Online Travel Market Continues Surge

The marriage between the Internet and travel consumers has never been stronger, and brick-and-mortar travel agencies are paying the price, according to Gomez Advisors.

There are currently 15 percent fewer travel agencies than there were at the end of 1997, Gomez found. The vast majority of these agencies are the small independent firms who relied on ever-shrinking commissions from airline bookings to make ends meet.

“In many cases, it is too soon to see the effect that the Internet is having on brick-and-mortar businesses,” said Gomez Advisors senior analyst Krista Pappas. “Not so in travel. Agencies are closing across the country because they cannot compete with the robust product being offered by leading online travel sites. We don’t see any reason why this trend won’t continue.”

In terms of specific products being purchased online, the Gomez Advisors research shows that 60 percent of all airline tickets being purchased online are booked through individual airline sites. In 1999, consumers spent $3.5 billion on airline tickets purchased online purchased online, and Pappas expects that number to rise to $6.3 billion in 2000.

“While more people are logging on to purchase airline tickets, there will be a shift towards purchasing tickets away from the airline Web sites to the leading online travel agents such as Travelocity.com and Expedia,” Pappas said. “This shift will be due to the fact that airline sites simply aren’t offering the kind of comprehensive services, travel packages, and technology backbone that consumers are demanding.”

According to Gomez, the top three online travel firms, Expedia, Travelocity, and Preview Travel, now take in more than 40 percent of all online travel bookings. The online travel industry has experienced its share of consolidation lately. Expedia recently purchased Travelscape.com and Vacationspot.com, as the larger sites buy up smaller niche sites in an effort to dwarf smaller competitors. Gomez Advisors predicts that as the consolidation trend continues with Travelocity and Preview Travel becoming Travelocity.com, the top two firms will account for just under half of all Internet bookings in 2001.