Not an Orbitz-uary, But …

Those of us who discovered the relative ease of booking travel online were primed and ready for the debut of Orbitz this past summer.

The company’s premise — an independent operation dedicated to offering the lowest published fares from 30 airline companies — seemed like an ideal business proposition to many of us.

So far, Orbitz has had a difficult time living up to its original hype, and in response to a recent series of questionable business moves, many of us may choose to remain loyal to the two “founding fathers” of online travel — Travelocity (Nasdaq: TVLY) and Expedia (Nasdaq: EXPE).

Competitors Cry Foul

The company’s most recent high-profile problem became more pronounced last month when the Interactive Travel Service Association asked the U.S. Department of Transportation (DOT) to investigate Orbitz for possibly stifling competition among online travel sites.

ITSA specifically objects to Orbitz’ requirement that associated airlines must offer their lowest published fares directly to the site.

This is not a new controversy. Similar complaints were lodged prior to the Orbitz launch in the spring, but the DOT chose not to block the company’s launch, and took a wait-and-see approach instead.

Now the ITSA wants the DOT to step in once again. A government investigation would not be surprising, in view of an extreme sensitivity to online antitrust violations.

What Consumers See

Meanwhile, other moves that directly affect consumers appear to indicate uncertainty within Orbitz.

First, just after the terrorist attacks in September, Orbitz immediately cut its staff in anticipation of what it believed would be a prolonged decrease in consumer travel. This highly public move proved somewhat premature, because Nielsen//NetRatings soon reported that Orbitz’s share of traffic to online travel sites rose from 11.3 in September to 17.2 in October.

In fairness, this does not necessarily mean business was booming, because increased traffic does not always equal a sharp increase in sales. Orbitz is not required to reveal its number of tickets sold.

Still, by the middle of last month, Orbitz announced “that both site traffic and sales transactions have set new records, demonstrating the site’s continued growth despite the overall slowdown in travel buying post-September 11.”

New Fees

Then, late last week, Orbitz reportedly announced a newly instituted US$5 service fee on all of its tickets. In an oddly vague explanation of this latest move, Orbitz said the fee is necessary to let the company remain independent from the airlines and other travel companies with which it is associated.

It would appear Orbitz is banking on consumer willingness to shell out a measly five bucks, an amount that will not make or break most people.

However, when the economy is in recession, unemployment unreasonably high and near-term prospects somewhat bleak, any fee hikes with doubtful justification are probably not wise.

The obvious question: Why was the $5 fee not necessary in the first six months of the company’s operation?

More Missteps?

One more Orbitz move could cause people to think twice about the company. This week, reportedly, Orbitz will unveil a new partnership with Comet Systems, intended to lure travelers away from Expedia and Travelocity. Comet Systems transforms traditional cursors into animated figures that function as comparison shoppers.

When a user checks fares at Expedia or Travelocity, Comet’s technology will supposedly display the Orbitz fares next to its competitors’ fares.

From a business standpoint, the move appears a bit unsavory. As a consumer, it seems intrusive and overly aggressive.

Consumer Loyalty

Despite its much-delayed launch, Orbitz claims it will be profitable by mid-2002, ahead of its original schedule. However, critics say it will achieve profitability through unfair business practices and questionable sales techniques.

In the long run, whether Orbitz prospers will largely depend on consumer loyalty. At this point, Travelocity and Expedia are the clear frontrunners in what has developed into one of the most competitive and profitable online business sectors.

If nothing else, Orbitz should probably have entered the race a bit earlier and not allowed its two competitors to have such a major head start.

What do you think? Let’s talk about it.


Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.


4 Comments

  • The only problem I found with Orbitz is that it is occasionally extremely difficult to book the very low fares. I tried one night for over an hour with the site crashing my browser several times. When I returned the next day the fares were 50% higher. The fares have since reduced but not quite to previous levels.

    Other than that I find Orbitz to have lower fares available then either Travelocity or Expedia. For instance, for the exact same flight Orbitz shows a fare of $122 while Expedia and Travelocity both show $170.

    One other item I have found with Orbitz is that their rates for car rentals agree with the rental company’s site. I booked a trip previously through Travelocity and when I arrived found that the rental was over $50 higher than the rate quoted by Travelocity. Even though I had the quote in hand, the compqny told me it was a Travelocity problem and not theirs. Upon calling Travelocity I was told there was nothing they could do.

    All in all I think I’ll stay with Orbitz. BTW, the $5 service fee is waived if you register.

  • Obits-uary would be more like it. If I ran my business like an airline runs theirs I’d be arrogant and pompous and not think about customer service or creature comforts.

    I’d plot to have a pricing system that every time I increase the fare to a profitable one I would then have a 50-70% off sale with higher fares than it was before I raised them. But the public thinks it’s getting a bargain.

    Then I’d cut my expenses by laying off anyone who has over 10 years’ experience, taking lettuce, tomato and bread off the sandwiches and replacing them with pretzels & peanuts and that’s in first class, outsourcing all my public contact people at the airport to hourly contract workers handling check-ins, baggage handling and security, etc., etc.

    Or there’s one airline with 3 billion cash on hand that could borrow 9 billion against its aircraft who comes out and says though fuel has gone down we still will keep the fuel surcharges because we have to squeeze every nickel of profit we can.

    Oh yeah when there’s nothing left to cut let’s take another 5% from the travel agents and that’ll keep our stockholders happy.

    I could go on but there’s not enough room, but would I pay $5 for a ticket and still not have anyone to complain to. I can get the same service at the money store who also sells tickets without a service charge or I could go to my travel agent and pay $15 or more and have someone look out for my interests and book me either through the internet or the airline system and when there is a problem I have someone to contact and ease my stress levels.

    good luck to everyone else

  • What’s wrong with the $5 service charge? Just regard Orbitz’s first 6 months as a promo. Expecting that a service should be free is a remain of the dot com culture, but real companies that actually make money charge for their services one way or another. Hotels even charged more for electricity during the energy crisis, Hotmail is starting to charge for email space. Why would Orbitz not charge their customers??

    Michael, San Francisco, CA.

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