For the first time last year, online sales of travel services exceeded bookings through traditional sales channels, according to PhoCusWright, a Sherman-based company that researches the travel industry.
Also for the first time, however, online sales did not achieve a double-digit percentage increase from the year before, likely a result in part of the slowing economy, but also a possible signal that travel agencies are blunting the assault on their industry by the likes of Expedia Inc., Orbitz Worldwide Inc. and Norwalk-based Priceline.com Inc.
Travel agencies booked $110 billion in travel in the United States last year, or 41 percent of the total market. PhoCusWright calculated the figure in part from surveys of 1,900 agencies.
The shift of flight, hotel and rental car bookings online has eroded agency commissions, PhoCusWright found, forcing agencies to focus on complex trips featuring cruises, exotic “adventure” vacation packages, and independent itineraries requiring experience and contacts in the destination markets.
The strategy appears to be working: agencies reported having a 7 percent profit on average in 2006, according to a separate survey in April by the American Society of Travel Agents (ASTA) and respondents indicated they expect improved profits this year despite high travel costs; airline bankruptcies that are complicating travel bookings; a low dollar abroad and the proliferation of online competitor services.
ASTA is fighting legislative efforts in Massachusetts and Florida to impose fees on hotel bookings made by travel agents.
The Fairfield County area generated $2.6 billion in bookings for both domestic and international travel in 2005, according to the most recent statistics published by the Travel Industry Association of America. That activity supported a local work force numbering more than 16,000 people.
Under its “Name Your Own Price” program, Priceline.com allows patrons frequenting its site to make offers on travel reservations and services at rates they dictate. In the past few years, the company has acquired overseas Web sites to expand its sales base.
As of mid-February, Priceline.com had 280 employees in Norwalk and 1,300 in all, in addition to an undisclosed number of independent contractors it uses for customer service and other functions.
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Last June, Priceline.com eliminated booking fees for travel vendors using its Web site, which it credited for a year-over-year doubling in business from that sector.
The strategies appear to be paying off: in the first quarter, the company had an $18 million profit on $403 million in revenue, a reversal from a $15 million loss in the first quarter last year on sales of $301 million.
Competitor Expedia Inc. likewise enjoyed 25 percent year-over year growth in its most recent fiscal quarter; Orbitz Worldwide Inc. had negligible growth over the same period.
A decade after Priceline.com launched, hotels still struggle to determine an optimal discount on rooms they sell through the Web site, according to Chris Anderson, a researcher at Cornell University”™s Center for Hospitality Research. Anderson found that hotels either overprice rooms and so never sell them or prices it too low, crimping profits.
Either way, hotels probably leave money on the table ”“ the catch is, he added, there is no way to tell how much. Anderson has designed a quantitative tool to help hotels better determine what a room will fetch on Priceline.com.
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