Call them the biggest survival story of the dotcom era. Or call them the big guys in the making in corporate America. Online travel agencies like Expedia, Travelocity, and Orbitz have shown extraordinary (no, one is not at all generous, they deserve it every bit) resilience in surviving not one, but three challenges-one after another.

As online players, the first challenge was the tech meltdown of 2000. While many other dreamy dotcomers fell, these companies did manage to hold on. That itself was an exception at that time. Hardly had they settled in, came 9/11 resulting in fear of travel never before known in America. And the final (and ongoing) challenge is from the very suppliers whose services they distribute-the hotels and the airlines.

These have themselves have become tech savvy and are challenging these independent agencies aggressively in the online marketplace. The jury is still out on who will win this round, though most market observers feel it will not be a straight one-or-the-other judgment.

Travel Shines

While challenges have definitely strengthened them, what has helped them survive and grow is the American consumer’s increasing reliance on the Web for making their travel purchases. The figures are telling. According to JupiterResearch, which tracks consumer commerce on the Net, 23 percent of all consumer travel purchases in the US, in 2004 were transacted online. This figure, according to the forecast, will increase to 33 percent in the next four years. In other words, in 2009 one-third of the total consumer travel spending on travel will happen via the Web. That may sound a little optimistic at first, but it is anything but surprising.

One out of four Americans already visits online travel destinations, according to Nielsen/NetRatings. In November alone, says the Internet measurement and analysis firm, as many as 68 million unique visitors flocked these sites, out of which Expedia, Travelocity, and Orbitz-the three top online agencies- put together received 36 million.

In fact, travel accounts for the predominant majority of total retail commerce happening on the Net. As much as 43.3 percent of the $117.4 billion, which American retails spent on the Web in 2004, was on travel according to comScore Media Metrix. That is a whopping $51 billion. The growth was even more impressive at 26 percent. That is by and large good news for all stakeholders in the online travel. By and large.

So Far, So Good

The online agencies are not relaxing, however. While the impressive growth forecast-of reaching $91 billion in next four years-in online spending is a reassuring factor, their concern is that slowly but steadily suppliers have been taking away online market share from them. Till 2002, the industry was almost equally split between the suppliers (like airlines or hotels), websites, and the online agencies. In a global economy that is moving more towards specialization in services and outsourcing, it is natural to expect that the balance of power should increasingly tilt towards the independent agencies.

But it is not

In 2003, suppliers started surging forward and had built a significant lead by 2004. They accounted for 56 percent of the total online sales in 2004. And according to Jupiter, they are expected to increase that to 60 percent by 2009.

Though it looks a little surprising, it is not difficult to explain. The agencies came to the forefront riding the Internet wave. Since travel sales are more about managing information than anything else, technology had a great role in removing the inefficiencies. Says Ram Badrinathan, analyst at specialized online travel business research firm PhocusWright, “It is all about how you customize information and how you push it. Technology adds a great value to it.”

It is through the power of technology that online players built their presence and challenge. And they snatched market share from the traditional travel agencies, which were either small or too dependent on the corporate travelers to react fast enough.

However, Internet is open to all. While suppliers could not compete with the traditional travel agencies, because of lack of physical penetration, the Internet suddenly gave them a platform. As most online agencies were struggling to cope with one challenge after another, in the wake of the tech meltdown, the suppliers quickly built their technology capabilities to neutralize the agencies and challenge them as equals. Other factors like customer service and fulfillment capability already being their strength areas, a solid Internet presence allowed them to take away market share from the online agencies.