On-line consumers are comfortable with the idea of making leisure travel arrangements on the Web. By the end of 1997, 27% of all households that shop on-line -- 1.3 million total -- had purchased airline tickets on the Internet. Another 10 million on-line households indicated a willingness to make travel purchases on the Web, including one-third of the on-line households that have not yet made a purchase of any kind on the Internet.

To meet this demand, travel suppliers are rapidly shifting their on-line focus from providing information to enabling direct booking. This year, 76% of the top 75 airlines, hotels, and car rental agencies will offer on-line booking, a dramatic increase over the 37% with booking capabilities in 1997. In addition to creating new revenue opportunities, direct booking enables suppliers to cut costs through internal efficiencies or by eliminating distribution intermediaries.

"The rise in direct booking will effectively drag the rest of the travel industry onto the Internet," said James L. McQuivey, analyst in Forrester's On-line Retail Strategies service and author of the Report, "Leisure Travel's Booking Boom." "Because consumers trust large suppliers, the major players will enjoy a surge in direct bookings. But eventually, choice will win out over convenience, and consumers will migrate back to on-line travel agencies that offer price-comparison features, rich destination content, and syndicated selling relationships."

By 2003, on-line bookings will account for 12% of the total leisure travel market; these will be dominated by airlines and hotels. Airlines will use generous mileage bonuses and targeted e-fares to capture frequent fliers, then add hotel and car rental booking to their direct systems to entice customers to make all their travel arrangements at one site. As a result, airlines will take the biggest piece of the on-line travel pie, growing from $1.6 billion in 1998 to $10.6 billion in 2003. Hotels will keep pace with the airlines by focusing on family vacationers and offering detailed destination content on-line. By drawing leisure travelers to their sites, on-line hotel booking revenues will grow from $1.1 billion in 1998 to $10 billion in 2003.

Tour packagers will make a strong showing after a slow start, growing from $175 million in 1998 to $4.8 billion by 2003. Innovative tour packagers will grow market share by offering one-stop shopping, specialty tours, flexible packaging, and greater convenience to on-line consumers. The introduction of one-stop booking of packages that include air, hotel, car, event, and attraction tickets will attract on-line travelers. Car rental agencies and cruise lines will also benefit from on-line booking boom. Syndicated selling relationships with airlines and hotels will boost on-line bookings for car rentals from $171 million in 1998 to $1.6 billion by 2003.

Cruise lines will slowly adopt direct booking, held back by fears of alienating travel agents. But once cruise lines launch bookable sites, direct booking revenues will soar from zero today to $2.5 billion in 2003.

Forrester Research, Inc., is a leading independent research firm offering products and services that help its clients assess the effects of technology on their businesses. Forrester provides analysis and insight into a broad range of technology areas such as new media, computing, software, networking, telecommunications, and the Internet, and it projects how technology trends will affect businesses, consumers, and society. Forrester's European Research Center, located in Amsterdam, Netherlands, brings the company's unique perspective to new media developments in Europe. Additional information about Forrester Research can be found on the Web at www.forrester.com.