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Issue 2001-8 - Thursday, May 10, 2001

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  Exclusive interview of Cheap Tickets's President and C.E.O (May 01)  

Today, Cheap Tickets is among the few eTourism actors who manage to make a profit online. With already 10 millions people registered on its Web site, Cheap Tickets is among the biggest actors involved in the eTourism battle.

This strong position incited me to ask its President and C.E.O., Sam E. Galeotos, to give us his own vision of the future of the eTourism sector but also to tell us which online strategy of Cheap Tickets will adopt.

Luc Carton: Your gross booking non-published fares accounts for 57,1% in year 2000 and only 39,2% in the last quarter. Is it a strategic decision or simply the result of the market/demand?

Sam Galeotos: We work closely with our suppliers to distribute non-published inventory. . In fact, Cheap Tickets offers more than one million non-published airfares on many major domestic and international airlines. We have seen that seasonality, and to a greater extent, airline fare wars, affect our booking mix.

So, along with a building our non-published inventory, we have focused on the bonuses (aka override agreements) we receive from the sale of published fares. We have greatly enhanced the terms of our override agreements with many suppliers, resulting in higher margins on published fare sales.

We recently reported a powerful first quarter - gross bookings were $192 million, up 44% over the prior quarter and revenue was $24.9 million, up 35% over the prior quarter.

LC: Is your aim to be the leader of the discount leisure travel compatible with the launch of and the future Both of these sites are claiming that they are (or will be) the best sites for the cheapest online prices and they both take their power directly from airlines.

Sam Galeotos: Cheap Tickets pioneered the discount leisure travel market 15 years ago. Over this time, we have developed expertise servicing this market, including robust 24x7 call center operations, live customer care agents and a successful e-commerce site.

We believe that airlines will continue to invest in and explore different distribution channels, including their own. Yet, because of our extensive supplier relationships, coupled with our focus on leisure travel, we believe Cheap Tickets is positioned to excel as a preferred distributor. We are able to deliver added value by employing the most effective mix of tools to distribute, market and sell leisure travel.

Just as important, we offer consumers choice. Customers can contact us via phone, online, or at one of our retail locations. And, customers know what they are buying from Cheap Tickets up front - they will know their itinerary routing, airline and fare price before committing to a purchase.


LC: I personally think that in less than a year, the other airlines companies will follow Northwest and will stop paying commissions to web sites. What is your own opinion? Do your think that your specific partnerships created for the non-published fares will help you to negotiate differently than your online competitors if this event happens?

Sam Galeotos: It is difficult to predict the future, however, it is certainly possible that other airlines will follow suit with the recent Internet commission elimination by Northwest and KLM. We are confident in Cheap Tickets' ability to add value for our suppliers, and as a result, feel strongly that our suppliers are willing to compensate us for providing that value. Cheap Tickets is well positioned to adjust to an environment of decreasing published commissions because a large percentage of our business is non-published.

LC: The fact that the biggest part of Cheaptickets gross bookings is now more on published than non-published fares makes your company more vulnerable if online commissions are cut tomorrow. What is your strategy to avoid this type of problems? Is it the reason why Cheaptickets is now accelerating the sales of hotel accommodations, car rentals and cruises? What percentage of your future revenues you expect to get via these new products?

Sam Galeotos: Revenue diversification is an important ingredient to Cheap Tickets' growth strategy. Historically, the vast majority of our revenue has been generated from the sales of airline tickets. However, we know it is important to our customers to offer the convenience of "on-stop-shopping" for all travel-related services, such as hotel accommodations, rental cars and cruise vacations. The diversification is good for customers, and good for our company's future growth.

Over the last year, we have introduced non-published rental car rates with Hertz, Alamo and Avis. We offer rental cars through our Web site and call centers. On a PNR basis, we have seen our car rental attachment rate grow from 2% a year ago to 6-7% today.

In fact, compared to a year ago, rental car gross bookings increased 116%, cruise bookings increased 35% and hotel bookings increased 144%.

We still see plenty of room to grow our bookings with other travel products and will continue to work with our suppliers on both published and non-published offerings in order to grow our total revenue.

LC: Travelocity, Expedia, Southwest airlines… all these sites are thinking that will act as a monopoly for airlines. Do you agree with them?

Sam Galeotos: We view Orbitz as another competitor in the online travel space. Yet, we are not aware of any significant supplier relationships with Orbitz that would limit our ability to work with those same suppliers.

LC: North American online market is a very though one. At the same time, the European eTourism market is still a burgeoning one with essentially local leaders. Do you intend to position Cheaptickets in the European market in the future? if yes, will it be alone or via a local partnership?

Sam Galeotos: We thoroughly investigated several opportunities in Europe, however in the current climate do not see any immediate investments that meet our objectives. As a result, we will maintain representation in Europe until an appropriate opportunity surfaces.

LC: Today, Cheaptickets is one of the rare eTourism actors to make profit online. With already 10 millions subscribers on your Web site, we can say that this client loyalty can be considered as a real asset in the online battle. What do you intend to do tomorrow to keep it and to increase it?

Sam Galeotos: We are very fortunate to have such a loyal customer base. In fact, over 40% of our online transactions are from repeat customers. We believe that leisure travelers return to Cheap Tickets because, at the end of the day, they know that they got the best available deal on their travel. Because we offer and disclose routing options and prices (no bidding), tell the traveler with whom they'll be flying, and can handle transactions through our Web site, call centers or retail stores - we provide travelers what they want: choice.

Looking ahead, we are looking forward to the launch of the first phase of our new technology platform. This first phase is largely focused on and includes a new booking engine, CRM technology, e-ticketing, improved fare search capabilities, and several personalization features.

We expect that these technology enhancements, coupled with both rich promotional programs and exceptional service, will encourage customer loyalty and drive repeat purchases.


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eTourism Newsletter Web Site Editor: Luc Carton