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Study: Expect shakeout in online travel

A shakeout in the online travel industry is coming, even though more and more users are comfortable with booking travel on the Web, according to a newly released study.

A shakeout in the online travel industry is coming, even though more and more users are comfortable with booking travel on the Web, according to a newly released study.

The online travel industry is dominated by a collection of Web portals, including Yahoo and Excite; travel sites, such as Travelocity and Expedia; and airlines, including Southwest Airlines and American Airlines, according to Forrester Research.

According to the rankings, Yahoo is the leading travel site, almost entirely because of its reach. Approximately 60 percent of online travel researchers have done research for their trips on Yahoo, the study found.

"That's just phenomenal," said Forrester analyst James McQuivey, noting that Yahoo's reach far exceeded that of other sites. But Yahoo is having a relatively difficult time translating that huge audience into ticket purchases.

The study focuses solely on leisure travel and ranks sites based on the percentage of travel consumers visiting their site, the percentage of consumers purchasing tickets, and their quantity of purchases.

Although Yahoo receives more travel researchers than anyone else, the buying rates are low, McQuivey said.

In contrast, Travelocity, the next highest ranked site, had a higher-end audience than Yahoo, according to McQuivey. Although it scored far lower than Yahoo on reach, a higher percentage of travel consumers bought from Travelocity and tended to spend more money.

The Forrester study predicts that the top nine sites, which include Netscape, Delta, and Infoseek, along with others previously mentioned, represent a top-tier of "locked-in leaders." Because of their reach and desirable customer base, these sites are likely to continue to dominate the category for at least the next several years, the survey predicts.

Meanwhile, mid- and lower-tier travel sites will begin to thin out by 2003, with many larger sites swallowing smaller sites.

But online travel sites aren't the only ones evolving. According to McQuivey, who coauthored the report, many smaller offline travel agencies have focused on leisure travel in recent years because of the higher commissions.

Unlike business travel, where agents typically receive flat fees and no commissions, or air travel, where they typically earn less than 10 percent commission, travel agencies can earn 20 percent or more on cruises or travel packages. With an increasing share of the leisure travel pie being spent online, those high commissions are at risk and McQuivey predicts that offline travel agencies will begin to close shop.

"One of the things about the travel business is, it's always been hard," McQuivey said. "[Online business] will only accelerate that."

According to the study, about 5 million U.S. households booked trips online in 1998. Forrester predicts that number will grow to 9 million this year and 26 million--or one-fourth of all U.S. households--by 2003.

The study also projects that U.S. households will spend approximately $7.8 billion booking trips online this year, and $29.4 billion in 2003. That figure is up from $3.1 billion last year.