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Of all the industries the Internet was predicted to put to death, the travel
industry is certainly one that has seen a vast portion of its customers move on-
line. As an information source the Net is perfect for finding out about holidays
that range from backpacking in the Borneo rainforest to booking a package
holiday for the family in Tenerife.
But while travel agents were initially thought to be facing a grave threat with
the Net, it's worth taking a hard look at the on-line travel companies who are
luring customers away from real world shops. Many of the premier firms with on-
line travel operations have had a history selling holidays in the off-line
world, such as Budget Travel and Direct Holidays.
Certainly the travel business is a rich hunting ground for the intrepid business person. In the US the on-line travel
business is expected to reach USD29.4 billion in value by 2003, nearly four times the 1999 level, according to a recent
Forrester Research report. And even though on-line travel is still in its infancy, travel products are sold over the
Internet more than any other consumer product, said Forrester.
The dollar volume of travel sales on the Web currently surpasses that of
software, books, music, clothing, games, toys, videos and sporting goods
combined. Ireland is among those countries warming to Internet travel --
according to Amarach, around 24 per cent of Irish on-line consumers have bought
travel products.
Yet while the Internet is certainly a perfect medium for the travel industry, it
doesn't necessarily follow that it is ripe for colonisation by straight-to-the-
Internet travel companies. Firms need to be bonded in order to book flights and
other travel deals as a travel agent, giving traditional travel firms a leg up
on their pure-play Internet rivals. Offline travel firms can also leverage their
experience and their branding when they decide to bring their services on-line:
many customers want more than simple travel booking tools, they want the advice
and the specialist information that can help them decide what trips to book.
"People who want to make money out of the Internet have to have travel products
that are suitable for sale on the Internet. Not every travel company
automatically has that," said Ethel Power, marketing manager for
clickandgonow.com, an Irish site that specialises in hotel reservations. "The
product needs to be simple. With our product, people know what they are paying
for, most people are well used to booking hotel rooms at this stage. With
companies like Ryanair, again the product is simple. Customers are merely
booking an A-to-B flight and they know what to expect. But once the product
starts to get complicated that is when people start to become nervous.
"Say for instance, a customer wanted to book a round the world ticket, where
they stop off at numerous destinations," she continued. "The first thing they
start to think is 'what can go wrong?' and the answer is, 'A lot!' Bags can go
missing, flights can missed, hotels could be awful. If there is a chance this
could happen then they don't want to be e-mailing the customer service team on a
Web site, they want to ring a travel agent. Even during the booking process of a
complicated product like this, people want a real, live travel agent to hold
their hands."
Branding is also vital. Clickandgonow.com has gone to great pains to promote the
fact that one of its shareholders is Gillian Bowler, the Irish entrepreneur who
set up Budget Travel at the age of 19. Bowler is the company's brand and
Clickandgonow.com is anxious to put that across.
Every company we spoke to for this article had originally had a successful
presence in the off-line world that it publicises, even if the presence was only
a small one. According to Power, customers like to know you have had physical
premises a couple of years before you moved on-line, since it reassures them the
company is not simply going to disappear with their money.
THE PROFIT IS THE THING
Even once travel firms make the move on-line, being profitable isn't easy
compared to offline travel businesses. Ebookers.com is the on-line incarnation
of Bookers, a pan-European network of travel agents. Ebookers.com allows people
to book hotels, flights and car hire on-line. CEO Dinesh Dhamija said that
moving to an Internet business model can be hard and it takes a long time to see
the profits rolling in.
"The Internet is a completely different culture and sometimes the staff you have
in the real world, while they may be very successful, can find it hard to adjust
to," he said. "It does require a different company culture and it can be very
hard to do business with two cultures in the company. We found it easier to
actually split the company in two and call the Internet half Ebookers and build
up a separate management team."
While it is possible to be profitable in one year in the real world, that's
never going to happen for an on-line travel agent. "There is a lot of investment
to be made in the first year, in terms of staff, technology and just as
importantly, publicity," said Dhamija. "A lot of companies, like ourselves, have
a presence in more than one country, and if you are going to spread yourself
across several different markets then you need to advertise quite extensively.
If customers don't know you are there, they won't come and do business with
you."
Power said, too, that companies looking to broach the on-line travel arena
mustn't forget basic rules of business. "The first question people should ask
themselves is, can their product make them a profit?" Power said. "If you look
at the travel industry's business structures most travel agents only have a
profit margin of between eight and 10 percent once they have paid commissions
and fees to the myriad other companies they need to do business with. If your
product traps you within that profit margin, how are you going to make money on-
line considering the amount of investment you have to make and how will you
differentiate yourself for customers?"
On-line travel firms who sink because they can't reach profitability can be bad
news for the market as a whole, since the bad PR can put customers off buying
travel on-line.
Other on-line travel firms, meanwhile, insist it's not essential to run up
enormous marketing costs to promote a Web travel service. Fly2thesun.com is one
of the better known Irish sites that lets people book flights, accommodation,
car hire or the complete package on-line. Fly2thesun.com is an offshoot of
Skimcneill.com, the ski company that grew up out of one shop in Northern
Ireland.
According to Michael Ferguson, marketing manager for the company, the marketing
budget is only in the tens of thousands and the one shop has not been augmented.
Ferguson says his success is due to the all-important word of mouth. "The
quality of the customer service you supply is vital, and we have trained staff
who can talk directly to customers and give them all the information they need,"
said Ferguson. "The quality of staff you have is crucial to an on-line travel
company. No one is going to spend IEP600 to IEP1000 on a holiday with you
without talking to a representative first. We have sold some holidays on-line
without speaking to the customer, but 99.9 percent of the time people use a
combination of Internet and phone."
While Ferguson acknowledges that recent dot.com failures would make people wary
of branching out on-line, he says his experience shows customers are confident
about buying holidays via the Internet.
While he wouldn't be drawn on exact figures, he claims Skimcneill.com pulled in
a respectable number of orders in its first year of business and many of those
people came back the year after. "You've got to have experienced, trained people
to back your product up," he said. "People come to you armed with so much
information now that it doesn't take them long to figure out [whether you] know
what you are talking about."
Che Golden is at
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