TravelMole Interview: Henry Harteveldt, principal analyst, Forrester Research

Traditional travel agencies have seen their worst haemorrhaging, but online agencies will continue to increase market share as they continue to battle fiercely in 2004, says Henry Harteveldt. “The small corner shops can’t compete with the Wal-Marts on price, so they’ll have to continue to compete on other things such as better quality of service or a wider choice of products,” he told TravelMole. “The agencies that survive will have a very different business module. They will really be agents of the customers rather than suppliers. Since they’re getting less and less compensation, they’ll have to turn around and charge customers a fee,” he added. While on-line providers continue to add market share, he said, traditional agencies will be better off by continuing to develop personal relationships. The move towards on-line in bookings is evident, he said, citing projections of $34 billion in sales this year compared to last year’s 27.8 billion. Mr Harteveldt said on-line companies have increasingly been moving in the past three years to more complete travel service providers, offering clients a “fulfilled dream” concept. That packaging element more recently has added the cruise business,” he said. Mr Harteveldt sees 2004 shaping up as a pivotal year for the major on-line agencies, Travelocity, Expedia and Orbitz. Travelocity dominated the online-travel agency business as recently as two years ago, he said. But since then, Travelocity has become No. 2 behind Expedia. “If they lose that to Orbitz and become No. 3, then they’ve lost the game. Nobody cares about No. 3,” Mr Harteveldt said. Losing out to other on-line agencies as No. 3 will lead to less advertising dollars, and less support from Wall Street, he added. Despite their increasing sales, however, Mr Harteveldt said on-line travel seems to have made no inroads in customer or brand loyalty among the providers.