Orbitz Touts Service

At PhoCusWright conference, CEO Jeffrey Katz keeps comments brief regarding recent DOT decision

By: David Peterkofsky

LOS ANGELES Downplaying the U.S. Department of Transportation’s determination that Internet fares do not need to be regulated, the chairman and CEO of Orbitz emphasized his firm’s commitment to customer service in a speech at the PhoCusWright Executive Conference here.

Although critics continue to rail against the travel site including five California agencies who filed an antitrust lawsuit Jeffrey Katz said his company’s unwavering focus continues to be its customers.

“As long as we are an airline-owned entity, that’ll be the case,” Katz said of the ongoing criticism. “We spend most of our time on our customers and customer satisfaction. That we continue to do very well.”

Katz briefly discussed the DOT’s recent decision not to extend GDS rules to Orbitz and its Web competitors, saying only that his company clearly differs from the GDSs and, therefore, does not warrant such regulation.

Instead, he focused on what he called the bright spots in the current travel climate, citing a 6% increase in travel this Thanksgiving over last year. Internet travel spending in general is up nearly 40% for 2002, coming against an 8% decline in travel spending overall, he added.

He also spoke highly of Orbitz for Business, the corporate travel product launched in September, proclaiming that a corporate customer with a $4 million annual travel budget can save $800,000 per year on fares and fees.

Orbitz’s Supplier Link technology, which lets airline suppliers process Orbitz transactions without a GDS, also has proven popular, Katz said. Three of Orbitz’s airline owners American, Continental and Northwest participate, and another eight carriers, including non-Orbitz owners, are set to join the arrangement in the next quarter.

Katz said he wouldn’t rule out the possibility of Orbitz someday offering agents a booking tool alternative to the GDSs, but he said nothing is planned now.

Traditional agencies don’t offer Orbitz much in the way of competition, added Katz, who suggested offline agents are old-fashioned and unable to compete with companies such as his own.

“Our competition today is for the heart of the traveler whose ultimate tendency is to call Myrtle,” Katz said. “I like Myrtle, but I don’t think she has what it takes to compete. Orbitz has good customer service 24 hours a day and low prices. Who else offers that?”

Katz rejected claims that Orbitz’s existence stifles competition, stating that the company’s airline owners actually conceived of the site “to create competition and opportunity” when Travelocity and Expedia were “duopolizing” the online market.

Corporate Two-Step

Also at the travel industry research firm’s conference:

" PhoCusWright President Philip Wolf said that the major online players’ expansion into corporate travel has been one of the major stories of the year, along with Web fares.

Expedia last week introduced its own corporate travel product.

“It’s like a dance hall where the music got turned up louder and faster, and everybody’s stepping on each other’s toes,” Wolf said.

" Paul Blackney, president and CEO of Worldspan, spoke about the challenges facing traditional agents, predicting that traditional agents will account for just over half of all travel purchases within five years. Noting the shift online, he said Worldspan has diversified itself from a GDS into a technology provider for multiple sales channels.

In mid-December, the company is scheduled to roll out a product for agents that provides published, negotiated and Web fares in a single search. Worldspan teamed with FareChase on development of the product, Total Fares.

" Barry Diller, chairman and CEO of USA Interactive, said his company’s long-awaited travel TV channel and accompanying Web site will be launched sometime in the second half of 2003. The as-yet-unnamed entity represents a “screen-indifferent approach” to selling travel, Diller said one that will mirror the path his company took with the Home Shopping Network and corresponding HSN.com site.

" John F. Davis, chairman and CEO of Pegasus Solutions, suggested that online travel sites should aggressively pursue merchant-model hotel room sales, whereby agencies buy the rooms in bulk and resell them with a sizable margin built into the price.

Merchant-model room sales now account for less than 2% of all room nights, but Davis predicted that number could be as large as 10% in the next few years.

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