Booking online topping travelers' to-do lists

For the first time, more consumers are booking online than through traditional means. Though it may be good news for travel sites, it could intensify an already bitter struggle.

Greg Sandoval
Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
3 min read
To a growing number of travelers, the Web is the only way to fly.

For the first time, more consumers chose to book travel tickets online than by calling traditional travel agencies or the airlines themselves, a study said.

A survey conducted by travel study group PhoCusWright indicated that 21 million Americans said they "usually" make travel arrangements online--a figure that is up 75 percent from last year. Those who book online now represent 13 percent of the population, PhoCusWright said.

The study highlights a dramatic turnaround. Last year, PhoCusWright found that 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.

"Online travel is still the e-commerce 'killer application,' despite a very battered market," PhoCusWright Chief Executive Philip Wolf said.

The reason for the large shift is price, PhoCusWright said. Almost 60 percent of the respondents listed price as the most important factor in deciding to make travel arrangements online. After the Sept. 11 terrorist attacks, airlines began offering deeply discounted Internet fares to encourage the public to fly.

Sherman, Conn.-based PhoCusWright surveyed a segment of the adult population who have used the Web during the past month and have traveled on a commercial airline in the past year.

On the rebound
The study comes as the airlines try to rebound from the terrorist attacks, which almost paralyzed the travel industry. Even after flights resumed, a fearful traveling public stayed on the ground, causing airline layoffs and a reduced number of flights.

Online travel was not immune. Almost every Web travel company saw its stock plummet once the markets reopened. Orbitz, Travelocity and Hotwire also announced layoffs to prepare their companies in case of an extended downturn. Two months after the attacks, the industry is bouncing, as most of the companies are seeing sales on par with pre-Sept. 11 levels.

The industry stands alone as the most successful sector in e-commerce. Online travel agencies Travelocity and Expedia are among the best-performing stocks of Web retail companies. Sales levels have grown each year as more travelers comparison shop via travel sites.

But though things may be looking up for online travel, as evidenced by the study results, the burgeoning market can only heat up an already bitter struggle for control of ticket distribution between Web travel agencies and the airlines.

The most recent volley came last month when Continental Airlines stopped paying commissions on fares booked over the Internet. Several Web travel agencies have hinted that they cut side deals to get paid through some other means for booking Continental fares. Nonetheless, analysts have predicted that more airlines will drop Internet commissions.

So far, Travelocity and Expedia have captured the largest share of the market--but it's early in the game. The airlines are throwing more money into promoting their own Web sites and are starting to see an increase in traffic. And earlier this year, the airlines joined forces and launched Orbitz, their own travel Web site.

Critics have charged that Chicago-based Orbitz has access to discounted fares that are not available to other Web travel agencies. The Department of Justice is investigating whether Orbitz violates antitrust laws.

Discount-travel bonanza
While retail travel agencies duke it out, a rise in price-conscious travelers could mean a bonanza for discount travel agencies such as Priceline.com and Hotwire.

Hotwire and Priceline are "opaque" travel sites that deal in deeply discounted fares but hide the name of the carrier and departure time until a customer pays for the fare. The airlines use these sites to unload seats that they otherwise could not.

"While consumers continue to look for low airfares, more and more are going online for hotels, vacations and cruises," Wolf said.

Amy Bohutinsky, a spokeswoman for Hotwire--which is backed by some of the same airlines that formed Orbitz--said the privately held company has gained 1 million new customers since Sept. 11.