In 2003, Expedia was bought for $5.1 billion. The following year, Hotwire and Cheap Tickets was bought for $2.1 billion, and a year after Orbitz was purchased for $1.2 billion. What are these companies? Are they selling some kind of wonder drug? Or, maybe some kind of lubricant that will make old engines run like new? No. These companies sell travel. But, they're not like your friendly neighborhood travel agency with an office down the street. These are virtual travel agencies. Their business sites are on the Internet.
The New Kid on the Block
Right now, there is one Internet travel agency that's giving Expedia, Hotwire, and Orbitz a run for their money. It's YTB (Your Travel Biz) International. It was founded in 2001, but it began operations only in 2003. It has a unique formula. Instead of operating just one travel website like its competitors, it sells them to Referring Travel Agents who will operate separate internet travel agencies under the YTB umbrella. But, RTAs won't pay billions. Not even thousands.Starting with just 3 when it began operations, YTB has now over 100,000 RTAs. The strength of this formula lies in the fact that YTB does not spend money on advertising. It relies on the word-of-mouth of the RTAs. The RTAs will simply refer their relatives, friends, acquaintances, and people they meet to their sites. One hundred thousand RTAs is a formidable advertising force.
Making Money the Easy Way
How do the the Internet travel agencies make money? These companies are technically Referring Travel Agencies. What they do is point travelers to their website. The website is a virtual travel mall where the traveler can:* shop airlines, compare prices and purchase tickets (60 airlines)
* make reservations with hotels and resorts (55,000 hotels and resorts)
* rent cars
* book cruises
* send flowers
* buy tickets for special events (concerts, sports events)
* check out golf schedules
* get help with travel problems
Everything that makes travel easy and fun are inside the travel site. When travelers make a purchase through the websites, the vendors pay a commission to the website owner. Very simple, and very profitable. Those billions of dollars paid for Expedia, et al really say a lot.
The Reason Why: The Way to Go
Why would investors pay billions of dollars for intangible assets? It's all about trends. Right now travel is a $7 trillion industry world wide and is expected to double in 10 years. In the U.S. it generates $1.3 trillion annually which translates to:* $3.4 billion a day
* $148 million an hour
* $2.4 million per minute
* $40,000.00 per second
BIG numbers. What brought this about? Remember the Baby Boom phenomenon? Those people born between 1946 and 1964, the Baby Boomers, had exercised significant influence on world economy for decades. When they were babies they made Gerber famous because of baby food. When they were toddlers they played with toys that put Mattel and Hasbro on the map. In their 20's, they drove sports cars and made the Ford Mustang the top-selling car in America. When they became parents, it was the minivan.
The Travel Avalanche
Now, these Baby Boomers are in their retirement age. They will start to retire at the rate of 1 every eight seconds, or 10,800 every day for the next 20 years. This figure is only for the U.S. World wide, there is an estimated 1 billion Baby Boomers!This generation also inherited the wealth of the previous generation, the Savings Generation. Now, if you are a Baby Boomer with money to spend what would you do? Travel and go on vacation, that's what you'd do. After years of hard work you will reward yourself. Vacation, travel, the chance to enjoy life and have fun, these are the best rewards you could get.
Better Pack up and Run
If you own a travel agency with an office where you pay rent, salary for staff, utilities, and miscellaneous expenses you are in big trouble now. Why? Every 3 seconds someone, somewhere goes on line to shop or to buy- anything and everything. Eighty million Americans book travel on line each year. Baby Boomer households registered 268.9 million trips in 2003. The highest recorded travel volume in the United States.Take a look at the trend in travel spending done on the Internet:
* 2002 - $30.8 billion
*2003 - $37.0 billion
*2004 - $54.0 billion
*2005 - $62.0 billion
An increase of 27% per year, average.
What are You Thinking Now?
So, if you're thinking of owning a home - based business the Internet travel agency would be a smart way to go. However, buying Travelocity might be way too expensive. It might cost you billions too. But, you can still get one from YTB International and be an RTA. Very smart move.How do I know? I'm one. If you want to know the way, Green Crest will lead you.
No comments:
Post a Comment