The ability to customize packages drove continued growth in combination purchases by online travel buyers in 2004, according to the upcoming report published by PhoCusWright. Last year, one-third of online travel buyers made a combination purchase of travel components using dynamic packaging technology, up from 24% in 2003. The number of online travel buyers who purchased pre-packaged travel, however, declined in 2004 to 13% from 19% in 2003.
True dynamic packaging is defined as a package for which the overall price and component prices change based on the business rules that govern them, as well as the value of the customer to the supplier, packager or intermediary, according to the new report. All of these elements may not be in play for all packaging engines in place, but the essence is customer-driven customization.
This trend puts the spotlight on the emergence of technology evolving to support a new, “just in time,” Internet-based leisure distribution platform. In fact, dynamic packaging user interfaces will change dramatically in the next two years, according to a new report from PhoCusWright Inc. and Travel Tech Consulting Inc. Dynamic packaging commands an increasingly dominant share of the online packaging market, and suppliers, tour operators and online travel agencies are enlisting new technologies to capture those sales.
For online travel agencies, package sales have become a significant driver of growth. Travelocity recently reported that fully 24% of its 2004 gross bookings were packages, double the portion of sales two years ago. Meanwhile, 20% of Expedia’s bookings were accounted for by packaged sales. Packaging is also being touted as a significant growth area by Orbitz and Priceline.com.
Online pre-packaged tour purchases were on the rise until dynamic packaging hit its stride. The percent of online travel purchasers who bought vacations, tours and all-inclusive packages increased from 3% in 1998 to 18% in 2001, at which point the curve flattened. Starting in 2002, however, from one-quarter to one-third of online travel buyers were reporting that they were creating their own packages by purchasing air, car and/or hotel in a single purchase, while fewer reported pre-packaged travel purchases.
New dynamic packaging technologies that can react to consumer behavior are close on the horizon. This fact, and the continued conversion of package bookings online, presage a new phase of package sales for consumers, suppliers and intermediaries alike.
