Online travel market gets new player

Orbitz: competing for a slice of a $23bn market

By BBC News Online's North America Business Reporter, David Schepp

After months of planning and speculation, five major US airlines have launched an online travel site they say will be the most comprehensive internet offering of its type.

Orbitz, which is owned by United, Continental, Delta, Northwest and American airlines, claims to offer more choice, and often better prices, than the web's current offerings.

Orbitz is going to be the first real solid contender

Harvey Harteveldt, senior analyst, Forrester Research

But the online venture faces possible scrutiny by the US government over antitrust concerns that an airline-owned web site will not benefit consumers.

A bevy of consumer groups have joined together, asking the government to stop the site's launch until Orbitz assures regulators that it intends to compete on a level playing field.

The unprecedented link-up of major airlines has so far passed US Department of Justice and Department of Transportation muster.

Officials say the companies involved have yet to show evidence of collusion or price-fixing.

Nonetheless, the link-up has other travel web sites, most notably Travelocity.com, largely owned by travel firm Sabre Holdings, and Microsoft's Expedia, ready to do battle in what analysts say is expected to be a $23bn (£16.3bn) market in 2001 - up from $18bn last year.

More choices

"Orbitz is going to be the first real solid contender in terms of a travel agency since Travelocity and Expedia launched five years ago," says Forrester Research senior analyst Harvey Harteveldt.

Jeffrey Katz: "Consumers want something new"

"It could emerge as a hypermarket of low-cost travel deals."

For its part, Orbitz says the relationships it has established with more than 40 other air carriers, hotels and car rental companies will benefit consumers by giving them more choice.

Additionally, Orbitz says it is focusing on customer service as one way to ensure users' satisfaction.

And it is that focus that will allow Orbitz to compete strongly with other travel sites, analysts say.

"Consumers are ready and eager for a different kind of travel website that offers a more comprehensive and unbiased view of their travel options, and that is much easier to use," says Orbitz chief executive Jeffrey Katz.

While analysts generally see Orbitz's entrée into the online travel world as a 'no-brainer', they say the company will still have to establish itself with the travelling public.

Orbitz has "a long way to go in building their brand", says Fiona Swerdlow, an analyst with online media research firm Jupiter Media Matrix.

"It is not a household name," she says. "They have to establish a lot of trust.

"It is not just about fares and prices - it is a package of fares, services and reliability."

Bright spot

Orbitz's launch follows on the heels of fresh research that shows online travel to be one of the few bright spots within the internet retailing sector.

While profits at Expedia and Travelocity are currently small, First Call, a corporate research firm, expects those profits to rise handsomely in 2002.

In April, Expedia posted its first quarterly profit, a year ahead of schedule.

Perhaps more significant is the fact that online travel firms are making money in a slowing US economy by attracting more customers.

"People are changing the way they are buying tickets," says CIBC analyst Paul Keung. "And it has less to do with the underlying economy."