Expedia Buys Into Corporate Travel

Competition in corporate travel management is widening further today as online travel agency Expedia announced a significant investment in the corporate side of the business through the acquisition of Metropolitan Travel and the creation of a business unit dedicated to the business travel market.

Expedia later this month expects to close the purchase of Metropolitan, the Seattle-based 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. "We're not discussing product plans, but you certainly can count on reporting and negotiated rates. The first major upgrade to what we're offering will come later this year."

The new direction for Bellevue, Wash.-based Expedia, which is majority-owned by New York-based USA Interactive--whose other brands include Hotels.com, the Home Shopping Network and Ticketmaster--was well received by analysts and other sources.

Tom Underwood, Baltimore-based Legg Mason's Expedia analyst, noted that one reason to take Expedia seriously is its strong financial position. "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."

"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. Expedia could be a solution because midmarket requirements tend to be more generic since those companies can't afford custom development."

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."

Expedia executives emphasized that there are advantages to buying self-booking technology and travel management from the same provider. They described the AXI arrangement, in which Microsoft licensed technology to Amex, as a "disconnect."

"Why now?" asked director of product development Matt Hulett. "We're seeing enough gravity for corporations to move online and they're looking for someone to provide technology and answer the phone. Customers have called and told me exactly what they wanted, and at a time when commissions are going to zero, businesses are being squeezed by increased transaction fees and they are reevaluating how they manage travel. It's no longer a profit-based view."

Expedia's announcement follows a plan outlined by Orbitz in which the airline-owned company also will deliver products for the corporate market.