Totally myopic view of the travel industry will not stimulate growth

Implications: Orbitz stock fell 7.2% on Thursday, largely attributed to the fact that 87% of its bookings are US domestic and 74% of their product sold is comprised of air tickets. Priceline also fell, but not as substantially.  Only Expedia reported a rise in value. The following facts substantiate this observation about the online industry being myopic in its approach to the travel marketplace. •  Just 15% of US overnight travel is by air •  85% is by car, motorcycle, RV or other •  Just 8% of all travel in the US is for pure vacation travel to top 100 destinations •  Just 26% is business travel • That leaves 66% that do day trips, weekend jaunts close to home, visit friends and family and "life event" travel (weddings, funerals, sports tournaments, graduations, family reunions, etc.) to the other 86,900 cities, towns and villages in the US. The online players (and their offline counterparts alike) virtually ignore all but the vacationing and business travelers.

Analysis: In 2006 there were 2 billion trips taken in the US.  Of those, just 15% were by air, and 85% are by car, motorcycle, RV, taxi or other.  Yet the online players still cater primarily to the air traveler in positioning their products.  Their technology and the rigid "where and when" dialogue makes it so. Source:  Travel Industry Association.

Air travel in the 4th quarter of 2008 is set to decline by a minimum of 10% and possibly as much as 20%.  Online sites that are dependent upon air travelers are set to experience a large part of this decline in both their top line revenues and in their bottom line if they don't make cost cutting adjustments between now and then.

Of the 2 billion trips taken in 2006, just 8% of those were for vacation and 26% for business travel.   The other 66% (1.2 billion trips) are day trips, weekend getaways, visiting friends and family or what we call "life events" (weddings, funerals, graduation, births, etc.) which include travel to the 86,900 other cities, towns and villages in the US. 

If the travel industry remains myopically focused on the air traveler and more specifically on just vacation and business travelers that use air as their primary mode of transportation, they face certain revenue declines in the 4th quarter.

It is the author's contention that the next disruptive application, will be systems that marry trip planning, content, consumer feedback, booking, mapping and routing together.   Without these tools, the online players will be doomed to serving a declining market.

Consultations on the subject with author Chicke Fitzgerald should be arranged through GLG. 

Chicke Fitzgerald
Solutionz Group
www.solutionz.com