Airline sites grow faster than online travel agencies

Brad Foss

Friday, April 13, 2001 | 11:04 a.m.

NEW YORK -- Visitor traffic grew faster in the past year at the websites of major airlines than it did at online travel sites, a new study found, and Terry Trippler, a columnist at OneTravel.com, said people like his brother are to blame.

"I want to slap him because he browses on our site and then goes and buys his tickets on United so he can get his (frequent flyer) miles," Trippler said of his brother, who also receives a 5 percent discount on United's already-discounted online ticket prices. "That is a real carrot on a stick."

While the two most popular online travel sites, Travelocity and Expedia Inc., still grab more unique visitors each month than the top six airline websites combined, analysts and executives believe their dominance will be seriously challenged in the coming years by the airlines, which are offering exclusive incentives over the Internet to redirect this traffic.

Airline websites are the "sleeping giants" of the online travel sector, says Heidi Kim, an analyst at Jupiter Media Metrix. The research firm released data last week showing that unique visitors to airline websites increased by 26.1 percent year-on-year in February, compared with 7 percent growth for online travel agencies.

Combined, the number of monthly unique visitors to airline websites and online travel agencies grew to 30.1 million in February, compared with 24.4 million a year ago.

Even though airline ticket sales remain Travelocity's bread and butter, accounting for 55 percent of its 2000 revenues, the company hopes to increase sales of other products and services, which made up just 20 percent of its income last year.

"We're really driving home the fact that we have a great cruise booking service," said Michael Stacy, a senior vice president of consumer marketing at Fort Worth, Texas-based Travelocity. The company, which expects to report its first operating profit at the end of the second quarter, is also heavily promoting its car rental and hotel reservation services as well as the higher-margin business of selling vacation packages.

Stacy is quick to point out that Travelocity is still the leading online travel site, with nearly 7 million unique visitors in February. More importantly, Stacy said the site's conversion rate -- the number of visitors who actually made a purchase -- grew to 8.1 percent from 3.9 percent in the past year.

Nonetheless, he added, "airlines are getting a little savvier at running their websites."

Northwest Airlines, which had 58 percent more unique visitors in February than a year ago, according to Jupiter Media Metrix, also has increased ticket sales on its site by 25 percent.

Fifty percent of Northwest's online ticket sales still come from third-party websites, but the company is hoping to further reduce this reliance.

The Minneapolis-based airline recently said it would no longer pay commissions to travel websites, a move industry watchers believe is a harbinger of more intense competition in the future between airlines and online ticket sellers.

"We are obviously leery of having new intermediaries coming between us and the customer," said Al Lenza, Northwest's vice president of distribution planning. The fear, Lenza said, is that the more customers rely on Travelocity and Expedia, the more these companies will want to charge the airlines for such services.

To better retain existing customers and woo new ones, Northwest offers 8 percent discounts to people who cash-in frequent flyer miles online, gives away 1,000 free miles every time a purchase is made at nwa.com and allows passengers to print boarding passes directly from their computers.

United Airlines, American Airlines, Delta Airlines, Southwest Airlines and other major carriers also offer special deals on their websites.

Tom Underwood, a Legg Mason analyst who follows online travel sites, believes travel websites will have long-term success selling airline tickets because consumers "don't have time to go to the six major airlines" to find the best Web fares available.

However, Underwood sees a different threat on the horizon.

Start-ups such as SideStep and Qixo have developed software, known as "bots," that scour the websites of airlines, hotels and car rental companies for free and find the lowest fares available. Web surfers who download software from SideStep, for example, can search fares at 27 airlines at the same time they browse, say, Expedia -- parent of Travelscape.com in Las Vegas.

If Santa Clara, Calif.-based SideStep can convince airlines to pay a fee for customer referrals, "it would have enormous potential," Underwood said.

Under fire from all sides, the online travel sites are also making changes.

Bellevue, Wash.-based Expedia, for instance, is cutting deals to sell "net fares," whereby the airlines agree to give specially priced tickets to the website, which profits by marking them up a notch. Another weapon is the "opaque fare," which are extremely discounted tickets offered to consumers, who must agree to buy them without knowing which airline, or the precise time, they'll be flying.

Any anger Trippler at OneTravel has toward his brother, is eclipsed by his enthusiasm for the lively competition in the online travel sector.

The top five airlines and the top five travel websites "are going to have a real battle," Trippler said. "And that can spell nothing but good news for the consumer."