Expedia Antes Up: Acquires Corp. Agency, Plans Tech Unit For Biz Travel

Online travel agency Expedia last week announced a significant investment in corporate travel through the acquisition of Seattle-based Metropolitan Travel and the creation around it of a business unit to develop technology unique to the corporate market.

Airline-owned Orbitz, meanwhile, plans today to formalize its entry into managed business travel.

Expedia expects this month to close the purchase of Metropolitan, the corporate agency known for incubating Highwire, now Galileo International's corporate self-booking subsidiary.

Expedia said Metropolitan generated $150 million in 2001 gross bookings; its major accounts include Amazon.com, Nordstrom and Starbucks.

According to Byron Bishop, now Expedia senior vice president of corporate travel, the company will enter the market with an initial focus on accounts that spend $2 million or less on air travel. "But certainly we're willing to take on larger customers and will be adding clients to the Metropolitan service in the next few months," Bishop said, noting that when the corporate product is better established, "We'll go knocking on the doors of larger companies."

While Expedia refused to reveal product-related details, Bishop said that "you certainly can count on reporting and negotiated rates. The first major upgrade to what we're offering will come later this year."

An Orbitz spokesperson also said much of its offering is due later in the year, although booking data reports and itinerary tracking are imminent and the option to load negotiated rates should be available next month. Orbitz said it is not targeting companies of any specific size. However, Orbitz said its booking reports can be integrated with an account's existing agency, Expedia's goal is to become that agency. Neither Expedia nor Orbitz would discuss plans for pricing, but the Orbitz spokesperson said, "with Orbitz corporate product, companies can save up to 70 percent on travel management costs." One buyer familiar with Orbitz's plans suggested the fees will be extremely low.

Since first revealing its intention to address the corporate market (BTN, June 3), Orbitz conducted a demonstration for a handful of National Business Travel Association leaders who were "very impressed with the direction in which Orbitz is headed and very excited about seeing the product at the upcoming convention," said Seattle-based Weyerhaeuser Co. travel and meetings manager Suzanne Fletcher, who also serves as chairman of NBTA's aviation committee.

The new directions for Bellevue, Wash.-based Expedia and Chicago-based Orbitz had been anticipated by some of their own senior management and/or other experts earlier this year (BTN, March 4). Both timed their announcements for the NBTA convention.

"It's a natural extension," said Declan Boland, principal in business innovation services at IBM. "They've grown so much on the leisure side, it's not a surprise. My observation on the midmarket would be that it has been serviced in a haphazard way. Midmarket requirements tend to be more generic, since those companies can't afford custom development."

While Orbitz may have an advantage in that it is owned by and will be supported by the airlines, it's still a loss maker. Moreover, it's under plenty of regulatory scrutiny. Tom Underwood, Baltimore-based Legg Mason's Expedia analyst, noted that Expedia's strong financial position should not be underestimated. "They have a market capitalization of $3.5 billion, no debt and more than $300 million in cash," he said. "This is very favorable. Expedia has done a lot to change leisure travel by offering a better product and they're already aware of—and through Metropolitan will learn more about—the demands of the corporate market."

Created by Microsoft, Expedia has some experience in corporate travel management, thanks to its late-1990s partnership with American Express on the now-defunct AXI corporate booking product. Bishop was "personally involved" in that work, he said, and coming up with a new model for the business market is a "challenge we relish." Bishop accused existing corporate vendors of "over-promising and under-delivering."

According to recent BTN research (BTN, June 24), more than half of 223 companies polled with U.S. booked air volumes under $2 million already direct travelers to such online agencies as Expedia for reservations, and three-quarters of them said they had no plans to buy a managed travel self-booking product of the sort many large companies have implemented.

Expedia officials emphasized that there are advantages to utilizing self-booking technology and travel management services by the same provider. They acknowledged that at least some corporate travel fulfillment will be outsourced, but asserted that agents handling corporate travel will be well-trained in it. Bishop said Expedia does not expect its accounts to achieve 100 percent online adoption, so "if it doesn't work, you can give us a call."

Expedia described the AXI arrangement, in which Microsoft licensed technology to Amex—and models like it—as a "disconnect."

"Over and over we hear from customers that say we just want someone who can deal with everything," Bishop said. "What you have now is booking engine saying it's the GDS's fault or the agency's fault and vice-versa. By having a single solution, we can focus on putting the two together so rather than an agency supporting five tools, you have the advantage of making sure the pieces fit together."

Both Expedia and Orbitz work closely with Atlanta-based global distribution system provider Worldspan and consider each other and Sabre's Travelocity subsidiary to be their primary competitors. Travelocity for now is staying on the sidelines of the corporate game, leaving it to Sabre's four branded business products: GetThere DirectCorporate, GetThere DirectMidMarket, Sabre Business Travel Solutions and Sabre Corporate.Res.

Travelocity senior vice president of marketing Michael Stacy would "not go into further detail" about what the site offers managed business travel, noting that "we've stopped talking" about such details as the number of clients signed up for its Travel Manager Account feature, in which a single arranger books for multiple travelers. Last spring, a different Travelocity executive said 6,000 companies had signed up to purchase travel using a consolidated credit card. "Our effort now is not really focused on offering travel policies and things like that, and the lightly managed area does require some of those decision-making tools," Stacy said. "We certainly won't compete with GetThere."

"Corporate travel is very different from leisure," said a GetThere spokesperson regarding Expedia's announcement. "They're equipping themselves to handle the small and midmarket, but addressing the large corporate market would probably be a pretty big challenge for them." He said GetThere's top 20 clients have an average adoption rate of more than 50 percent.