For a few months now, sites have been either closing-down or going through financial difficulties in the eTourism sector.

LeisurePlanet.com was the biggest victim that was claimed in 2000 and it seems that things have been going even faster since the beginning of January.

Savvio.com shut down at the beginning of the year only four months after takeoff… and after it burnt $14 million cash all in vain.

At the same time, Travelnow.com had to sell its assets to the Hotel Reservation Network company, as it did not want to meet the same fate.

For a few months now, sites have been either closing-down or going through financial difficulties in the eTourism sector.

LeisurePlanet.com was the biggest victim that was claimed in 2000 and it seems that things have been going even faster since the beginning of January.

Savvio.com shut down at the beginning of the year only four months after takeoff… and after it burnt $14 million cash all in vain.

At the same time, Travelnow.com had to sell its assets to the Hotel Reservation Network company, as it did not want to meet the same fate.

And finally, Whiplash stopped its activities after slaving away for three years and ByeByeNow.com laid off 75% of its staff…

Priceline.com and lastminute.com show disappointing results, which do not augur well for the near future of their respective business-models.

This is how Priceline.com said it had $228 million in revenue in the fourth quarter, down from $341 million in the third quarter. Including all charges, the company reported a loss of $105 million for the fourth quarter alone.

Of course, after detailed calculations, the site specifies that most of its quarterly loss is the consequence of extraordinary restructuring charges, which means that their pro forma net loss would not exceed $25 million.

And yet, as I already mentioned when I studied Priceline.com' business model, the site can no longer keep on seeking a proper leading Internet position. Indeed, its market's actual size seems much smaller than what its founder Jay Walker expected it to be.

This is why I think Priceline will have to limit its ambitions to a simple niche strategy if it wants to keep on existing online.

Dynamic prices on the Internet, just as "last minute" purchases, do not yet represent a big enough market segment to expect drawing a profitable business model from there.

Such being the case, you have two choices: you can either try and cut down your expenses in order to adapt them to the reality of your market and make do with your little niche, or else you can try and reconvert as lastminute is presently trying to do (see eFocus in the same edition).

This is how Priceline just managed to seduce two new Asian investors by playing the restructuring card. Hutchinson Whampoa Ltd and Cheung Kong just invested a total of $50 million in Priceline.com.

Given that, everything should be rosy for Priceline. Unfortunately, at the same time, Vulcan Ventures, Paul Allen's investment firm, (Co-founder of Microsoft), just liquidated its holding in Priceline, selling $9.1 million shares.

Let's also specify that the investment made by the two Asian companies in Priceline.com was based on the company stock trading at $2.1 a share, when it traded as high as $94.5 in March 2000!

This is why we should start asking ourselves how start-ups are going to get any new financings in the eTourism business.

Venture capitalists' main interest lies in the "Stock Exchange". Indeed, it would be close to impossible to get multiplying rates as high as the ones we've seen up till now without the Stock Exchange.

Prices are currently trading low in the New Economic sector and, as a result, venture capitalists will probably hold back from investing huge sums of money in eTourism projects, as they no longer know when they will be able to get a profit from their investments.

Stock Exchange marketplaces worldwide should not expect to get back the same infatuation as the one that was shown for the New Economic sector in the near future.

And yet, venture capitalism totally differs from the trade of banking.

Let me explain this: venture capital companies only have limited financial means. You only invest money in a business when you know for sure that you can get out of it quickly, thus generating supplementary funds in terms of treasury. This implies fast and profitable exit cycles.

As all start-ups saw their shares' value drop dramatically, those exit cycles got longer and some investments even resulted in dead losses. All this happened in the tourism economic sector where margins are particularly low and new comers need supporting for a few years before they see their first ever sign of profitability.

Even when venture capitalists still believe the companies they backed up could yet prove successful, they no longer have enough money to keep on supporting them.

As far as new projects are concerned, they tend to be dead before they are even born, only because they did not manage to convince in financial terms.

This is why eTourism start-ups are presently suffering from four different handicaps:

• It is becoming harder and harder to get listed on the Stock Exchange, please refer to the numerous projects of introduction on the Stock Market that were cancelled at the very last minute.
  
  
• As for the companies that are already listed, they find it more and more difficult to trade sufficiently high to keep on attracting new shareholders or even keep the old ones.
  
  
• It takes longer and longer to find venture capitalists ready to supply new financings for second, third or even fourth core shareholders and this constantly endangers your firm of having suspended payments.
  
  
• Online competition is becoming harsher and harsher and this is true throughout the world.

This is how we now have, after the euphoria that could be seen at first in the eTourism sector, at a time when sites are taken over or restructured bluntly, Web sites that are facing financial difficulties and that can only sell at low price in order to avoid closing down.

Professional investors, just as small shareholders, now require results and no longer accept to count only on a site's potential future.

This is why I fear that online investments might well be over for many eTourism Web sites (at least for a few months still) and, as a result, failures and restructuring problems should increase even further.