As Myspace and Friendster can readily attest, being the first at something in the online space does not guarantee market dominance.
Travelocity, when it emerged from Sabre in 1996, pioneered the online travel agency (OTA) space. But in the 16 years since, it has fallen sharply behind its competitors in terms of online traffic.
Presumably, it has also fallen behind in revenue, though as one of the four major OTAs that is not public, it does not disclose its financial results.
Despite the deterioration of is market share, Travelocity’s leaders, along with several industry analysts, say the OTA is on an upward trajectory under the leadership of CEO Carl Sparks, who recently celebrated his first anniversary on the job.
Sparks, the former president of Gilt Groupe, also spent time at Expedia and Hotels.com. Now, his mission is to refocus Travelocity.
“We are very selective about where to place our bets,” Sparks said. “We want to do fewer things but do them really well.”
The “things” of which he speaks include increasing Travelocity’s sales of hotel products and packaged vacations and strengthening its position in the mobile and tablet space. And, yes, it also includes bringing back Travelocity’s iconic “Roaming Gnome” mascot.
One of the first decisions Sparks made after arriving at Travelocity was to not let the company rest on its laurels as the first Web enterprise to enable consumers to book travel online. It was a novel idea in 1996 that many wonks thought would mean the end of traditional travel agents.
The proposition was not unique for long. By 2000, Travelocity faced stiff competition from new players Expedia.com, originally backed by Microsoft’s deep pockets, and Orbitz.com, which the airlines were just launching in what eventually proved to be a quixotic attempt to protect their flank.
Sixteen years later, both have surpassed Travelocity in online traffic, as has Priceline.com.
Recent data from Compete, a website traffic-measurement firm, shows that in terms of unique visitors, Travelocity and Orbitz have essentially taken turns occupying the bottom rung for most of the last year and a half. The data also show that Travelocity’s traffic actually topped Priceline’s in June 2010 but has since fallen sharply below it.
Hitwise, which tracks Internet usage, found that during this past April, Expedia had nearly 42.3 million unique visitors, the most of the four major OTAs, accounting for a 35.5% share of the market (see chart).
Priceline.com followed, with a 27% share. Orbitz came in third, with a 19.9% share, and Travelocity was last, with 17.5% of the market.
These numbers are not lost on Sparks. In an interview with Travel Weekly, he focused on several areas where he believes the OTA needs to improve. So far, he said, the changes are working.
“The bottom line is we are seeing growth again,” Sparks said. “In the first quarter this year, we grew in our Asia business, our North America business and our Europe business — in all three markets, positive transaction growth. That’s the first time we’ve seen that in a long time.”
To get there, Sparks first made some behind-the-scene changes, such as adding management leadership with e-commerce experience. He also consolidated the staff, closing Travelocity’s New York and San Francisco offices and bringing everyone under the same roof in the Dallas area.
“It’s a turnaround situation,” said industry analyst Henry Harteveldt. “Carl got there, and lot of what he has to focus his attention on is behind the scenes ... on being a good leader and getting the management situation stabilized and helping to create a culture where there is more collaboration.”
Harteveldt, principal of Atmosphere Research Group, said that Sparks came with the right kind of credibility, perspective and experience to lead Travelocity forward, but he added that it will be a challenge.
“Travelocity’s descent happened a long time ago,” Harteveldt said.
He noted that while Expedia was getting into the merchant business, bought Hotels.com and made an aggressive global expansion, Travelocity remained too focused on air for too long.
“Not much innovation has occurred lately with Travelocity, and for Travelocity to compete — and compete credibly — against strong firms like Priceline, Expedia and Orbitz, it has no choice,” Harteveldt said. “They’ve got to up their game.”
Sparks, he said, brings from Gilt an understanding of merchandising and consumer behavior, as well as how to present offers, products and services to consumers “in a compelling, evolving and engaging manner.”
Sparks said he is aware of the air-centric issue that Travelocity has, which has also been a major problem for Orbitz. Neither OTA shifted its core business away from air enough, despite the fact that air sale margins have historically been much lower than the margins for hotel bookings and vacation packages.
“Air is really important, and we like growing that, but we need to grow our mix of hotel, package and car, as well,” Sparks said.
Sparks, much of whose background touched on how to grow hotel business, said Travelocity had not done a good enough job marketing hotels and converting sales.
“A key area of focus is improving our marketing and conversion and content on hotels,” he said.
He said that Travelocity is already seeing “really good traction” in this area with many key markets in double-digit territory.
“We could double or triple our hotel business here,” he said.
Douglas Quinby, an analyst with PhoCusWright, said Sparks’ focus is in the right place, and he commended Sabre for bringing him on as CEO.
“It’s really good to see Sabre and Travelocity reach outside to bring in somebody with a pedigree in hotels and online retailing,” Quinby said. “That’s what this market has evolved into.”
To compete, Quinby said, OTAs have to focus not only on hotels but on international sales, and to a lesser extent, mobile.
He also noted that in the current environment, especially in the very mature U.S. market, the OTAs are in “a catfight for market share.”
And winning that fight, Quinby said, is “really about being extraordinary online marketers and merchandisers.”
Sparks said Travelocity has “doubled down” on its investment in the mobile space, and its global mobile platforms have yielded “fantastic results,” not only seeing 300% to 400% growth but with highly incremental results.
He said he learned from Gilt that mobile consumers behave differently from website users in ways that range from the time of day they log on to the product they eventually buy.
“You see a huge skew to last-minute bookings with mobile,” Sparks said. “This suggests a greater propensity to be an incremental, impulse purchase.”
Part of that commitment involves speed, Sparks said, and the company is now focused on “acting more like a fast-paced e-commerce company. ... You have to raise your game on speed, and how quickly you get innovations out to market.”
As an example, he cited Travelocity’s iPad app, which he said was developed faster than any of its previous points of sale and is still the only one of the major OTAs’ native apps that enables users to book air, car and hotel.
Sparks is also focused on social media and user-generated content, and he has incorporated an “ask and answer” section on the site to enable consumers to have conversations about hotels not only with the Travelocity team but with hoteliers, as well.
“If we can get consumers asking questions and us answering them, we create a really engaging experience,” Sparks said.
While it might seem trivial, Sparks also wants to reclaim the focus on Travelocity’s well-known Roaming Gnome mascot, which he believes represents to consumers the promise of good value.
“One thing that made Travelocity successful was focusing on the Gnome,” Sparks said. “We are going back to the roots.” Follow Johanna Jainchill on Twitter @jjainchilltw.