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Christmas Gift Guide
Tech Industry

Online travel deals may take a holiday

Conventional wisdom dictates that the cash-strapped airlines will unload unused tickets on the Internet at the last minute before the holidays. But this isn't a conventional year.

Thinking you'll find last-minute holiday travel deals online?

Think again.

Conventional wisdom dictates that the cash-strapped airlines will unload unused tickets at the last minute on the Internet, exploiting the medium's ability to match excess inventory with price-sensitive travelers. In online chat groups for travel aficionados, some frugal fliers recommend postponing ticket purchases until late November or even mid-December, when they believe airlines will become increasingly desperate and offer cut-rate tickets.

But travel industry veterans are warning that restricted flight schedules, combined with surprisingly robust demand, will limit last-minute deals for Thanksgiving and Christmas. They say people who aren't picky about all-inclusive packages for resorts and cruises in Europe, Mexico or the Caribbean could find last-minute deals online, but they're urging most domestic travelers to confirm seats now--or risk paying a fortune to go home for the holidays.

"If you're looking for holiday travel, now is the time to get it," said Bob Jones, the self-declared "chief frugalist" of East Greenville, Pa.-based OneTravel.com. "There are not going to be better deals than you'll find right now and in the next week or so. What you're seeing now is rock bottom."

That represents a subtle shift from last year and the late 1990s, when travel sites such as Travelocity and Expedia offered spur-of-the-moment deals from airlines and hotels eager to unload seats and rooms that would otherwise go vacant--even during the holiday airport crush. Savvy travelers who clicked on Lowestfare.com or Cheap Tickets often found great deals as late as Dec. 22.

But new research suggests that the Internet has expanded beyond the cyber-savvy jet set. A survey by PhoCusWright released this week at an online travel industry conference in Miami Beach, Fla., indicated that 21 million Americans "usually" make travel arrangements online--75 percent more than last year.

In 2000, 39 percent of travelers said they booked tickets through traditional travel agents, with only 27 percent using the Internet. But this year, 41 percent went online, about 26 percent said they used a traditional travel agent, and another 26 percent said they called the airline or cruise company directly, according to Sherman, Conn.-based PhoCusWright.

Because the Internet has gone mainstream, Web-only deals disappear faster than they did when airlines began building their online sales divisions in the late 1990s, said tourism researcher Roy Cook, assistant dean at the School of Business Administration at Fort Lewis College and director of the Colorado Center for Tourism Research in Durango.

"The people who are even the least bit technology literate are getting their tickets online--if only to check rates so you're a more informed shopper," Cook said. "There are still OK deals online, but they're not the rip-roaring, phenomenal, whiz-bang deals where you could save 70 percent, like there used to be. It's basic supply and demand: People are using it more and prices are going up."

Terrorist attacks may make deals more elusive
The terrorist attacks of Sept. 11 may increase the popularity of online travel sites even more. Struggling financially and eager to find new ways to cut costs, the airlines are bolstering their online sites and reducing the number of labor-intensive call centers--in some cases making online booking the most convenient way to fly and encouraging more people to explore online purchasing.

For example, budget carrier JetBlue announced in late October that it was boosting its online travel distribution and retraining its reservation staff as "Internet support agents." Before Sept. 11, half of JetBlue passengers booked tickets online; the New York-based start-up hopes to boost that number to 60 percent by the end of 2002.

Southwest Airlines decided in early October that it would rely on the Internet to reach its frequent-flier customers in an attempt to cut "every discretionary cost." Southwest eliminated mailings of quarterly statements, newsletters and promotional offers to Rapid Rewards members and asked members to sign up for an e-mail list.

Online travel sites not operated directly by the airlines are also in a fierce battle to snag new customers and convert traditional shoppers into online bargain hunters. So far, Travelocity and Expedia have captured the largest share of the market. Earlier this year, the nation's major airlines launched Orbitz, which provides access to certain deeply discounted tickets unavailable on other sites.

The abundance of online options comes as demand for online travel sites and airplane travel fades. Researchers at Forrester recently downgraded their estimate for online travel spending for the year, cutting the forecast by 15 percent from $16.7 billion to $14.2 billion because of the Sept. 11 attacks. Meanwhile, most U.S. airlines have cut about 20 percent of their flights and mothballed hundreds of airplanes because of sluggish demand.

Still, some are vaguely optimistic that demand will improve for the holidays and prop up the ailing travel industry. In mid-October, Travelocity reported a third-quarter net profit of $4.9 million before charges, despite a decrease in revenue relating to the attacks. The next week, Expedia announced a third-quarter net profit of $15 million before special items, compared with a $1.6 million loss for the same time last year.

Some go so far as to speculate that the attacks could spark a renewed interest in holiday travel.

"If people are frightened, they don't need to travel for business or leisure purposes. But travel over the holidays is a very different pattern," said Edward Hasbrouck, author of "The Practical Nomad Guide to the Online Travel Marketplace." "In the current climate, they're even more interested in family reunions, nesting, making sure their loved ones are safe. They want to go home."

Friendly skies, cloudy visibility
Snagging last-minute discounts online has always been risky. But the increasing flow of travelers to the Internet, combined with cancellations in the wake of the terrorist attacks, have made holiday travel planning more tricky--especially for people who have become accustomed to going to Web sites for last-minute deals.

"The conventional wisdom is that people would rather take a good price, knowing they didn't get the absolute best deal but are locked in something, rather than take a gamble to save 10 percent but risk prices going up 50 percent," said Sean Greene, CEO of Washington, D.C.-based travel agency Away.com. "There's no silver-bullet answer here. It depends on whether you can tolerate risk."

Some travel industry experts say Web sites will feature deals as late as mid-December, but they'll be restricted to a limited number of short-haul domestic routes, such as flights from San Francisco to Portland, Ore., or Cincinnati to Cleveland--not more popular routes such as Chicago to Miami or Boston to Dallas.

Airfare for flights on Dec. 20--the Thursday before Christmas--and Dec. 25 itself may also be less expensive than on days immediately before and after Christmas, according to Jones, the travel frugalist. Airfare to or from airports such as Chicago, Los Angeles or New York, which have large numbers of carriers and discount carriers such as JetBlue and Southwest, is generally less expensive than airfare to cities dominated by one airline, such as Northwest Airlines in Detroit and Minneapolis, Cook said.

Travelers who know they want to be in a tropical destination--but aren't picky about whether it's Jamaica, Bermuda or Cancun--could also snag deals. Fear of flying compounded with longer lines at customs means that many airlines are eager to find passengers for international routes, according to a survey by tourism and hospitality students at Fort Lewis College.

Some travel experts say they have no confidence in their ability to make intelligent predictions on the market this year. Mark A. Bonn, professor of business at the Dedman School of Hospitality and director of resort and condominium management at Florida State University, says the next two to three weeks will provide critical information for travelers wondering whether to further postpone holiday airfare purchases.

"Interest rates are the lowest they've been in four to five decades," Bonn said of the Federal Reserve rate decrease on Tuesday. "How people interpret that is going to be very important to the travel industry because it influences how people's discretionary income will be spent. Maybe it will increase consumer confidence to the extent that people decide to buy or build new homes, in which case they might not take a holiday trip."