Online travel battle heating up: Southwest looking to dominate web space

Friday, April 13, 2001 | 11:06 a.m.

DALLAS -- Southwest Airlines is vying to be as big in cyberspace as it is in the nation's airspace.

The airline, which last year sold 30 percent of its tickets over the Internet, took a giant leap last month with the introduction of online hotel room bookings on its site, accessible at www.southwest.com or www.iflyswa.com.

The airline, which launched its Internet site in 1995 and began selling tickets on it in 1996, also began offering car rentals on the site in December.

But the primary mission is -- and will continue to be -- selling Southwest tickets, said Kevin Krone, vice president of interactive marketing, at the company's media day event at Love Field last week.

Krone said the company continues to tweak the site to make it easier to use and that is what's behind its exponential growth.

A study by Nielsen/NetRatings, an affiliate of the company that monitors television viewership, showed that in January, Southwest ranked second behind Travelocity.com in the percentage of Internet shoppers it attracts buying travel. According to the study, 14 percent of Southwest's 4.1 million unique visitors bought travel on the site that month.

That compares with 18 percent of Travelocity's 8.7 million visitors buying and 11 percent of No. 3 Expedia.com's 7.8 million visitors buying.

The Nielsen report showed Southwest's site was tops among airlines, ranking ahead of Delta and United.

Krone attributes the site's success to listening to customers and offering them what they want. Taking those suggestions gives southwest.com a decidedly different look. Also, the airline's strategy toward Internet marketing has made it somewhat of a maverick in the industry.

Industry maverick

Although southwest.com is becoming a viable competitor with Travelscape and Expedia, it only sells Southwest Airlines tickets. It also doesn't offer banner advertising, a revenue stream to most other online travel sites.

Southwest has chosen not to be listed on some giant travel websites. It's no longer on Travelocity because of a technical problem that developed on some flight reservations. It's never been on Expedia.com, the Microsoft Corp. travel spinoff company's site.

Krone said there was a time lag between Travelocity's booking of Southwest flights and the confirmation from the airline. As a result, some Travelocity customers were getting ticket-confirmation messages from Travelocity before the airline could verify seat availability. Unsuspecting customers would arrive at the airport thinking they had a confirmed seat, only to be denied boarding.

Since Southwest personnel had to deal with the problem, the airline opted to remove itself from Travelocity. Krone said Southwest could have paid more to upgrade its technology to solve the problem, but opted against it.

"Our feeling is that we want to have the control," Krone said. "If it isn't up to Southwest's standard of service, we don't want to be there."

Krone said because of that high standard, other companies want to sell Southwest tickets from their sites, even though the airline doesn't pay a commission on sales. Krone said he doesn't know how many of the smaller sites sell Southwest tickets. So instead, his focus has been on refining the site.

Some of the features southwest.com offers:

* Hotel room and rental car sales. Hotel rooms are offered though Galileo International, Rosemont, Ill., which has an inventory of about 49,000 properties worldwide. Galileo negotiates the hotel contracts, but Southwest can remove any hotel from the list. For example, Southwest won't list the Rio hotel-casino or Harrah's in Las Vegas because of business relationships those properties have with Las Vegas-based National Airlines.

Dozens of Las Vegas properties, from Strip resorts to neighborhood casinos, are offered on the Southwest site. Among them: MGM Grand, New York-New York, the Stardust, the Flamingo, the Las Vegas Hilton, Terrible's, the Four Queens, Bally's, Texas Station, the New Frontier, Imperial Palace and the Regent Las Vegas. Several small properties and chains also are represented on the site.

* An account status on Southwest's frequent-flier program, Rapid Rewards. The program offers customers free flights based on the number of flights they take, not the number of miles they travel. Free flights are awarded after eight round trips in a year. Customers also can receive awards through some hotel and car rental partners. Through December, customers who book tickets through the Southwest Internet site get double credit on Rapid Rewards.

* Notification of Click 'n Save Internet specials via e-mail. Southwest offers special discounts available only through the Internet. For example, the airline is offering $30 tickets to some destinations from Las Vegas this week and seats for $99 or less to any location, but they have to be bought online.

* E-mail receipts. The airline is using e-mail to send flight verifications and other receipts to passengers who book online.

* Cargo tracking. Customers who send freight on Southwest can track their packages via the Internet.

* Information on SWABIZ. SWABIZ is an accounting system offered as a service by the airline to business customers who want to track their travel expenditures. Roz Santangelo of Southwest's Las Vegas marketing office said the airline is projected to have 90 Las Vegas companies signed up in the SWABIZ program by midsummer and those customers will be able to access their accounts through a corporate identification number and a password-protected Internet link.

Coming changes

Santangelo said Southwest is working on another Internet program that is expected to be enormously popular -- the ability to change reservations online. Southwest currently offers customers credit when they change reservations on a restricted ticket. The ability to change reservations over the Internet won't change that policy -- but it will enable customers to make the changes themselves for the same expense it would take to go through an agent.

Krone said the push toward more Internet service and enabling customers to make their own reservations is cost-effective for the airline. He said it costs the company about $10 when a ticket is sold through a commissioned travel agency, about $5 through a Southwest reservation agent and about $1 over the Internet.

As Southwest continues to grow, the airline hopes to hold the number of reservation personnel it must hire in check, which will cut down on salaries, benefits and the buildings and equipment for the reservation agents. The airline said it also will keep fares down.

Southwest's Internet presence has a major impact on Las Vegas since airline websites accounted for almost 60 percent of air travel bookings in 2000, according to PhoCusWright Inc., a Sherman, Conn.-based research company concentrating on the online travel marketplace.

Southwest and other airlines have built their Internet relationships from existing programs that have enhanced the company's position.

For example, Southwest, America West and National airlines have extensive vacation package deals with local resorts. Southwest Vacations, the tour-packaging division of the airline, has similar relationships with other resort areas, like California, Florida, Texas and Arizona, and ski packages in Utah and New Mexico. But Santangelo said Las Vegas is by far the biggest destination draw for the airline.

Las Vegas, as a major center for conventions and meetings, also profits from special Southwest programs for groups. The airline has package deals it offers for groups -- when several passengers share the same itinerary -- and for meetings -- when passengers arrive from different places to a common destination.

Santangelo said conventions aren't the only groups that can take advantage of the package deals -- wedding parties and reunions also can participate and Santangelo said Las Vegas is a popular Southwest destination for those types of gatherings.

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