As online agencies move swiftly to expand their offerings of
packaged vacations, analysts say tour operators are under
increasing pressure to build up their own presence on the Web.
“Dynamic packaging” technology that allows consumers to
essentially build their own vacation by combining air, hotel, car
and attraction options in one discounted price, is seen potentially
as a huge area of growth for online agencies.
And that growth, said Henry Harteveldt, principle analyst for
Forrester Research, “will redefine the whole packaged travel
Though package vacation sales online began only a few years ago,
they are already making an impact. Expedia, seen as the leader in
dynamic packaging, reported that 30 percent of its second-quarter
revenue came from vacation packages, which the company began
offering in 2001.
Other online agencies are quickly catching up. Orbitz last week
launched its “vacation package matrix,” which allows consumers to
view various air-hotel combination packages on one Web page.
And in the next several weeks, Hotels.com is expected to
significantly expand its vacation package offerings in partnership
with sister company Expedia.
Priceline.com, which launched its packaged vacation options in
May 2002, reported 100 percent growth in the offerings in the
second quarter over the same period last year. Last month,
Priceline added all-inclusive resorts to the list of 1,700
properties among package options for which consumers can name their
For consumers, packaging gives online agencies “greater
flexibility to do the necessary trade-offs” to get consumers the
prices they want to pay, said Brian Ek, Priceline.com
For suppliers, the sale of inventory as part of a package is
attractive because prices are opaque. The discounts that may be
included in a package won’t undercut published prices.
The growth in packaged vacation sales online is fueled in part
by expectations that air bookings will drop in coming years. Online
agencies are focusing increasingly on higher-margin products, such
as hotels, vacation packages and cruises.
Online hotel sales have already skyrocketed. But the vacation
package market is expected to grow more quickly than online cruise
Some tour operators and wholesalers sell pre-packaged trips
online, either through their own branded Web sites or online
agencies. Trafalgar, for example, offers some of its tours on
But in PhoCusWright’s Online Travel Overview, released in
February, researchers predict dynamic packaging will soon pre-empt
the online sales of prepackaged vacations.
Harteveldt with Forrester Research estimates that vacation
package sales on the Web will total $599 million this year,
representing 7.4 percent of all vacation package sales.
By 2007, online vacation package sales will grow to $954
million, an increase of 54 percent, and will represent 9.4 percent
of vacation package sales.
“It’s a nascent niche product,” said Harteveldt. But the
potential for growth is there, particularly as airlines offer more
packaged offerings on the Web, as improved technology simplifies
build-your-own-package tools for consumers, and as travelers become
more confident about buying vacation packages on the Internet.
Bill Carroll, visiting assistant professor at Cornell
University’s School of Hotel Administration, said sales of online
vacation packages would initially have little impact on tour
Most of what is defined as a package on the Internet is
relatively simple. “Just because you combine air and hotel does not
a sophisticated package make,” he said.
Tour operators can offer far more complex and specialized
products, with more flexibility and a level of service not found
with online agencies.
But, noted Carroll, as dynamic packaging technology improves,
online agencies will be able to add more options like spa, golf, or
diving activities, for a more complete vacation package.
Expedia, for example, began offering Las Vegas wedding packages
online in 2001, and so far about 2,000 packages have been sold.
Wedding package destinations now include Hawaii, and soon more
popular spots to tie the knot will be added.
Expedia is planning to beef up even further its offerings of
“destination services” such as boat tours, show tickets, golf
bookings, or kayak tours, said Jenne Pierce, director of planning
for hotels and packages.
It’s that increasing sophistication that may force tour
operators to invest more in their own online sales.
Currently an estimated 85 percent to 95 percent of tour operator
packages are sold by “offline” travel agents. And, as the
PhoCusWright report contends, suppliers are “in no rush to upset
their trusty partners, especially in hard economic times.”
Still, some tour operators like Pleasant Holidays are looking
for ways to build online sales along with their agent partners.
Pleasant Holidays has offered vacation packaging options on its
branded Web site for three years with the ability to combine air,
hotel and ground transportation services.
Consumers can book direct, but agents can also use Pleasant’s
Web booking options to put together complicated multidestination
And agents can add Pleasant’s booking options to their own Web
sites for commissionable online sales.
Todd Castor, Pleasant’s vice president for e-commerce, said
agents’ online bookings are growing faster than consumer-direct
bookings on the company’s Web site.
“We’re seeing an offline-to-online shift,” said Castor. In
August, the total volume in online business increased 40 percent
over August 2002.
The next step is to draw travelers to book higher-end vacations
online, said Castor. Currently, the average cost of Pleasant
Holidays packages booked online is about $2,700.
“We’ve put a lot of time and resources into packaging technology
to provide the flexibility we believe is necessary for big-ticket
purchases online,” he said.
Recognizing that agents need online tools to compete with
companies like Expedia, Mark Travel in October will begin offering
dynamic packaging through its VAX VacationAccess a Web-based system
that enables travel agents to book vacation packages from
The agents-only Web site has offered prepackaged tours since its
launch in May 2000. But starting Oct. 1, agents will be able to
build their own real-time packages for clients.
Initially, the dynamic packaging will include products from
United Vacations and Funjet, but eventually all of Mark Travel’s 19
brands will be included, such as ATA Vacations, Adventure Tours
USA, AeroMexico Vacations, and Blue Sky Tours.
And agents will be able to fold fees “seamlessly” into the
packages, notes John Ische, president of Trisept Solutions, a
sister company to Mark Travel that developed the technology for VAX