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Advertising Could Give Boost to Flagging Online Travel Agencies

Kim Hart

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.

By Kim Hart  |  August 22, 2008; 11:31 AM ET  | Category:  Kim Hart
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You wrote: “It's the height of summer vacation season, but online travel agencies are seeing a reduction in bookings thanks to the weak economy. “ Excuse me, but I would like to modify your statement: “It'is the height of summer vacation season, but all the travel agencies are seeing a reduction in booking thanks to the weak economy.” For my point of view, it is not a particular problem of the “online travel agencies”, it is a problem of all the market including the “online” and “traditional” booking systems of the airlines companies.


Posted by: Domingo A. Trassens | August 23, 2008 7:51 PM

This is not quite right… Domestic gross bookings, transactions and shopping in general are up for everybody except Orbitz. They (the online travel agencies) are benefitting from a down economic cycle (people are shopping more), but the online travel agencies are just not making as much per transaction, hence looking for ways to monetize the (growing) unconverted eyeballs. Collectively online agencies were up more than 10% in domestic gross bookings through the first half of 2008.

Douglas Quinby
Senior Director, Research
PhoCusWright Inc.
+1 860 350-4084 x390

Posted by: Douglas Quinby | August 26, 2008 11:45 AM

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