by Stacy J. Moran

March 1, 2004 - In 2003, 45% of online travel buyers purchased all of their travel online, according to The PhoCusWright Consumer Travel Trends Survey Sixth Edition, a recently released tracking report that annually documents online shopping and purchasing behavior. In total, 35 million Americans bought travel online in 2003, up 17% from 2002. Yet online travel buyers are divided as to which type of site ultimately gets the sale -- supplier or online travel agency.

Online travel agencies are feeling the heat from the supplier channel. Online travelers are now almost as likely to purchase travel from a supplier (online and offline) as an online agency. In fact, The PhoCusWright Consumer Travel Trends Survey Sixth Edition finds that nearly two-thirds of "online travelers" buy personal travel from either online travel agency or supplier Web sites. And, the majority of online travelers usually check at least one online agency site (88%) and one supplier site (73%) before purchasing airline tickets online.

Price parity between online and offline channels and erratic content availability across Web sites are encouraging online shoppers to use multiple channels for comparison shopping and purchasing. In addition, half of all online travelers continue to shop online but purchase offline. Together, these underscore the slower growth pace of the Internet as an exclusive purchase channel due to the increased complexity of online travel offerings, consumers' use of offline support, and supplier success in nurturing consumer-direct relationships in the leisure segment.

Online Travel Agencies Dominate but Feel Pressure

Consumers are driven to online agencies due to lowest prices, broad product offerings and ease of use -- areas where this channel performs head and shoulders above its competitors. Report findings about this channel include:

• Online agencies rate better than suppliers, in general, in lowest price (56% vs. 24%), broadest air and hotel choices (60% vs. 14%), and ease of use (43% vs. 32%).
• Online travelers who are loyal to several Web sites are more likely to check online agency Web sites (95%) than those with single site (75%) or no purchase loyalty (81%).
• Forty percent of online travelers usually purchase personal travel from online agencies vs. 19% from supplier sites.

Consumers often turn to suppliers for reliability and customer service. In fact, per the report's findings, suppliers are now considered to offer better customer service than even traditional travel agencies.

Through aggressive brand promotion, increased inventory availability and online channel discrimination, supplier Web sites now "own" more than one-third of the air and more than one-fourth of the hotel reservation markets.

Since 79% of online combination purchasers (air, car and/or hotel) create their own packages by buying components separately, dynamic packaging options and tools will be critical to success for players in all channels. Also important are upselling and cross-selling strategies for vacation packages since 59% of those surveyed for The PhoCusWright Consumer Travel Trends Survey Sixth Edition said they are interested in purchasing pre-bundled packages online in the future.

It is expected that online agencies will place greater strategic emphasis on customer loyalty, booking engine capabilities and ease of use to counteract supplier momentum in the marketplace.

Report findings are based on interviews with 504 "online travelers" in the U.S. in fall 2003. Online travelers are adult Americans who have flown by commercial airline in the last year and used the Internet in the last month. There are 54 million online travelers in the U.S. -- one-fourth of the U.S. adult population. Of this group, 65% purchased travel online in 2003.

The PhoCusWright Consumer Travel Trends Survey Sixth Edition, is over 35 pages, includes 46 tables and charts and will be available for individual purchase next month.