Relevance:Delivering the right product, to the

right customer, at the right time

Tedd EversDirector

Partner Marketing, Europe

Reykjavik

February 18, 2005

What I’d Like to Talk About…

1. Who is Travelocity? …a Case Study for Today

2. The Online Road Divides: Finding the Right Path

3. Staying Relevant in Today’s Marketplace

Travelocity’s “Family Tree”

• Wholly owned by Sabre Holdings

• Our business philosophy is “The Best Trips Start at Travelocity”, with offers built upon direct supplier relationships

• Our culture is proactive, positive, passionate, and creative in pursuit of our business philosophy

• Investment and growth in 2005 is focused on growing globally

RH

Travelocity Overview

• $5 billion in gross travel bookings in 2004– Revenue up 30%– Packaging Rev. up 90%

• Millions of registered members

• 42,000+ affiliates in 40 countries

• 15 million+ unique users/mo.

• 6th largest US travel agency

Source: Forrester, 10/02

Household income

# leisure trips/year

Travel spend/year

Air traveler

Hotel guest

International traveler

Avid leisure traveler

Brand loyal

$89,3254

$4,29584%89%43%50%44%

+7%+8%21%+6%+6%

+14%+17%+14%

Travelocity Booker

Travelocity vs. all agencies’ Bookers

Travelocity US Booker Profile

Travelocity bookers earn more,travel more, spend more, and stay in more hotels than the average travel consumer…

Consumer Marketing Identity

• US : “Roaming Gnome” Multi-Million $USD Advertising Campaign

• UK ads star cult travel journalist Alan Whicker, who pops up in unexpected situations across the globe

• Campaign won the Grand Prix Prize, British Travel Awards 2004

Significant Sales Potential

Over 30,00030,000 airline tickets

More than 14,00014,000 hotel reservations

Over 5,5005,500 car rentals

More than 1,5001,500 vacation and cruise packages

On Average, Every Day Travelocity sells…

Travelocity distributes to millions of registered members, and through exclusive

partnerships with:

Exclusive Distribution Channels

World Choice Travel is a wholly owned subsidiary of Travelocity.com

An Expanding European Presence

UK France GermanyScandinavia

Distribute Globally, Market Locally

Fully Owned Subsidiaries Joint Venture Partners

Sweden, Denmark, Norway

Canada

Japan

Australia, Hong Kong, Singapore, Taiwan, Korea

Germany

France

The Online Road…is rough

1. Online loyalty is absent, customers shop

multiple sites

2. Most customer relationships are

transactional, transient and price-driven

3. No one has succeeded in differentiating

Consumers Increasingly Shop Multiple Sites…

Consumers getting savvier, moving away from closed environments unless they have proven, distinct value propositions

… And Frequency of Use Is Largely Price-Driven

No Online Players Have Succeeded in Differentiating

• Only 10 to 15% of bookers felt that the top three sites were really differentiated

Stands out as an extremely different travel site

Stands out as a little different from other travel sites

It’s not very different

Brand Commitment

34% 39% 40% Top 2 Categories

Online Development: Two Paths with Different Values

Core Beliefs/Assumptions:

• Price is only a ticket to play—

travelers want more

•Travel planning is about

inspiring ideas, honest guidance,

unbiased reviews

• Be responsible all trip long

• Travel products, and above all

service, are differentiated--full

disclosure before you book

Core Beliefs/Assumptions:

• Price Matters—Exclusively!

• Travel planning is price comparison process

• Be responsible for the shopping process—nothing else

• Travel products services are commodities

Travel AdvocatesTravel Commoditizers

How to Stay Relevant?

• Travel Advocates for our Consumers

• Mutually Successful Supplier & Destination Partnerships

• World Class Retailing & Compelling Offers

• Passion: Travel is life!!

We Will Differentiate

Consumer Advocacy: Showing Available Airline Seats – BEFORE purchase

Consumer Advocacy: Search by Neighborhood

Neighborhood search makes the booking

process simpler, increases customer

conversion, satisfaction

Consumer Advocacy: Delivering Rates when Rooms are Available

How to Stay Relevant?

• Travel Advocates for our Consumers

• Mutually Successful Supplier & Destination Partnerships

• World Class Retailing & Compelling Offers

• Passion: Travel is life!!

We Will Differentiate

Travelocity 3rd Generation

- Flexible rates & inventory = effective merchandising

- Industry-leading last-minute demand creation

- Connectivity options enable broadest range of hotels

- Immediate payment upon guest checkout

Early Internet Merchant

- Fixed allotments and one-sided contract terms

- Limited connectivity options

- Slow payment to hotels

Fixed Traditional Model- Hotels tied to one rate per season

- Fixed allotments and one-sided contract terms & slow payment to hotels

- Limited last-minute availability

Delivering Supplier Value: Hotels

Our Unique Supplier Proposition Gained Hotelier Traction Rapidly

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Jan-02 Jan-03 Jan-04

Me

rch

an

t H

ote

l P

rop

ert

ies

Dec-02 Dec-03 Dec-04

In Just Two Years, We Grew to 17,000+ Properties Worldwide

Merchant Hotel Growth Chart

Benefits to Hoteliers:• Drive more volume by providing net, non-commissionable rates and receive preferred placement in Hotels path 

• Multiple Connectivity Options via CRS or Extranet

• Instant Payment upon checkout for each booking

• Participate in Travelocity Consumer Advertising Campaigns and in special regional hotel promotions

• Participation in the Travelocity Redistribution Network

How Did We Grow So Fast?

A ‘Win-Win’ Hotelier Value Proposition

Dynamic Packaging & Travel Extras

Supplier Value: Building the Non-Core Travel Businesses for Many Leading Travel Brands

Destination Marketing Alliances

Bahamas Tourist Office- Targeted key origination markets- 106% increase in bookings

Aruba Tourist Authority- 159% increase in bookings- Best in Class Click Thru Rate

Visit Scotland- Unique sweepstakes offers- 139% increase in hotel sales

How to Stay Relevant?

• Travel Advocates for our Consumers

• Mutually Successful Supplier & Destination Partnerships

• World Class Retailing & Compelling Offers

• Passion: Travel is life!!

We Will Differentiate

Merchandising Compelling Offers

Promotions may be based on:- Themes- Seasonality- Exclusive offers- Unique experiences

Entry-level Pricing, but:- many consumers upgrade- hotel ADR can also increase

January “Cool / Hot” Promo:- 48% increase in room nights- 11% increase in ADR

Targeted Email and Sweepstakes Offers

Integrated Marketing Partnerships with some of the Most Valuable Brands in the World…

..That Have Yielded Significant Results for our Partners, and for Travelocity.

TE

Takk fyrir!