MARKET FOCUS: Taking in the sites

The abundance of travel websites is good news for consumers.

The abundance of travel websites is good news for consumers.

The internet has significantly affected travel industry distribution and put phenomenal power in the hands of the consumer. Online travel agency sites have evolved and proliferated since Travelocity and Expedia went online in 1996, and they're now enjoying a comfortable stride with sizable revenue gains, while the overall travel market is still limping. PR was a valuable partner in the industry's beginnings, and will continue to play a key role in its formidable future.

"PR for online travel is about educating the customer," says Andrea Riggs, Expedia's director of PR. "Once we figure out what our customers really want, we use technology to innovate it and PR to communicate it."

A high-flying sector

Total online travel sales increased 45% in 2002 to $35 billion and are projected to reach $43 billion this year, according to Jupiter Research. PhoCusWright, a research company specializing in online travel, estimates that the internet will account for nearly one-third of all travel sales by 2005.

While the market is split almost evenly between online agencies and supplier-branded sites, the former category is dominated by Expedia, Travelocity, and Orbitz, which took 73% of all online agency sales. (These three sites are considered retailers, whereas sites such as Priceline and Hotwire are considered discounters. Discounters market themselves to people who are primarily concerned with price, while retailers publicize an array of services beyond tickets.)

Forty-five percent of online agency bookings are airline tickets, but sites have recently seen growth in hotel rooms and car rentals. Dynamic vacation packages and foreign supplier sales (estimated to increase 170% from 2002 to 2005) are seen as the next big sales stars. Business travel is also being courted and should expand as more sites develop adjunct products and sites to serve managed sectors.

Most in-house PR teams are small (Travelocity has the largest, at seven staffers), and all but Priceline retain outside PR counsel. Site59, which has no in-house team, has a $250,000 PR budget and is represented by PJ Inc. Expedia partners with Edelman and will spend more than $260 million in marketing this year. is handled by Fuhr & Associates and has a $60 million combined marketing budget. Fleishman-Hillard represents Hotwire, which will spend about $40 million combined. Vollmer Public Relations, with roots in consumer product PR, has been with Travelocity since 1997, and Brodeur Worldwide helps with regulatory issues.

Consolidation and shifting ownership have made relationships between sites somewhat fluid. For example, Travelocity was founded in 1995 inside Sabre, a travel industry veteran and heavyweight created by American Airlines, and it dominated in the beginning. Sabre divested from American in 2000 and sold part of Travelocity, but bought it all back last year. It now also owns Site59 and GetThere (its managed-business travel site).

Expedia was created inside Microsoft in 1994 and is currently owned by InterActiveCorp, which acquired this summer. and Travelocity ended a working relationship earlier this month, and now the hotel site is cross-selling products with old rival and new sibling Expedia.

Expedia recently unseated Travelocity as the top travel site. "We were a distant second for the first couple of years," Riggs says. "I attribute [Expedia's success] to a relentless focus on providing a great customer experience and figuring out what they want and value. We use PR to educate consumers about where they can find these great tools we know they want."

Orbitz, launched in June 2001 and owned by American, Continental, Delta, Northwest, and United Airlines, got a late start but came on strong. It quickly became the number-three player, despite being clouded in early 2000 by antitrust claims that its airline owners and the more than 40 domestic and foreign airlines it did business with would reduce competition and harm consumers. The Department of Justice cleared Orbitz in July.

Much of Orbitz's communications efforts have been aimed at defending itself, and some say its consumer focus has taken a back seat to its regulatory troubles. The site contains extensive documentation aimed at its defense, including a "Bias Buster," wherein Orbitz regularly provides examples of how both Travelocity and Expedia "manipulate search results and mislead consumers."

A planned $125 million IPO was shelved last year because of the investigation, but Orbitz refiled with the Securities and Exchange Commission late last month. On September 2, it named John Samuel, a 16-year American Airlines veteran, EVP of consumer travel in charge of marketing and leisure travel, which may signal a new consumer focus.

