Partnerships Are Key To Online Travel Search Survival
The newest breed of these businesses are the so-called meta-search sites that present users with lists of bookings for comparisons.
The trouble is that too many sites are doing the same thing and too few travelers care, according to Henry Harteveldt at Forrester Research.
"There is a glut. They're not working," Harteveldt said. "Our research indicates these meta-search sites just aren't gaining any traction."
Data from Forrester shows that only 6.5 percent of travelers who planned trips online used travel search engines to plan a trip, compared with 44 percent who used a travel agency.
"The truth is that meta-search really doesn't matter," Harteveldt said.
An Internet search for "travel search engines" yields dozens of results, including not only well-known brands like Expedia and Orbitz, which is owned by Cendant Corp. (CD.N: Quote, Profile, Research), but also a slew of names like AllCheapFares, Kwikfly and Travel Now.
Experts say the travel search market is reaching a point where competitive pressures threaten to smother start-ups before they can get a toe hold.
"I think it's going to be a lot tougher road for some of the new companies to try their hand at travel search," said Phil Carpenter, vice president of corporate marketing at search engine SideStep. "I think it's getting really challenging for new players to enter the space."
Carpenter said the key to success is in partnerships with big-name travel suppliers and other travel service companies. Only then will users be confident that they are getting access to the best deals possible, he said.
SideStep, a leader in travel search, just this month announced deals with Hilton International, Amazon.com and American Airlines.
SideStep searches more than 100 Web sites for travel bargains. But the company is not alone in that approach and faces competition from search engines like Kayak.com and Yahoo! FareChase. Other competitors include general search engines.
Meanwhile, online travel agencies such as Expedia and Priceline.com (PCLN.O: Quote, Profile, Research), which made their reputations locating cheap fares, are adapting to the new competitive environment by personalizing research and bookings instead of relying solely on finding low prices. The agencies hope to expand their businesses by addressing all travel needs and making recommendations.
"The online travel agencies haven't really felt the pinch," said Lorraine Sileo, an analyst at PhocusWright, a travel research company. She said the newest crop of travel search sites are a bigger threat to each other than to established travel agencies.
Still, the appeal of ad revenue, lucrative partnerships or a buyout remain key motivators for people looking to jump on the travel search gravy train. What's more, e-commerce trends suggest their optimism is not misplaced.
Data from Forrester Research showed that in 2005, travel has been the largest sales category in online commerce with $62.8 billion of the total sales of $172.4 billion. The travel component on Web commerce is expected to account for $119.1 billion of a total $328.6 billion by 2010, Forrester said.
SideStep's Carpenter said there is still money to be made in the online travel industry as long as a company has an innovative approach and the funds to carry out a vision.