During the dotcom boom many firms were spending to support an unproven business model but companies are now showing that e-business can be a fast track to increased profitability.
Analyst firm Forrester Research has estimated that more than half of all travel-related bookings made in Europe are researched on the Internet, and that consumers are twice as likely as last year to book online.
Last week, Brittany Ferries revealed that its online operation has had turned over £25m since 2000, based on an initial investment of just £300,000. The ferry operator, which carries 53% of all UK passengers travelling from ports to the west of Dover, said that more than 75,000 customers have made online purchases since it launched its Internet booking service in February 2000.
Steve James, Brittany Ferries' business development manager, said the Web site, which is hosted by e-business software supplier Goss Interactive, has surpassed all expectations. "When we launched we would have been happy with 5% of bookings online within three years but we already have 14%," he said.
Outsourcing the hosting of the site to Goss Interactive will have contributed to the remarkable return on investment figures, said Tony Hart, managing analyst at research firm Datamonitor. "Brittany decided that hosting the site [itself] was not an option, which allowed it to concentrate on what it is best at," he said. "For companies that are simply operating a transactional Web site, there is no reason why they should not outsource the hosting."
Much of the success of www.brittanyferries.com is down to the simplicity of design, according to James. "We kept it as simple as possible, allowing customers to make a booking in a matter of minutes," he said.
Ensuring sites are focused on the customer rather than the design is crucial, according to analysts. A recent survey from research firm Taylor Nelson Sofres found that many consumers rejected whole categories of Web sites where they considered the service to be poor or the site badly designed. "It is in the interests of all to ensure that Web sites are not based on what Web designers think looks impressive, but rather give consumers what they want in the form they want it," said Ben Lovejoy, research director of the interactive division at Taylor Nelson Sofres.
The number of customers booking at the Brittany Ferries Web site means the company is cutting costs as well as boosting profits. It expects to have saved £1m through online bookings by the end of 2002, as the average cost of taking a booking over the Web is £2.11 and falling, compared to £14.67 at a call centre, said James.
"Because the development costs are fixed the more online bookings we take the cheaper it gets," he said. "Some people will always prefer to use a call centre but the Web will play an increasingly important role in the future." Brittany Ferries plans to upgrade the Web site to make it more dynamic and expand its online operation, James said. "We are aiming to offer package holidays online by 2004 which will require an XML platform. We are developing an online booking system for our freight customers," he said. "We hope this will lead to savings similar to those we achieved on the customer site."
Brittany Ferries could use the freight online booking system to expand their business horizontally, said Hart. "Potentially, it could be used as an e-marketplace for all freight carriers. Tenders could be put out for companies wanting to freight bits and pieces, meaning resources are fully used."
Other areas of the travel industry are benefiting from the increasing reliance of consumers on the Internet for planning and booking their holidays. Last month, travel agent First Choice revealed that 85% of customers using its online booking service had completed the transaction via the Internet. This marked a major shift in behaviour as consumers had previously used the Web to research holidays, paying later, offline.
Meanwhile, a survey of 1,000 UK hotels released last week found that the number of reservations made on the Internet has increased by 300% in the past year. The survey, conducted by Active Hotels, a UK online reservation portal, showed that the most significant growth was in the north-east of England, where online reservations rose by more than 450%.
Andrew Phillips, chief executive officer of Active Hotels, said the growth rates reflect increasing acceptance of the Internet as both a selling and buying tool.
"Hotels are realising the true value of the Internet as a distribution channel and understand the benefit to customers of providing instant reservations over the Internet," he said. "As a reflection of this, hotels are now providing more than twice as much stock to online channels compared with this time last year."
"Second, and in parallel, consumers are beginning to trust the Internet as both a research tool and as a method of making reservations," Phillips added.
Holiday-seekers may be a captive audience for the Internet, but the success of Brittany and First Choice shows how good business practice can relate to profit. "Concentrating on what you are good at and learning from the mistakes from the past are the key lessons," said Hart.
Brittany Ferries' Web success story
- Online booking system launched in February 2000
- Unique visitors to Web site increased by 600,000
- More than 75,000 bookings made online
- Share of direct bookings grown from 2.9% in 2000 to 14.3% in 2002
- Total online turnover has doubled (2000-2002) to more than £25m, from an investment so far of £300,000
- Cost of taking a booking online is now £2.11, against £14.67 in call centres
- By the end of 2002, Brittany expects to have saved £1m on bookings made online.