Online travel consolidates
Travel and real estate Cendant Corporation announced recently its plans to buy online travel Web site Orbitz, Inc. That move continues a campaign by the company to build itself into a widely-based company in the travel industry.
Orbitz is the #3 online travel site, after Expedia and Travelocity. It has an 18% market share for online booking. The company was founded in 2000 by five of the US's largest airlines: American, United, Delta, Northwest and Continental Airlines. Those companies, all in financial straits, need the cash, which is estimated to be around $1.2 billion.
The online booking area is becoming more and more important. According to a Wall Street Journal article ("Cendant is Close to Deal for Orbitz", 9/29/04):
Consumers increasingly have been redirecting their spending toward do-it-yourself online bookers and away from old-line travel agencies. More than one-third of all U.S. travel will be booked online by leisure and business travelers in 2006, up from 15% in 2002 and 20% in 2003.
Cendant already owns a travel-database unit, Galileo, which supplies fare data to travel agents. One of the questions about the deals is how hard it will be to combine the two systems. In any case, a traditional travel agencies decline, the Orbitz approach will help compensate the lowered use of its Galileo services. Cendant also owns CheapTickets.com.
According to the WSJ article "The purchase would concentrate more power in the top three online-travel agencies, which already control more than three-quarters of all Web-based agency bookings."Tomorrow, we'll have fewer 'shelves' to get on. And what are the cost of those shelves?" asked Jim Young, senior vice president of global distribution at hotel firm InterContinental Hotels Group PLC, which uses the systems to list and book rooms."
Cendant has a lot of stake, in that its car rental agencies and hotels are major sources of online bookings. In fact, as a New York Times article (:Cendant Is Close To Acquiring Orbitz For $1.1 billion", 9/29/30040) staes: "The most profitable segment of the online travel business has turned out to be selling discounted hotel rooms." InterActive Corp.'s Hotels.com is the leader in this area, but given Cendant's extensive hotels holdings, they'll have a big advantage. The big things will be their ability to offer package deals.
Other travel acquisitions this year have included InterActive Corp's increased stake in Hotels.com and Expedia, along with its purchase of Hotwire.com. Sabre (a rival to Galileo in providing info for travel agents) acquired Site59.com and GetThere.
