14 May, 2000

Europe's old economy strikes back

LONDON: The 'bricks' are striking back against the 'clicks'. Three separate initiatives this week demonstrated how Europe's old economy companies, dismissed by investors a few months ago, are coming out fighting in the war of the Web with upstart dot-coms.

Leading British package holiday company Airtours Plc, unveiling its e-commerce strategy, made the battle lines crystal clear by refusing to supply products to online travel agents like lastminute.com and ebookers.com.

At the same time 11 European airlines, led by British Airways, Lufthansa and Air France, joined forces to launch at Internet travel agency in a head-to-head challenge with dot-coms.

And in a third blow to the Internet intermediaries, hotel operators Forte Hotel Group, Hilton International and French hotelier Accor set up a joint venture which will allow customers to make online reservations across Europe.

Hilton Chief Executive David Michels believes established big business has to act fast to stop dot-coms stealing a march in the new Internet world.

``It was the clicks versus the bricks unless we did something...we have a right to sell our own product direct to the consumer without in some cases an unnecessary middleman,'' he said Friday.

At stake is a 10-15 percent margin which Michels sees no reason to hand over to online intermediaries.

The latest moves in the travel sector are only the latest example of a growing drive by old economy firms to displace dot-coms from operating in the space between producers and customers.

Retailers, for example, are already busily at work with leading British supermarket chain Tesco Plc reporting this week it has signed up 500,000 customers for its online shopping service. Tesco claims to be the world's biggest online grocer.

Jay Marathe, head of research at specialist technology investment bank Durlacher, believes old European businesses with strong brands are demonstrating a step change in their enthusiasm for the Net.

``In the early days of the Internet there were significant opportunities for pure Internet plays like Amazon, Yahoo and eBay who had several years head-start before the old economy companies woke up,'' he said.

``Today in Europe, where things have developed a few years behind the U.S., the old economy companies are waking up faster. The market is changing and pure Internet plays are no longer that attractive.''

One obvious casualty of the barrage of old economy challengers has been lastminute.com Plc, which offers flights, holidays and other short-notice items, and whose shares lost a quarter of their value this week.

The stock, which was floated in March at 380 pence, ended down 3.8 percent at 190 pence in trading in London on Friday. (Reuters)


Link to the original article: