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The end of the recession has been very slow coming, and for the travel industry, very eagerly anticipated. Towards the end of 2009, airlines began to see lost revenues returning, but according to Compete, that has more to do with diversification than large increases in air travel. 

According to the analytics firm, many airline websites have partnered with other travel retailers to offer cruises, hotels and car rentals. The trend has helped buoy sales and site visits in 2009. But is it sustainable?

Compete tracked consumer surfing of travel sites and while overall traffic is up significantly, after accounting for overlap across travel categories, Compete found that airlines are barely doing better. 

The company created a travel category overlap index that tracked relative overlap over the past three years. (which means that a consumer who visits a hotel website and a car rental website would be counted once in each of the category results, instead of overlapped in the industry results.)

The higher the index, the more often consumers visited sites across categories. An index of 1.0 would suggest no overlap, but the index found pretty linear growth in overlap, from 1.21 in 2007 to 1.30 in 2009.

Furthermore, the results show that categories like cruises, hotels and car rentals have all rebounded more than airline travel and have grown more than the industry average:

According to Compete:

"The good news is that category growth means more consumers are visiting the websites of industries in those categories. More interest sets the stage for more bookings.... The bad news is that consumers research across categories more, meaning every company’s competitive set needs to get bigger."

Another problem is that while airlines are the experts in air travel, they're not always the cheapest place to buy tickets. And the same thing could be said about the other services they offer. With consumers increasingly making travel decisions based on budget options, that puts additional pressure on the bottom line for travel categories. 

However, if airlines do a good job creating well-integrated travel options from other purveyors, they can manage to create one stop shops for consumer travel. As shown above, JetBlue is clearly trying to leverage its reputation for budget air travel into cruise, car and hotel reservations. But the company will have to prove its efficacy to get buyers in those markets.

For now, cross-shopping options don't seem to be a big focus of these portals. But if a consumer is flying with a certain airline, why not offer lower rates for cruises or hotels booked through those channels? There are a lot of ways where airlines could make this interesting.

Currently it looks like the increased traffic in the travel sector could be attributed to online adoption more than anything specifically enticing consumers online. Compete has already offered advice on increasing cruise bookings with improved search strategies, and right now is the height of cruise season, which has a bit to do with the increase in that category versus other travel options for the winter months. It could also turn out to be a good prognosticator for other travel categories as the seasons shift and they move into their peak travel months.

Images: JetBlue, Compete

Meghan Keane

Published 1 February, 2010 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

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Comments (1)

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Miriam O'Flynn, Project Manager at esus Web Services

This article seems to focus on pure-plays like airlines broadening their online offerings and getting more online business as a result, which is what you would expect to happen.  

I don't see this in itself as heralding the dawn of a turn around in the travel industry, although from travel companies that we work with, there is certainly an upturn in the number of searches, which is translating to increased bookings in places. They have attributed this to the fact that many people had to for-go a proper holiday last year and are determined to find an affordable one in 2010, as well as lower prices / increased competitiveness.

 However, the good news for Airlines that you describe above is bad news for Travel / Tour Operators, as their potential margins will be eroded by these 'newly diversified' competitors. Not only are airlines offering cruise bookings etc (e.g. here in Ireland, Aer Lingus and Ryanair are now offering Disney holidays /tickets) but supermarkets like Aldi have entered the fray in the last year in Ireland too. Maybe the Travel/Tour Operators should start selling groceries!

almost 7 years ago

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