Wednesday, October 01, 2003

The emerging online travel oligopoly Barry Diller, as we pointed out earlier, is building InterActiveCorp (IAC) into an Internet powerhouse. The latest acquisition is Web travel site Hotwire.com. IAC's travel holdings already include Expedia.com and Hotels.com. It also owns Classic Custom Vacations, Newtrade Technologies, Travelnow.com, Interval International and TV Travel Shop. Hotwire.com specializes in extremely low-cost travel bargains, especially last-minute specials. It is closely connected to American Airlines, US Airways, and United Airlines, companies that helped found the company in 2000. Hotwire operates differently than Expedia, since the bidder does not know the identity of the airline of the hotel until the bid is complete. This "opaque" approach allows Hotwire to offer even lower prices than Expedia, though it's not for the traveler who wants control. Hotwire competes mostly against Priceline, which works much the same way. Expedia's biggest rival is Orbitz, which was founded in 2001 by a combination of five airlines: Delta Air Lines, Continental Airlines, Northwest Airlines, United Air Lines, and American Airlines Inc. (Note that two of these airlines were involved in Hotwire's start-up as well. )Lawsuits and antitrust actions aimed at the new company have failed. Orbitz has gotten a jump on Expedia by getting its business travel site started first. It is growing steadily. The other big rival is Travelocity. That company has been losing ground over the past year to its competitors, with revenues down in spite of the growing segment. The company's majority owner, Sabre Holdings, recently made an offer to buy back the 30% of shares it doesn't own. Sabre Holdings holds three other travel-related companies, including the computerized reservation system used by a number of US airlines and travel agents. Travel is where it's at online. According to one source, over 45% of online expenditures are for travel. And online travel represents over15% of all travel expenditures, and growing steadily. This is truly an emerging oligopoly, in contrast with the highly fragmented  brick-and-mortar travel agency business. The 2002 online travel market shares, according to another source, were Expedia 36% Travelocity 24% Orbitz 13% Orbitz has since grown strongly, partly at Travelocity's expense. It is now considered to be the #2 company in this segment. 8:47:54 PM

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