The travel industry was one of the earliest to go online. Since travel has few geographical
boundaries, the airlines faced none of the issues of online product retailers such as shipping and tax-collection schemes, the travel industry is uniquely suited for the Web. Websites today like Travelocity, Expedia, ORBITZ, Kayak and Fodors are examples of the industry that is always on an upward trend. These websites thrive on similar principles with all internet sites trying to grow and expand their business in the way that the internet is do-it-yourself and 24 hours a day without talking or interacting with people in the privacy of their own home. The travel industry will always be on the upward trend due to the relability and comfort the consumer has. These travel industries are easy to handle and work for your advantage in that they can do your needs 24 hours before or months before. The travel industry only expanded due to the rise of the internet because of unless ways of expansion and growth. The internet only exposed the rise of the travel industry greater and greater because of its ease of access. In 1997, it was estimated that the online travel industry made up 1 percent of the total U.S. travel market. Today it has grown to 11 percent, valued at over $20 billion. In looking at the financial results of expedia.com, revenue and costs have grown from 531.3 to 665.3, a 25% growth annually and gross profit has raised 27% in a year. North American has grown 18% while Europe has grown 47%. ORBITZ has also experienced growth 34% in a year and stands at $3.44 Billion. Kayak rose to $27 million in a year as a small company.
http://media.corporate-ir.net/media_files/irol/19/190013/4Q07Release.pdf
http://www.internetretailer.com/internet/marketing-conference/86921-orbitz-bookings-grew-34-last-year-344-billion.html
http://www.techcrunch.com/2007/12/20/breaking-kayak-raises-196-million-buys-rival-sidestep/
1. Analyze the income statement for a company in your industry.
Find a public company and look at its annual report.
If you can’t find a public company look for news information that talks about revenue, cost and profitability.
If you can’t find any data then estimate revenue and costs based on comparable businesses (ask instructor for help)
Summarize one year’s data in a table on your wiki (revenue, cost, % of total)
Do a first attempt at a “five forces” analysis of your industry.
List examples of each type of participant.
Put it on your wiki.
Assess the likely profitability of the industry.
Do a revenue and cost driver analysis.
What is the size of your industry (i.e. total revenue)?
What are the three biggest companies in your industry by revenue?
Continental Airlines Statement through December 2007
Revenue is 14,232 million
Cost of goods sold was $11,068 million
Gross profit $3,164 million
Gross profit margin was 22.2%
SG&A expenses were $2064 million (SG&A stands for Selling, General and Administrative Expenses. This includes Income statement item which combines salaries, commissions, and travel expenses for executives and salespeople, advertising costs, and payroll expenses.)
Depreciation & Amortization was $413 million
Operating income was $687 million
Operating Margin was 4.8%
Revenue was $14,232 million
Total Expenses were (cost of goods) $11,068 millions + (SG&A expenses) $2,064 million + (Depreciation & Amortization) $413 millions = $13,545 million
(Total Revenue) $14,232 - (Total Expenses) $13,545 = (Operating Income) $687 million
Percentage of total (operating margin) was 4.8%
2. Do a first attempt at a “five forces” analysis of your industry
List examples of each type of participant
Put it on your wiki
Assess the likely profitability of the industry.
Potential Entrants-aggregators—There are no aggregators in competition but companies in our field can compete to be the number one result in a search engine like google or yahoo.
Buyers- Individual travelers, Business travelers, Advertisers
Suppliers- Steel manufactures, Oil companies, Energy suppliers, Airports, Safety line contractors, Pilot schooling, Tower training
Competitors- Expedia, Travelocity, Orbitz, Kayak, Fodors, Navigant, travelnow, cheaptickets.
Substitutes- Cars, Buses (Greyhound), Trains (Amtrak)
4. What is the size of your industry (i.e. total revenue)?
World Travel; International Tourism Revenue $735 billion US. US Travel Revenue $699.9 billion US.
http://www.plunkettresearch.com/Industries/TravelAirlineHotelTourism/TravelAirlineHotelTourismStatistics/tabid/253/Default.aspx
5. What are the three biggest companies in your industry by revenue?
ORBITZ, Travelocity and Expedia are the biggest companies in the industry.
