Online travel takes off

Microsoft expands into another new business: online travel. But rather than worry, many of its competitors are hoping that the company's foray into the burgeoning business with Expedia will help expand the market for everybody.

Jeff Pelline Staff Writer, CNET News.com
Jeff Pelline is editor of CNET News.com. Jeff promises to buy a Toyota Prius once hybrid cars are allowed in the carpool lane with solo drivers.
Jeff Pelline
3 min read
Like an octopus, software giant Microsoft (MSFT) today extended its tentacles into another new business: online travel.

But rather than worry, many of its competitors are hoping that the company's foray into the burgeoning business with Expedia will help expand the market for everybody, making consumers more comfortable with the process of online bookings.

"It's probably a good thing," said Jim Hornthal, chief executive of Preview Travel, which offers a competing service. "It legitimizes the market."

An estimated $500 million worth of tickets was sold online last year, but that only accounts for about one percent of the $500 billion market. Online ticket sales could balloon to $3 billion by 1999, according to Jupiter Communications, an Internet consulting firm.

But judging from many consumers response, the industry has some big hurdles to overcome. "America on the Web: Where's the Advantage?" blared a headline in the New York Times earlier this year. The reporter who tried to book an online flight complained that it took at least four times longer to book a flight on the Web compared with booking through a travel agent.

Other consumers say they worry about whether they can get the lowest fare, or whether their credit card number is secure.

"We don't see it as a threat to travel agents," said Chris Privett, public affairs manager for American Society of Travel Agents (ASTA), a trade group representing 28,500 travel agents. "I don't think the average person has the time or the inclination to wade through all the information that is out there.

He added brusquely: "I have a pair of scissors, but that doesn't mean I want to go in front of the mirror and cut my own hair."

ASTA presented a study that showed 82 percent of the respondents in an online survey said they would still rely on a travel agent to book flights.

But online proponents think ASTA has an ulterior motive in presenting such findings: namely, preserving the jobs of travel agents. Indeed, some travel agents admit privately that they worry about the trend toward online booking, especially with such big companies jumping into the market.

Microsoft's Expedia launched today. "Expedia builds on Microsoft's commitment to using the Internet to solve real customer needs," said Microsoft chief executive Bill Gates. "Being able to tap into and book the latest, lowest airfares right from your PC is very compelling. We think it will reshape the way consumers plan and purchase their travel."

And Microsoft is not alone. American Express recently announced plans to enter the online market, joining comanies such as Travelocity that are backed by Sabre and PCTravel. And a growing number of companies are beginning to book their in-house travel online, such as Charles Schwab & Company.

In addition, airlines themselves, such as Southwest, and Alaska Airlines, are building comprehensive sites to book and buy plane tickets. Some airlines, such as Cathay Pacific, are starting to auction off seats on the Web, too. Trans World Airlines said today it would offer discounts of up to 75 percent through the Internet. The fares will be posted once a week to selected cities and only to those who see them at TWA's Web site. Travel is then booked through a toll-free number.

Hotel companies also are jumping into the online market. Hilton said yesterday it expects to sell $1 million of hotel rooms online this year.

The big benefit for all of them is lower distribution costs. They save money in labor, paper, and back-office processing equipment.

Like other online travel managers, Preview Travel's Hornthal concedes the industry has room to improve. For example, his company has come up with a program called "Fare Shopping" that he contends ensures that consumers get the lowest possible fare. He said it has helped cut the average fair paid by Preview's customers by ten percent.