Orbitz may be the biggest Internet move by a consortium of airline heavyweights, but its not the first.
Last September, at a time when dot-com businesses were falling like quail during hunting season, a group of six major airlines joined forces to try to beat the discount travel sites at their own game.
Its too soon to predict whether that attempt, Hotwire, will beat out companies such as Priceline.com, which launched the original name-your-own-price concept. But Hotwire certainly has an advantage — a financial stake by a reputable group of carriers that control which sites are offered their extra seats for sale at heavy discounts.
That advantage — combined with the booming demand for online travel choices — has moved Hotwire into the top 10 ranking of online travel sites less than six months after it launched.
Building on Pricelines popular bidding model, Hotwire lets Web surfers search for discounts on the routes they want to travel. Like Priceline, the actual flight times, number of stops and carrier remain a mystery until the ticket is purchased. But unlike Priceline, Hotwire lets consumers search the prices, then take time to think about whether they want to buy the ticket. With Priceline, you cant search without making a bid that you are willing to stick to if a ticket for that price is found.
Additionally, with Hotwire, consumers are guaranteed the seats will be on one of its partner carriers. On Priceline and other travel sites offering similar secret discounts, the seats may also be on super-economy carriers such as AirTran Airways, JetBlue Airways or Spirit Airlines.
At the beginning of this year, Hotwire expanded into hotel reservations, rental car services and international air tickets, in addition to its existing domestic airline ticket sales service. Hotwire offers ticketing for 19 international and eight domestic airlines, and reservations for 2,000 hotels in 25 major markets. It claims its rates provide a savings of 40 percent or more from regular airline and hotel prices.
Hotwire says it beats the ticket prices of other popular online services such as Expedia, Priceline and Travelocity.com by tapping into a vast reservoir of unsold seats. An estimated 3.5 million airline seats are unoccupied each week.
"With Hotwire, suppliers get money for seats that otherwise would go empty," said Karl Peterson, co-founder and CEO of Hotwire. "Consumers can save up to 80 percent on an airline ticket."
With more than 2 million registered users and 300,000 airline tickets sold so far, Hotwire has caught on like wildfire with Web-savvy travelers. The site relies on key partnerships. Peterson, who was a venture capitalist at Texas Pacific Group before launching Hotwire, developed close relationships with airlines and other travel businesses. He saw a need for these companies to dispose of excess inventory on the Internet in a way that wouldnt jeopardize their full-fare business.
Hotwire has become so hot with consumers, primarily through word-of-mouth advertising, that it has made the big Internet travel sites such as Expedia and Travelocity take notice. Both have launched their own bidding services this year.
Privately held Hotwire is backed by $75 million in venture capital, including investments by American Airlines, America West Airlines, Continental Airlines, Northwest Airlines, United Airlines and US Airways.
The airline investors have no say in the companys day-to-day operations, Peterson said. The service has also adopted a firewall to prevent the airlines from seeing how many seats each carrier is contributing to Hotwires inventory, he said.
Hotwire does not provide revenue or profit figures, since it is privately held, Peterson said. But he said the company makes money on every transaction it does, and it sees a bright and profitable future ahead.
"The good news is this is a huge market," Peterson said. "We have high ambitions for the future. We will reach profitability on a much faster basis than anyone who started before us."