hen the major online travel sites took
root, the bulk of their business was in the leisure market, with an
emphasis on individual travel components.
Air tickets and hotel rooms represented the majority of the
volume, and suppliers viewed the sites as offering a new
opportunity to move last-minute, unsold product.
There was a belief -- probably spurred by wishful thinking on
the part of traditional agents -- that the online outlets would be
effective only if the travel products they sold were simple. More
complex types of travel, it was argued, would remain the province
of the offline distribution system.
But it has now become clear that the major online players have
opened up a second front involving two strategic changes. First,
they have moved swiftly from concentrating on individual components
to offering more complex leisure products. They have produced
significant amounts of cruise business and, with the introduction
of dynamic packaging enabling users to put tour components
together, they are gaining momentum in that category.
In addition, the three major players, Expedia, Travelocity and Orbitz, have
shifted from their initial focus on the leisure sector and have
embarked on an all-out campaign to establish themselves as
competitive vendors for top corporate accounts. They are seeking to
wrest market share from the big offline players in that sector, and
their efforts are not going unnoticed by the large corporate
agencies.
It would be easy to assume that the result will be a battle
royal for the major corporate accounts between traditional travel
management companies and the online giants. That might well happen,
but my guess is that accommodations will be made to preclude a
knockdown, drag-out fight.
A study of the history of competition among 800-pound corporate
gorillas will show that massive businesses with unlimited capital
often prefer to join rather than fight each other. They usually
find a way to get together, sometimes for better and sometimes for
worse.
Getting together could mean mergers and acquisitions but it also
could mean joint ventures that are designed to combine the
expertise of the traditional vendors with the dazzling technology
of the online firms.
Expedia already has shown its interest in acquiring a
traditional business agency with its acquisition last year of
Metropolitan Travel in Seattle. That deal could pale in comparison
to what we might see in the near future.
One thing is clear: The big offline travel management vendors
and the major online companies all have deep pockets and could
cause each other much grief. The greater likelihood is that they
will see the benefit of getting together.