Fighting for Control
Fighting for Control Travelocity, which is majority-owned by online reservations giant Sabre Holdings, and Expedia, which is 70 percent owned by Microsoft, control 35 percent and 25 percent of the online travel market, respectively. Combined, the two had bookings totaling $4.3 billion last year, according to PhoCusWright, a Connecticut research firm that tracks the online travel industry.Within just a few years, Orbitz expects to capture 20 percent to 30 percent of that combined online travel market. The consortium offers a broader selection than other online travel agencies, said Jouzaitis, who pointed to the companys agreements with 35 charter member airlines. Even though its official launch is still a few days away, Orbitz is already off to a good start. In February, the site began a trial run that it said has so far attracted more than 100,000 registered users and has sold more than $1 million worth of tickets. In April, Orbitz attracted 429,000 visitors, according to Jupiter. It ranked 12th among travel sites; the April leaders were Travelocity, with 7.4 million visitors, and Expedia, with 6.8 million. For a standard booking fee of about $3.50 per ticket, Orbitz will sell seats on any airline, with the exception of Southwest, which does not allow other Web sites to sell its tickets. Airlines that sign the charter agreement get a 33 percent discount off that fee, but they must agree to include Orbitz in any special fares they make available on other sites. That means if an Orbitz charter member airline strikes a deal with Travelocity or Expedia for special rates on a certain route, or has special Web fares on its own site, that airline must offer that rate to Orbitz. Orbitzs charter members also commit to spending up to $2 million per year each to market the site a sum that can be repaid, in part, by offering online fares exclusively to Orbitz. Those agreements worry incumbent online travel sites. "Whenever a group of powerful suppliers get together to do anything, it should interest the government and consumers," Expedias Barton said. Others have expressed similar general concerns. But where the regulatory agencies have invested the time and resources to thoroughly understand Orbitzs infrastructure and the market, they have found that Orbitz will have a pro-competitive impact, Jouzaitis said. Early signs are that competition is indeed improving services. In recent months, Travelocity and Expedia have both launched improvements to compete with Orbitz. Orbitz promises to deliver the broadest range of discounted fares, culled from 450 airlines and tailored to customers price and flight time preferences, at a rapid-fire pace. Expedias new Expert Searching and Pricing (ESP) averages 400 price and schedule combinations for every round-trip U.S. flight search, up from six to 15 possible combinations. The technology took four years to develop, and cost $30 million. Like the technology behind Orbitz, Expedias search engine lets consumers sort options by airline, lowest price, shortest flights, and departure and arrival times. And once travelers have selected a flight, Expedias improved system gives them the option to book an air and hotel package that the company said will, in most cases, save money compared with buying the components separately. Travelocity has also beefed up its site in the past few months by enhancing its "best-fare finder." Its the first application of Travelocitys own new pricing technology, which, like Orbitz and Expedias ESP, bypasses the mainframe computers that travel agents and airline reservationists have used for decades. Travelocitys best-fare finder lets travelers search for the lowest published fare between two destinations, regardless of day and time, and check a calendar for applicable dates. Until now, however, the fares on those dates were often sold out; Travelocitys new version displays dates, within a three-month window, on which the published fares are actually available for booking.
Traffic to individual airlines sites is also gaining ground. Last year, for the first time, the airlines sold more tickets through their sites than the through online travel agents. And according to a recent survey by Jupiter, traffic to the airline sites is growing faster than traffic to online agents sites. In February, visits to airline sites rose 26 percent, to 10.4 million, compared with a 7 percent increase, to 15.4 million, for online agents.