Merchant Hotel Activity Helps Orbitz Turn Profit As Sale To Cendant Nears

Orbitz this morning posted a third-quarter net profit of $5.1 million, up from a $3.9 million profit one year earlier, as 20 percent revenue growth was powered by expanded booking activity through the Orbitz Merchant Hotel program. President and CEO Jeff Katz said stronger hotel revenues through the merchant program, which now has 8,900 properties under contract, is "our top priority."

Transactions through that model accounted for 31 percent of all third-quarter hotel transactions, up from 21 percent in last year's third quarter, and 57 percent of total hotel revenue. Total merchant room nights sold in the quarter increased tenfold, to just under one-half of a million.

Orbitz's airline revenues rose only slightly, as comparisons were impacted by "a contractual step-down in airline charter associate transaction fee rates on June 1, without a corresponding increase in the consumer fee per ticket." Car rental revenues rose 59 percent.

Separately, Cendant Corp. yesterday announced the end of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act in regard to its proposed purchase of Orbitz. Cendant's tender offers for Orbitz are scheduled to expire next Wednesday.

Cendant Travel Distribution Services chairman and CEO Sam Katz yesterday told investors that Orbitz would be maintained as an unbiased Web site and that Orbitz SupplierLink technology, under that name "or something else," ultimately would represent a combination of Cendant distribution processes.

Though he termed SupplierLink as "an advantage and an innovation," Katz said the "attractive economics" of the $4 SupplierLink fee paid by airlines equates to Cendant's $3 to $5 net revenue from global distribution system segment fees, after factoring out incentive payments to large travel agencies. Suggesting that revenue-share programs with agencies have been the traditional driver of GDS pricing, Katz said, "We are trying to replace that model by giving travel agencies other products and services they can make money on."

Orbitz said 41 percent of third-quarter airline bookings were funneled through SupplierLink, a five-point year-over-year increase, and that SupplierLink processed more than $1 billion in airline bookings during the past 12 months.