Getting off the ground

Internet travel agencies evolved around customer needs. Focus groups and surveys determined that customers wanted value, convenience, and the ability to comparison shop, and technology was developed to better facilitate and accommodate sales. Travelocity and Expedia led the way.

Al Comeaux, Travelocity's VP of PR, says PR is the brand's foundation, and it considers journalists another market. But, he adds, they were a market that required development. "In 1996 we were missionaries doing missionary work."

Vollmer VP Judy Haveson says the education campaign was sometimes as frustrating as it was fun. "Some media outlets didn't have wide internet access," she recalls. "So we tried to find out when journalists had trips coming up and help them maneuver the site. When they didn't have access, we planned their trips and faxed them the pages."

Internet popularity grew and sites developed rapidly. They churned out new features and services, and PR teams touted them in turn, helping differentiate them in the growing field of competition.

"We launched in the fall of 2000 in San Francisco when internet companies were dropping like flies," says Amy Bohutinsky, PR manager at Hotwire. "Due solely to PR, we had the ninth-largest traffic e-commerce site launch. Being a latecomer, we learned from our competitors. We built the company with PR."

Media interest shifted from tech-categorized stories to consumer-interest stories as online travel became more mainstream and brand identities became more cemented. These days, pitching is more often geared toward consumer-relevant information, rather than site-centric news. "People weren't covering our latest products like they used to, and we realized that this 'build it and they'll cover it' was over," says Comeaux.

Brian Ek,'s VP of communications, finds that databases provide valuable trends and generate far more coverage than product pitches. "Media interest in mining databases for trends is significant," he says. "It's become almost a cottage industry here."

Comeaux says that sharing similar information has helped make Travelocity a resource that journalists seek. For example, recent coverage of its "total pricing" (a feature that allows you to see rental car total cost in advance) got a huge boost from database statistics showing Texas as home to six of 10 cities with the highest jump from base price to total price. president Bob Diener says tips and travel information are always important. He talks to the media almost every day and has relied on PR since 1991, when the company was a call center. "I started on radio shows, telling people how to save money, and I ended up on KGO San Francisco for 10 years. It turned into hundreds of radio shows and eventually TV shows."

Travelocity's "resource to journalists" projects are another step in media mingling. As editor-at-large, Amy Ziff writes a travel column that is widely published. Rally Caparas, Travelocity's "Eye on the Sky," is a former air traffic controller who regularly appears on CNN and CNN Headline News with travel-delay reports.

So long to the offline agency

Online agencies have delivered for consumers because they're relatively inexpensive distribution channels (PhoCusWright estimates that online distribution has saved airlines about $200 million). And they're particularly powerful marketing outlets for smaller suppliers. Offline travel agencies can't compete; Airlines Reporting Corp. says about 200 per month have been shuttered in the last two years.

"Nineteen million people came to our site in July," Riggs says. "Our marketing managers help suppliers, and we provide tremendous merchandising - photos, maps, amenities, a lot of detail. Customers know what they're getting, and suppliers can showcase what they have in ways they couldn't before."

Discounter relationships with suppliers are different because degrees of anonymity are necessary to protect deeply discounted brands. "My goal is to keep my suppliers under the covers," Ek says. "They trust you're going to be judicious and [they're] not going to be in a news story."

Industry analyst James Cammisa notes supplier/site relationships are still being defined and suppliers are concerned about pricing and better inventory control. "The internet has become a bazaar where consumers go from stall to stall," he says. "Prices will always remain low if the consumer has access to information and is able to compare. Where wares are openly displayed, the consumer is king."

Gross Online Bookings

Site 2002 2001 % Change

(millions) (millions)

Expedia $5,288 $2,903 +82%

Travelocity $3,500 $3,128 +12%

Orbitz $2,500 $800 +213% $1,030 $650 +58%

Priceline $997 $1,162 -14%

Hotwire $550 $250 +120%

Trip Network $420 $300 +40%

(Cendant Corp.)

WorldRes $219 $246 -11% $192 $50 +284%

(Cendant Corp.) $99 $99 0%


Source: PhoCusWright

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