Travelocity.com and Expedia.com's globalisation strategies challenged.

Big marketing campaign for WebMiles. We take a look at travel award programmes.

I had the pleasure of being invited to speak at the recent IT Travel conference which took place in Brussels on 22 and 24 May.

A lot of eTravel managers at the conference talked about the qualities of their respective Web strategies, although they were much more discrete on the subject of their companies' turnovers!

What we learnt, however, was that eTourism has really taken off in the sense that, for the vast majority of sites represented (Expedia, eBookers, Lastminute, QXL, etc.), the online turnover for April 2000 alone was often equivalent to the total turnover the same sites had during the last three months of 1999.

The meeting of all these key players also enabled us to look at their companies' future strategies and, in particular, at the alliances and partnerships on the horizon.

I also noted that there was a movement of rejection against the aggressive strategies of the two major portals, Travelocity and Expedia.

eTravel sites typically aimed at bargain hunters (users interested solely in the price factor) were particularly emphatic about refusing to see their products taken up on these portals.

Howard Miller, CFO of Ryanair.com told us that not only did he not believe that the big tourism portals like travelocity.com and Expedia would become profitable, but that, in addition, his company categorically refused to envisage having its products distributed by them.

What is sure is that the price positioning strategies of sites such as Ryanair.com or Easyjet.com would make it difficult for them to pay an extra commission to portals.

Because they are particularly well-adapted to the demands of bargain hunters, the low cost eTravel sites are enjoying a real online success at the moment, with rates of Internet turnover approaching 60%. All the same, voluntarily deciding to cut themselves off from the big portals' distribution circuits is a major strategic decision.

The same misgivings about the big eTourism sites were also expressed by Brian Pratt, Vice President of eBusiness for Sheraton hotels (also covering Westin.com and the Starwood hotel chain), whose online sales in 1999 represented (mostly in the US, and to a lesser degree in Europe) about 2% of their overall turnover, mainly in the BtoC sector.

As we recently saw, the Accor group is following a fairly similar strategy, having decided to launch its own online reservation portal, an intention confirmed this week when they took a EUR 24.2 million stake in the online reservation company WorldRes.com (2.5% of WorldRes.com Inc's capital and 19% of WorldRes.com Europe's).

It is clear that when groups such as Accor, which has 370,000 rooms in 90 countries, decide to take their online distribution in hand, and when other hotel chains such as the Sheraton (200,000 rooms) follow their lead, this is going to start having a significant impact on the eTravel offers of the big portals.

Pratt indicated that the online strategy of Sheraton.com was to give preference to partnerships with smaller hotel chains (in Europe in particular) in order to create a specific BtoC site, rather than to develop links with portals like Travelocity or Expedia.

Many other speakers also rejected the big eTravel sites, proof that the attempt of the big eTourism portals to gain the dominant position has started to make an increasing number of companies react.

There have already been several ambitious reactions, such as the American airline companies' T2 portal "Orbitz.com", which was followed in an similar way by certain European airlines, such as Air France and British Airways, who also want to make sure that the big portals don't take over the whole online eTravel market.

Although these large companies, which have the financial means to fight the eTravel portals, can justify this strategy, the fact that companies which are much smaller or which are acting in specific sectors have also started having the same reactions, means, in my opinion, that we have reached a turning point in the eTravel battle.

However, these comments should be taken in context: the rejections are only aimed at the Travelocity and Expedia sites. I did not feel that there were any such reactions against sites like eBookers.com, Lastminute.com or Leisureplanet.com.

It is then, essentially, the fear that the two big worldwide sites will form a kind of monopoly which seems to be at the origin of these budding online marketing rebellions.

It is, of course, too early to draw any real conclusions.

If the omnipresence of these big portals is confirmed, it may be that certain strategic choices proclaimed loud and clear by these sites today will have to be reviewed tomorrow, if they find they need to have their products represented on the big portals after all.

Nonetheless, the fact that this attitude is so widespread, even if it was only expressed within the fairly limited framework of the conference, seems significant enough to me for the big portals to start to ask themselves serious questions about the future of their partnerships.

Their future success relies on having the widest range of products possible, this being one of the key factors for them in creating user loyalty.

The fact that more modest sites such as eBookers and Lastminute, who have stated that they only want to develop on a European level, were not challenged on this point, tends to make one think that their "local" positioning has had a reassuring effect on the key players in the online tourism sector.

I think then that, strategically, it will be interesting to watch what happens in the coming months in the sense that the globalisation naturally resulting from the Internet could well start to come up against its first obstacles, and not from consumers but from producers.

The idea behind the launch of WebMiles was a simple one: to give Internet users a frequent flyer programme... without the constraints usually attached to this kind of travel award programme (no restricted periods or blackout dates, easier conditions for obtaining for discount tickets, etc.).

Jennifer Case, Marketing Vice President of the site, said that it's the only travel award programme that "sets you totally free". Points are earned by purchasing goods on partner e-commerce sites (about fifty to date, covering all the main consumer sections).

WebMiles is about to launch the first round of its marketing campaign, which will cost a total of $15m. Marketing actions will cover the usual online and offline supports: TV ads (mainly on NBC), shares in webmiles.com, online advertising, specialised press. The main problem they will encounter comes from the public targeted (25-54 year-old Internet users, with high revenues) - a sector of the public already being energetically courted by many other sites.

The cost of contacting this target audience will therefore be quite high, and WebMiles will have to immediately satisfy the requirements of these very demanding users.

An original idea in their marketing campaign - and a very successful one too - is the launch of a humorous site rent-a-relative.com! This should create an interesting buzz in the media.

Even if most travellers are already used to using frequent-flyer type programmes, webmiles.com's positioning is still fairly innovative, since they offer a range of marketing services which did not exist before the net.

The question now is to know whether the market targeted - people who are interested in frequent flyer programmes, but who don't like the conditions attached to using them - will be a profitable one. Up to now, despite their limitations, these programmes have been a great success.

Under these conditions, it is quite legitimate to wonder whether the restrictions imposed by the airline companies are really unacceptable for customers. The success or failure of webmiles.com should quickly tell us what the potential for these services is.

In Europe, this type of programme, where benefits are linked uniquely to travel, does not really exist yet, since there are not enough Internet travellers for the moment and the airline companies are not very committed to the idea.

On the other hand, over the past few months, a lot of loyalty programmes have appeared on the web in which eTourism is just one of many activities (for example, in France, maximiles.com and libertytv.com programmes).

Given the high purchasing volumes of eTourism (the average transaction value is much higher than that of eRetailing, for example, and as a result the volume of points earned through such purchases is much higher), there should be a spate of offers in this sector of activity in the coming months.

Source: WebMiles