‘Dynamic’ packages allow versatility while they save money

Package vacations have long been a mainstay in the brick-and-mortar world of travel. Pleasant Holidays, Funjet Vacations, Apple Vacations and similar companies sell as much as $15 billion in vacation packages annually, according to PhoCusWright, a Connecticut-based travel research firm.

About 10% of package sales were made through online channels in 2003. But the big online travel agencies, including Orbitz, Travelocity and Expedia, are moving away from selling traditional packages and toward “dynamic packages.”

“This is not your grandfather’s ‘If-it’s-Tuesday-this-must-be-Italy’ package,” said Stuart MacDonald, senior vice president of marketing and packages at Expedia. “These allow travelers to buy lots of things at once but still have the ‘pay-one-price’ convenience.”

PhoCusWright predicts that dynamic packages sold online will grow from about $1.8 billion in 2003 to $8.5 billion in 2006.

Here’s how dynamic packaging works. Visit an online travel site and click a button that says “vacations” or “packages.” There, enter destination and date information and whether the package will include airfare, hotel or car. The site then searches its available inventory and reports on availability.

You can select a hotel from a range of choices with prices that include airfare. Or you can select a flight that’s different from the one presented.

Expedia and its fellow InterActiveCorp-owned company Hotels.com have a “package savings calculator” for each hotel that shows consumers how much they are saving over buying the components separately.

The online agencies can offer better deals because the individual price of the components is not revealed in the total price, thus allowing suppliers to maintain “price integrity.” The agencies negotiate special rates for the hotels and airfares and pass the savings on to consumers. It is a sort of “opaque” online pricing, like Priceline’s or Hotwire’s, except that consumers know in advance what hotel and flights they are buying; the only mystery is the cost of the components.

I did a quick test of packaging options at the big three: Orbitz, Travelocity and Expedia. My results are not scientific, are valid only for this particular itinerary and may no longer be available. Like all things Internet, it pays to shop. Pay careful attention when comparing prices between sites to understand whether all taxes and fees are included. (The sites I tested included them.)

The results from the three sites were similar, but Expedia presented the most low-cost options for this test and had the price comparison tool, so I chose it for this experiment.

I tested a four-night trip for two from LAX to London in early November. Expedia returned 31 trips for less than $700 a person, hotel and airfare included. According to the “package savings calculator,” I saved $57 to $151 per package.

Clicking on the first “your savings details” link, I found a package that included nonstop airfare on American Airlines (all the packages displayed on Expedia had the same flights) and four nights’ standard lodging in central London at the two-star Nayland Hotel for $757 per person. The calculator told me I was saving $102 over the price of purchasing them separately.

Expedia said customers in August saved an average of $193 per package versus its stand-alone prices (based on flight and hotel packages for two people).

When I priced the London Nayland Hotel and airfare individually on the website, the dynamic package saved $242, an even greater savings than the calculator suggested. That’s a savings my grandfather would have surely appreciated.

James Gilden can be contacted www.theinternettraveler.com.