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The New Age of Realism
6 November 2000

Tony Bennett's Destinex.com is up for sale. William Burton's Holiday Expert is going to acquire an existing travel company to re-invent itself as a bricks and clicks business. Many other online b2c travel companies are either going bust or are too ashamed to report their measly sales. Previously high profile travel industry figures who walked out on the offline world to join dotcoms may now be crawling back, their share option packages as worthless as the paper they are written on.

What is going on? Why aren't these people dotcom millionaires by now? I would like to suggest why. Let's take a look at the three business factors that I believe are critical to the success of an online travel business: product, place and people.

Looking at product, it is clear that simple products, commodities in particular, sell online in huge numbers. CDs, books, software, Viagra. The buyer knows exactly what he/she is getting. Translate this to travel and you begin to understand the success of ebookers and other flight driven businesses. Nowadays, whether the airlines like it or not a flight is an easily understood commodity. Package holidays, tours and tailor-made travel are more complex. Consumers are naturally more nervous of buying these without some old fashioned, human reassurance.

The place is important in terms of whether products are inbound or outbound. Inbound sells best online because it is a product that requires the global reach of the Internet. Hotels, airlines and tourism destinations generate huge online traffic for their Web sites.

However, the most important factor is people, consumers. If your business has appeal to those who are comfortable online, you have got it made. That is why business and student travel are succeeding. If you have been trying to sell a complex, outbound leisure product to nervous consumers who probably don't yet even have a PC, you cannot expect to be making money. The market simply is not there. It will be; maybe on the Internet, more likely on digital TV, but try telling investors that. They all ran scared when the potential to make a fast buck disappeared with Lastminute.com's Spring flotation.

There have been two ages of travel on the Internet and we are about to enter the third. I call the first the Gold Rush, when anyone who was anyone rushed in to scoop up the equity and share options, looking to cash-in fast. We are now in the age of Panic, when businesses are folding, dotcom execs are abandoning their new fancy job titles to return to the old world and potential investors are in hibernation.

Now, we are about to enter the third age, the new age of Realism, where people will grasp the fact that perhaps the online world does have something to offer, that there is gold in the ground. They are just going to have to dig deep and work hard to yield the benefits. Of course, those who always knew this will have the last laugh. They have been steadily working away to dig the foundations, not predicting early success, but getting a head start on the competition. Shame on those venture capitalists and investors who are not supporting them.

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