Study: Economic Slowdown Aids Online Travel

A slowing U.S. economy is actually doing some good for online travel providers, which many consumers see as a source of bargains, according to a report released Monday by Jupiter Media Metrix (Nasdaq: JMXI).

"Both consumers and businesses are increasingly in search of value for their precious travel dollars," said Jupiter analyst Heidi Kim. "The Internet will continue to grow as an important channel for information, products and services precisely because of its ability to help travelers find the best possible fares and rates."

Jupiter said that there is ample room for growth in the online travel sector. According to a recent Jupiter survey of U.S. online consumers, 42 percent do not use the Internet at all for travel shopping, while 29 percent buy online and another 29 percent research online but buy offline.

"Travel providers must vigilantly focus on increasing loyalty and wallet-share from each of their hard-won customers, in addition to converting customers who research online but purchase offline,'' Kim said.

On a Roll

The travel industry has recently become one of the strongest performing sectors of e-commerce. Two major sites, Expedia.com and Travelocity.com, reported their first quarterly operating profits within the past month.

However, Kim said that while the sector will grow from US$18 billion in 2000 to $63 billion a year by 2006, competition for customers remains fierce. In addition to Priceline.com and the other two major travel sites, a recent Jupiter study found airlines are rapidly grabbing market share with their own sites.

Add in the imminent arrival of airline-owned travel site Orbitz, and consumers will have a multitude of choices.

Loyalty Rare

Most travel consumers show little loyalty when it comes to buying online. Only 10 percent of online air travel shoppers buy after visiting just one site, while 60 percent visit two or three sites and and one-fourth visit four or more sites.

One potential storm cloud in an otherwise sunny forecast is a short-term slowdown in corporate spending on both travel and information technology platforms that enable employees to directly book travel online.

However, Jupiter believes that corporate travel buying will see a surge as the economy recovers, accounting for as much as $31 billion a year, or about half of all online travel spending, by 2006.

Southwest Flies High

In related news, a new study by Nielsen//Net Ratings and Harris Interactive said that the Web site of Southwest Airlines ranked first among airlines and travel agencies in customer satisfaction.

Southwest finished ahead of Expedia, Continental Airlines and Travelocity in the survey of 39,000 Internet users.