Travel eBusiness Models – Travelocity

David Bain
 


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Sabre and competitors Cendant and Expedia, owned by Barry Diller's IAC/InterActiveCorp, are carving up the Internet travel industry as more people buy airline tickets and hotel rooms over the Web. A third of bookings may be made on line by 2009 compared with 23 percent in 2004, according to forecasts by JupiterMedia Corp. [Bloomberg.com]

Expedia Overview

Expedia is the most popular website brand in the Internet travel marketplace. Expedia.com is the 245th most popular website in the world, Expedia.co.uk is the 1981st most popular website in the world – whilst Expedia. ca is the 4361st most popular. [Alexa.com – September 2006]

Offering services such as fare tracker and fare compare, Expedia encourages its customers to focus on cost and at least offer then the perception that they are getting the best deal.

Founded in 1994 as a division of Microsoft, Expedia was ‘spun off’ on 1999 and purchased by IAC / InterActiveCorp in 2001. The brand itself hasn’t changed a great deal since 2000 which is unusual with a website led business. This emphasises that Expedia focus on efficiency rather than image.

Expedia Position

An efficient, logical, knowledgeable yet cold looking website and brand, Expedia focus on offering best value Internet travel deals.

Expedia's $50 coupon for all-inclusive bookings and its recent focus on all-inclusive getaways — is the thinly veiled fear among online agencies that consumers will shop around. [USAToday.com]

Whilst focusing on the all-inclusive travel deal, Expedia have decided to use this method to try and ensure that customers stay with them. Diminishing airline ticket margins have encouraged them to focus on the ‘bundle’.

Expedia’s strengths include its history of operating underneath the Microsoft ‘net’. This has not only enabled Expedia to maximise its technological know-how, but also offered it the opportunity to capitalise being part of one of the most trustworthy software brands in the world. Although efficient in manner, because Expedia hasn’t undergone any image reinvention since 2000, it could be argued that it has allowed Travelocity to overtake it in terms of being visually appealing.

The fact however remains that Expedia have now held the number one position in the online travel marketplace for a number of years? Will this change in the near future? It doesn’t look too likely.

Expedia Core Competences

Expedia’s core competency is the superior understanding of technology within the Internet travel marketplace. This has enabled for them to gain first mover advantage in the sector by forming appropriate strategic alliances.

Expedia Competitive Advantage

Expedia have decided to go down a dangerous route by choosing a cost advantage as their competitive advantage. They have chosen to do this because they know that they already have the most popular Internet travel portal. Time will tell whether or not other companies such as Travelocity will be able to ensure that online travel customers are willing to spend more to receive greater service, facilities or perceived brand value.

However, in addition, Expedia have an extensive affiliate marketing portfolio of partners. Through CJ.com (Commission Junction) Expedia are continually offering other websites the opportunity to market their services in exchange for a percentage of the final booking fee. (Commonly around 5%) Compared with their nearest competitor, Travelocity, Expedia have been much more aggressive with their use of affiliate marketing.

Travel eBusiness Models – Travelocity

Travelocity.com / Travelocity.co.uk is owned and operated by Sabre Holdings – a products, distribution and technology solutions company focused on the travel industry. Their consumer direct and business direct side of the business is Travelocity. Travelocity has several million registered users and booked $4.9 billion worth of travel business in 2004. [Sabre-Holdings.com]

At the time of writing, Travelocity is the second most popular brand in the world in the Internet travel marketplace. Travelocity.com is also the 386th most popular website in the world, whilst the British version, Travelocity.co.uk is the 4884th most popular. [Ranking.com]

Travelocity was established in 1996 as a subsidiary or Sabre Holdings and was the first travel website that allowed users to browse, reserve and book travel-related products online. [Answers.com]

Initially Travelocity appeared to be extremely ‘community orientated’ – regularly arranging offline meetings and presentations for ‘do-it-yourself travellers’.

In 1998 Travelocity changed direction and became more ‘travel deals orientated’. They did this by incorporating the availability to book flights, hotels and car hire directly from their home page. [Archive.org]

In 2000 Travelocity became more aware of the need to market themselves as a brand. This resulted in 2002 with a complete re-design of the website to make it more user-friendly and encourage return visitors.

Travelocity’s present day website (designed in 2004) ‘look and feel’ is starting to rely more on a higher percentage of graphics. This offers website users a more visually appealing experience, although it does rely on the user being more likely to have a slightly faster Internet connection than they used to. [Archive.org]

Travelocity Position

Travelocity.com is a fun, friendly, informative, useful and easy to use website. In addition to this it is professional and reliable. This demonstrates that Travelocity is comfortable to try and be a ‘love all, serve all’ Internet Travel Portal.

Travelocity is however a company with an aggressive stance. It does not form strategic alliances with other companies in order to promote affiliate-marketing programmes. In addition, it regularly seeks out potential competitors to buy.

In 2000, Travelocity purchased another early web travel company, Preview Travel, [Answers.com] whilst in 2002 it purchased Site59.com – a New York based travel business that specialise in late bookings.

On 12th May 2005 it was announced that Travelocity had agreed to buy lastminute.com for £577m – creating Europe's biggest online travel retailer. [Silicon.com] Part of the reason why Travelocity wants to gain dominance quickly in the Internet Travel Marketplace and grow by acquisition is that it understands that the market is growing and evolving quickly.

It wants to be the first choice in the majority of consumers’ minds for future travel purchases. This is therefore one of their major strengths. Whether or not their decision not to evolve by forming strategic alliances may thwart this aggressive growth strategy is yet to be seen.

To a certain degree, opportunities within the Internet travel marketplace for Travelocity are still limitless. They can still expand to cover more countries Internationally, they can still improve upon their overall marketshare and they can still expect both Internet users and the amount of Internet users willing to book online to increase significantly.

Travelocity Core Competences

Travelocity are striving towards ensuring that their brand is the most recognised and trusted available in the Internet Travel marketplace. Their most important core competency is to offer an integrated, easy-to-use and intuitive website that keeps people wanting to come back to it much more that any competitor in the field.

Travelocity Competitive Advantage

Travelocity have recently introduced their Bill of Rights onto their website: Customers have the right to…

1) Get what you booked

2) The best overall value in travel 3) Accurate and objective information upfront

4) Find what you’re looking for quickly and easily

5) A straightforward presentation of your options

6) Speak with someone and get help anytime

7) Be inspired by your travel company

[Travelocity.com]

These seven key customer issues have been highlighted to demonstrate why Travelocity believe that they are better than the competition. Travelocity want their brand to represent trust, reliability and service and therefore define what they believe their competitive advantage to be.

The Merchant Model Conclusion

The merchant model is without doubt the most competitive Internet business model for the travel industry. The two main worldwide competitors – Expedia and Travelocity have chosen to focus upon price and service level differentiation respectively. It could be argued that Expedia however focus on their value-adding activities – their existing infrastructure in order to derive their core competencies of efficiency and price. Travelocity on the other hand rely upon their ‘bill of rights’ core competency in order to drive their ‘value adding activities’.

David Bain is founder of the UK travel website http://www.TREKtheUK.com . TREKtheUK is a comprehensive UK travel guide featuring lots of places to go and things to do.

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