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Wednesday, 23 January, 2002, 09:59 GMT
Opodo threat to online travel sites
An employee in Opodo's call centre
Opodo provides round-the-clock customer service
by BBC News Online's Emma Clark

The battle for market share in the online travel industry is really taking off (if you'll excuse the pun).

This week sees the launch of a new UK travel site by the obscure name of "Opodo", apparently short for "opportunity to do".

Opodo's nine airlines
Aer Lingus
Air France
Alitalia
Austrian Airways
British Airways
Finair
Iberia
KLM
Lufthansa
The site is backed by nine of the traditional European airlines and plans to sell cheap flights, hotel accommodation and car hire.

It recently set up a German version and has plans to launch in France, Italy and Spain before the end of the year.

"We will be the biggest travel site in the world," says chief executive Giovanni Bisignani, a former boss of Alitalia.

Opodo web stats
350,000 tickets a day are special fares (provided by 45 airlines that have marketing agreements with Opodo)
Opodo sources tickets from 480 airlines in total
Opodo site contains 40,000 pages of information, including maps and airport guides

Source: Opodo

Inevitably, Opodo has already ruffled a few feathers with its bold claim that "it will undercut other online travel companies from the outset".

Online travel shop Expedia is concerned that the nine airlines might sell their flights more cheaply on Opodo than they do on other sites - and has complained to the European Union.

"We welcome the competition, as long as it is a level playing field," says James Vaile, managing director of Expedia in the UK.

Name your price

Opodo's Mr Bisignani maintains that many tickets are considerably cheaper.

Giovanni Bisignani, chief executive
Giovanni Bisignani says tickets are cheaper on his site

"For 20 top destinations, in 85% of the cases we have the best fares," he says.

But rough comparisons of ticket prices between Opodo and other travel sites does not provide much to write home about.

In some cases, Opodo.co.uk manages to undercut the competition, but only by a few pounds.

A 'shake-up'

So what do the airlines really hope to achieve?

In essence, the airlines hope to cut the cost of selling their tickets, known in the industry as distribution costs.

Two tickets to New York*
Cheapest return on Opodo: 418.70 Icelandair (1-8 July, incl stopover)
Cheapest return on Expedia: 413.10 Icelandair (1-8 July, incl stopover)

Cheapest return on Opodo (no stopover): 437.50 British Airways (1-8 July)
Cheapest return on Expedia (no stopover): 439.86 United Airlines (1-8 July)

*Search conducted on 21 January

About 7-9% of an airline's overheads are run up by paying commission to travel agents to sell their tickets.

"For ages those airlines have identified distribution as their main cost," says Mike Cogan, a partner at travel consultancy Equinus.

"There needs to be a shake-up in the distribution model, it needs to become more competitive."

The traditional airlines have also seen their market share in Europe hammered by discount airlines which have always sold most of their tickets online.

By going straight to the consumer via the internet, the Opodo airlines should also be able to slice out some of those costs.

Swagger

Opodo is so confident of success that it predicts it will become the market leader in online travel by 2004.


Just because you plug a few numbers into a spreadsheet doesn't mean you are going to be profitable

James Vaile
Expedia

Its competitors, however, are unlikely to give in without a fight.

"That's ridiculous," says Expedia's Mr Vaile.

"Just because you plug a few numbers into a spreadsheet doesn't mean you are going to be profitable," he adds.

"Every company has a steep learning curve."

Analysts watching Opodo expect it to encounter more than a few curves on its journey to profitability:

  • Firstly, Opodo needs to build brand awareness three years after most online travel sites have established theirs.

  • It also needs to undercut the competition without the founding airlines taking too much of hit on their own margins.

  • And it faces the task of attracting audience away from sites that already have a following.

"It is very well funded but at the end of the day it doesn't do anything else that its competition doesn't already do," says Paul Richer, a senior partner at the travel technology consultancy, Genesys.

Learning from mistakes

By earning commission from the tickets it sells, Opodo plans to break even in 2004.

And despite the challenges it faces, it has obviously given careful thought to its web design and branding.

Opodo may seem an odd name, but Mr Bisignani points out it is versatile enough to be used in any European country.

Expedia's homepage
Does Expedia have anything to fear?

The website itself also avoids the mistake made by travel sites in the past - of making navigation too complex and providing fares before checking availability.

"Easy, cheap and big" seems to be Mr Bisignani's mantra.

He is also characteristically confident of a positive decision from the EU, denying that the founding airlines will show any favouritism to Opodo when selling tickets.

Opodo's competitors will be hoping the EU decides otherwise and their complaints so far are a measure of their concern.

The new site certainly seems determined to live up to its English name by grabbing all the market share it can muster.

 WATCH/LISTEN
 ON THIS STORY
Mike Cogan of Equinus
"It's very hard to see established players, like Expedia, disappear just because there's a little more competition"
Opodo's Giovanni Bisignani
"Our shareholders thought that it was important for Europe to have a new online travel player"
See also:

09 Jan 02 | Business
Online travel bucks gloomy trend
17 Dec 01 | Business
US travel site strikes deal with AOL
24 Oct 01 | Business
Ebookers defies travel slump
22 Oct 01 | Business
Expedia bounces back from attacks
05 Oct 01 | Business
Travelocity cuts costs
04 Jun 01 | Business
Online travel market gets new player
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