

This week has seen a flurry of reports and studies that purport to provide a clue about how we'll be buying travel a few years from now.

The most talked about report does not paint a pretty picture for most online travel agencies. But it also doesn't provide much succor for agents in the brick-and-mortar world.

The volume of travel sales conducted online is expected to expand, but the number of choices consumers have as outlets for those sales will contract, according to the experts. And, in the meantime, travel sales online will force real-world agencies out of business.

I don't agree with many of these conclusions, even though I was quoted in the Industry Standard recently as saying: "I think we are going to see two or three megatravel sites on the Internet," and that other sites "have to somehow distinguish themselves. That could be through extra content they have or through specializing, like being the best skiing travel site." As the U.S. president might say, "It depends upon what your definition of 'mega' is."

The facts first.

Investment banker Bear, Stearns and Co., which is just starting to cover online travel stocks, released a report concluding that 80 percent of the "1,000 Internet sites related to the travel industry" would fail. The company also said 25 percent of travel agents will lose their jobs as the sales on the Internet expand.

I challenge the basic assumptions of the report. First, I remember doing a search on Yahoo! three years ago for travel-related sites that maxed out at a thousand. Today, surely, many multiples of a thousand sites are somehow related to travel.

Second, many brick-and-mortar agencies are in trouble, but that's more because of decreased sales commissions than it is because of competition from the Internet.

Despite names such as American Express, the American landscape is dotted today with local and regional travel agencies. Many, certainly, are being gobbled up by larger companies -- as the one I use was by Navigant International.

But I am not yet convinced that consumers are going to forsake their favorite online travel agencies en masse and move to only a handful of Web-based travel sellers -- because they haven't left their real-world agencies to deal only with the mega-companies.

That groups of airlines and groups of hotels are planning to create online agencies only supports my assumption that there is room on the Web for more players.

Other studies support the idea of continued online travel growth. Online travel industry cheerleader Jupiter Communications issued a study predicting that leisure travel and unmanaged business travel sales will reach $28 billion online in 2005, a large jump over $6.5 billion in 1999, but a growth rate less than what's been seen during the past few years.

Business travel -- both managed and unmanaged -- will reach $20.3 billion in online sales in 2004, according to a Jupiter competitor, Forrester Research. The company sees a "sizeable" opportunity for Web retailers that court unmanaged business travelers -- the Trip.coms and Biztravel.coms of this world.

And a report from online travel consulting firm PhoCusWright this week gives comfort to travel agents, both online and off. That company concluded that price is the reason people purchase airline tickets online. Seventy percent of 500 "online travelers" studied said they could get the best price when dealing with e-agencies or their brick-and-mortar counterparts, while only 47 percent thought they could get the best price dealing directly with airlines.

We'll see consolidation in the online travel field; indeed, we already have. But the business is growing at such a rapid pace that that it won't fall into the hands of only a few.

David Kirby is the editor of Interactive Travel Report. His column appears on Friday. You can reach him at david@ticked.com.