01 Apr 2000
The World at a Clickby Margie KellyTopics:
Like so many dot-com businesses these days, the Internet travel industry is, well, taking off. Among the e-travel elite are Travelocity.com, known for the depth of its travel content and bolstered by distribution relationships with AOL/Netscape, Lycos, Excite, and Snap; and Priceline.com, the two-year-old, name-your-price discount site gaining fame of late with humorous ads featuring pitchman William Shatner. Both companies have grown rapidly since entering the online market, and with consolidation already under way (Travelocity just completed its merger with Preview Travel this spring), the potential for further expansion seems to be a virtual certainty.
"Our gross bookings have gone from zero to $400 million in four years," says James J. Hornthal (MBA '78), Preview Travel's founder, chairman, and director and now vice chairman of Travelocity. The company provides retail travel services for leisure and small-business travelers. Consumers enjoy one-stop shopping for airline tickets, car rentals, vacation packages, hotels, and cruises, as well as a wealth of travel news and merchandise. "Preview Travel and Travelocity saw $1.2 billion in travel bookings in 1999 and have a combined registered membership of nearly 20 million," Hornthal notes.
Priceline has enjoyed 5 percent monthly growth since coming online in March 1998. For the fourth quarter of 1999, the company reported revenues of $169.2 million -- a 791 percent increase in one year. "We've seen exponential growth because we offer a unique way of using the Internet to maximize efficiency for both the buyers and the sellers," says Priceline cofounder Timothy G. Brier (MBA '75). Brier calls Priceline a pioneer in a technique called "demand collection," in which buyers name the price they want to pay for a flight, hotel room, or car rental. The suppliers of such services then decide whether or not they can meet that price. Priceline currently holds several patents on demand collection technology and has expanded to offer customers a chance to bid on, among others, new cars, mortgages, and even groceries.
"It's a win-win situation," Brier declares. "The buyer can get the price he or she wants, and the suppliers -- the airlines or the hotels -- can sell their excess inventory without jeopardizing their retail prices." Priceline currently meets more than 50 percent of the "reasonable offers" made by consumers, who forfeit the opportunity to collect frequent-flyer miles and choice of travel times for below-retail prices. It's not for business travelers, however, since buyer flexibility is key in making a match. Still, Brier notes, "Our customers invariably say they feel like they've won something when their offers are accepted."
There seems to be plenty of room at the top for both Travelocity and Priceline, since each appeals to different consumer markets. In fact, the two companies have recently entered into an agreement to point customers toward each other's sites if customers can't get what they want on their first try.