August 26, 2008: It´s the height of summer vacation season, but online travel agencies are seeing a reduction in bookings thanks to the weak economy. Surveys by Forrester and Rand McNally showed that more than a quarter of travelers expect to cut back on their vacation plans this year. And the number of visitors to sites such as Expedia, Priceline, Travelocityy and Orbitz are down slightly, according to an analyst note put out this morning by Marianne Wolk, Internet analyst with Susquehanna Financial Group.
Rising fuel costs and a reduction in the number of flights offered will likely dampen air bookings for these companies during the second half of the year. Fare hikes on major routes and increased surcharges for meals, extra bags and even pillows, may discourage travelers from taking to the skies.
Hotel occupancy rates are also starting to decline, but online travel agencies are showing some benefits as more hotels are using their services to fill rooms. International bookings are also expected to drop slightly during the second half of the year.
But there´s an upside for these online travel agencies, which could see growth from advertising revenue as they monetize their traffic. Expedia is a top 25 site worldwide, and Orbitz is within the top 100 most-trafficked sites. "There is significant opportunity to increase growth and profits by monetizing this traffic--particularly lookers that do not book transactions," Wolk wrote in her note.
Expedia has begun this process by generating ad revenue through its social network, TripAdvisor. But the per-user revenue is still well below that generated by sites like Shopzilla and Ebay.
The goal for these travel sites is to generate advertising revenue from window-shoppers while not distracting bookers from actual transactions. Targeted, behavioral display advertising can also provide a lift to sites that have traditionally relied on revenue from transactions.
