Internet companies that sell airplane tickets? In this economy? It might seem to be a business trapped in a vortex of negative trends.
But here's a surprise: Despite the Internet malaise, economic slowdown and fears of terrorism and airline crashes, online travel companies are doing rather well.
The big public ones -- Travelocity, Expedia and Priceline -- had operating profits in the third quarter and expect the same in this quarter, too. Sales are down, of course, from what had been expected before Sept. 11. But the online companies seem to have gained a bigger slice of the smaller travel pie. That is good news for those companies and their investors, as Thanksgiving opens what could be the most uncertain holiday travel season in memory.
Online travel, in fact, has been bucking the trend all year, growing much faster than other forms of electronic commerce as customers are lured by the convenience and, often, the lower prices offered by the travel Web sites. Airlines and other travel-oriented companies have encouraged this shift, because selling online is cheaper for them than using traditional travel agents or telephone reservation centers.
If anything, the travel turmoil since Sept. 11 has actually accelerated the transition. Airlines are no longer merely eager to cut costs -- they are desperate to do so. And consumers see the Web as the best way to find the deep discounts that tour and travel companies are offering to lure travelers back.
"Travel was the bright spot on the Internet before," said Rick Braddock, chief executive of Priceline. "And guess what? It's still the bright spot on the Internet."
Even the crash of American Airlines Flight 587 last Monday seemed to slow online bookings for only about a day. ComScore Networks, a company that monitors the Web activity of 1.5 million home and small-business Internet users worldwide, said that purchases at travel sites fell 29 percent last Tuesday, the day after the crash, compared with a week earlier. But by Thursday, bookings were actually 5 percent above the previous week's level.
"As the evidence has mounted that Monday's crash was not a terrorist attack but rather a mechanical accident, travelers' confidence has returned and they have resumed booking air travel," said Gian Fulgoni, the ComScore chief executive.
The travel impact of Sept. 11 does linger. ComScore's data showed a 48 percent decline in online airline bookings the week after the Sept. 11 attack. And volume has only slowly climbed back. In the week ended Sunday, Nov. 11, online travel purchases had reached US$399 million -- still about 7 percent below their level in the week ended Sept 9. Overall, the airline industry is operating at only about 70 percent of its normal volume, and hotel revenue is about 80 percent of pre-Sept. 11 levels.
Cruise and vacation packages doing well
Travelocity says its revenue is 70 percent to 80 percent of what it had previously expected for October and November. But cruise and vacation package sales are doing even better than expected before the terrorist attacks, because of the heavily reduced prices now being offered by travel companies.
At Expedia, sales are 80 percent to 85 percent of pre-Sept 11 levels. Expedia's revenue of US$80 million in the third quarter was less than the US$90 million it had been expecting, even though it was up 90 percent from a year earlier. This quarter, the company expects sales of US$65 million, up 47 percent from last year's fourth quarter.
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