6 September 2002
SPECIAL REPORT: TAX 2002
In one corner, the click-and-mortar travel agents like
Chan Brothers who have gone online but maintain a
substantial brick-and-mortar operation.
In the other corner, online travel websites such as Zuji
and Priceline which are banking mostly on the "clicks" to
deliver revenues without too much "mortar".
Who will win out? Panellists taking part in the Online
Forum during TAX 2002 had no answers but one thing was
clear - this second wave of online travel players will have
a bigger impact on the distribution landscape than did the
NOW COME THE BIG BOYS
Indeed, according to Anthony Chan, managing director of
Chan Brothers, whose company went online during the first
wave and survived the busting of the balloon which claimed
several victims, including its arch competitor, Ken-Air,
"the scary part begins now."
"Now come the big boys," he said. "We will see a real
sorting out now."
This is because he believes the new players - the
American-driven business models such as Travelocity,
Expedia and Priceline - see the business differently. "They
see it as a commodity, they drive it as a commodity which
means low margins. And they use technology to drive the low
The online battle, he said, "starts now and it will not
be without its challenges." Asia however, is a different
market from those markets the American models are used to,
said Chan. With the exception of China and Australia, there
is no scale in each of the Asian markets where these online
players can play, he said.
The ones to survive will be those who get the
fundamentals right, he said - excellent personal service,
lowest costs and the right combination of
NO ONE'S GOT IT RIGHT YET
Martin Symes, commercial director of Zuji, outlined three
criteria for success of a travel portal - good customer
experience, strong supplier relationships and strong brand.
"The one with sufficient resources to build a strong
consumer brand will win the consumer trust."
So far, he said, nobody's got all three things right.
"Some spend so much on technology that they have no funds
for marketing. Some spend so much on marketing but have no
The second wave of players, he said, have more
experienced and senior management teams and more realistic
He posed two questions:
• Can an online player survive without an office presence?
"Can it move enough customers to online travel? Customers
still want the human touch - travel is a high comfort
• Will traditional travel agents wipe themselves out by not
offering services online? Can you make money from simple
air and hotel transactions?
Symes contended that it was not players like Zuji that
were driving low margins but suppliers. He queried the
inefficiency of a distribution channel that was still
"intermediated" by the GDSs to which suppliers had to pay
"Perhaps we should go direct to the suppliers rather
than through the GDS," he said.
IT'S ALL ABOUT THE DISTRIBUTION COSTS
By 2005, most simple air transactions will be done with
e-tickets and online. And 50 percent of hotel transactions
will be done online.
At the same time, Mark Siladi, vice president-travel of
Hutchison-Priceline, quoting those figures, said a clear
split was emerging between supplier-owned sites and
intermediaries and the factors that would drive their
success would be value, reach and speed to market.
He also painted the contrast between the North American
and Asian online travel market. "It is interesting to note
that in the US, the only big travel agency players
currently are Internet-only sites while in Asia, there are
two big regional players who do it all. We are seeing a
consolidation among single country players and those that
Travel agencies were realising there were no returns in
air ticketing, he said, predicting, "For consolidators and
wholesalers of air tickets, the writing is on the
He called Priceline a "superniche" player and "the most
efficient distribution system" for suppliers.
Conceding that some people would not use Priceline
because of its business model, Siladi said,
"Customers have different personas. I would use
Priceline if I wanted to make a quick trip somewhere but I
would never use Priceline for my family Christmas
Ultimately, he said, it was about providing the most
efficient distribution system for suppliers. "Airlines and
hotels will not stop driving distribution costs down," said
Siladi, who used to work for Virgin Atlantic.