Microsoft and Pegasus. Yahoo! and Travelocity. Worldview and Hilton. Preview Travel and Excite.
The latest string of high-profile deals in the interactive travel business begs a few questions:
Are these agreements part of a new push to find long-term partners within the industry, or just the latest round of musical chairs? What do these partnerships mean for the industry? How important is having a solid partner to your bottom line?
And, in what appears to be a rapidly consolidating business, is there room for smaller companies?
I put these questions to the people near ground zero.
“The deals are vital,” says Andrew Barbour, director of programming for America Online’s travel channel. “You can’t do without them. The travel industry is so vast, it’s almost impossible to cover all content areas sufficiently well. You have to go out and find the real experts.”
Barbour compares the experience of lining up partners to finding an elusive recipe to a favorite dish. To hear him describe it, dealmaking is part art, part science.
“You have to find the different pieces that will allow you to create a truly excellent product. But when you’ve brought all the best ingredients together, you still need a great recipe,” he says.
The players in interactive travel are turning their attention to main dishes now, where they once prepared hors d’oeuvres. In other words, observers believe, the business is starting to settle down.
“I think you’re going to see the beginning of some longer-term stability,” says Philip Wolf, president of interactive travel consultant PhoCusWright Inc. in Sherman, CT. “There’s a shakeout happening. The market opportunity for travel online is enormous, but the volume is not going to translate into cash flow for another few years.”
The net result will be fewer interactive travel companies, perhaps three to four mega-sites devoted to leisure travel, and an equal number dedicated to business travel, he speculates.
So what will happen to the smaller startups that can’t ink a blockbuster deal? Wolf thinks there will be room for “little players to do little things,” a sentiment shared by most of the dealmakers.
But not all of them. “The small guys are not going to be able to compete,” predicts Karin Wacaser, a spokeswoman for Pegasus Systems Inc. “It’s going to come down to a couple of megas.”
And no one else? One thing is certain: the days of creating a travel site or service in a garage, a la Yahoo! Inc., are over. Just how far our business has evolved is still a matter of debate.
One other thing, too. We’ve only seen the beginning of the dealmaking. “I’d expect to see more deals in the future,” says Mike Masters, director of marketing and business development at Worldview Systems Corp. “Including from us.”
The demands of a new medium are fueling partnerships that are more stable and long-lasting than the agreements made during interactive travel’s early years. The latest round of deals appears to signal the end of a frustrating game of musical chairs and the beginning of a more serious period of industry-wide consolidation.
Unfortunately, not all of us will be around to see the outcome.
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