By Martin Kelly, Editor, Travel Trends

Australia is great place for a duopoly. Think about it. Any major industry you care to mention has two major players. Coles and Woolworths, Myer and David Jones, Visy and Amcor, Qantas and Virgin*, Thredbo and Perisher, News Corp and Fairfax… You get the idea. And now it could be argued that one has arisen in the online travel transaction space.

This thought has been prompted by the elimination of booking fees in the US, with Travelocity and Expedia recently joining in the “no fee” camp. Some wonder if this trend – sparked by an increasingly desperate fight for market share – will find its way to Australia.

The answer has got to be “no” – that would be an aggressive competitive act, and those sort of things simply don’t happen in this market, which has got very comfortable and settled over the past 18 months. You could even say that Wotif and Webjet have got themselves the very best kind of duopoly.

Webjet has a lock on airfare aggregation and Wotif of course totally dominates accommodation. There is a massive gap between these two companies and their respective competitors (using the HItwise stats as a guide). At this stage there is no third online player, and no evidence one will emerge from the pack.

Indeed, the only genuine local competition for these two – at least in terms of brand recognition – (accommodation, primarily) and (airfares) – was consumed by Wotif early last year after a bidding war with … Webjet.

The Australian online travel industry has been quieter than a monk on sabbatical ever since.

Wotif and Webjet carved their niche and are now happily pulling in record profits despite harsh times. Without direct competition, Webjet has been able to bump its booking fees to a whopping $25 or so without any kind of consumer resistance – it is doing huge transaction numbers, while Wotif recently increased its booking fee by around 25% to $4.95.

Only a lunatic would derail that gravy train.

Or, you may speculate, a large, well-funded competitor.

Just think, they could launch a no fee policy and use it as their primary marketing hook, as, smallest of the Big Four, did so effectively in the United States, even creating a character called “nofee” – kind of a Bond villain – to complement their other brand icon, “The Negotiator”, actor William Shatner.

However, that probably won’t  happen on this side of the Pacific.

Tier 2 regional players Expedia, HotelClub (Orbitz) and Travelocity (aka Zuji) are lapping up the fees they are able to charge in Australia and it’s difficult to see that changing.

Nor are they the instinctive, aggressive marketers you feel would be willing to trade booking fees for increased market share and commissions, at least on the evidence we have seen so far Down Under.

Everyone else – bar traditional retailer Flight Centre, which runs a close second to Webjet in terms of OTA web eyeballs, is too small both in size and ambition.

And Flighties management have plenty of other things to worry about, such as the lemon they unfortunately bought in US-based Liberty Travel, which is absolutely haemorrhaging cash. Cut booking fees, what are you crazy?

That said, a dark horse could be the big accommodation suppliers such as Accor. IHG and so on. Imagine the campaign – “Avoid Fees Book Direct With Us” … In reality, not that far removed from the “Best Rate Guarantee” which every accommodation provider has anyway. Yet different, and certain to provoke conflict of the long-term kind with distributors and probably best avoided for the time being.

Which leaves us with … a static market, booking fees and, of course, the duopoly – an Australian classic since 1788.

*My favourite Australian duopoly featured Government owned Trans-Australia Airlines (TAA) and capitalist carrier Ansett Airlines, founded by legendary entrepreneur Sir Reg Ansett.

It was a race in two enshrined by government policy for many, many years.

Deregulation arrived in the early 1990s (by then Sir Reg was dead) and despite a couple of failed attempts by Bryan Grey, who tasted regional success with East-West Airlines, and deluded businessman Douglas Lamb, the duopoly remained inviolate.

Even when Ansett imploded through spectacular mismanagement in 2001, a new duopoly was immediately created when Virgin Blue filled the vacuum. That duopoly still exists, although it’s now Virgin Blue against the Qantas Group (which includes upwardly mobile LCC Jetstar). Tiger Airways is not yet big enough to be regarded as a genuine national threat.

Travel Trends: March 26, 2009

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