Corporate travel managers are receptive to the idea of using the airline-owned Orbitz Web site, which last month revealed plans to integrate password-accessible, Web-only fares with corporate negotiated rates and provide booking reports to suppliers and their clients.
Two-thirds of 42 corporate travel managers BTN polled last week would consider using Orbitz, and 19 of the mostly larger-volume buyers said they have held talks with airlines along these lines. At least two of those polled were scheduled to visit Orbitz next week for a demo.
Orbitz in April appointed its first vice president of business travel (see story, page 3), and in its May 20 registration for an initial public offering also said it plans to broaden its appeal to business travelers by developing seat maps, ticket cancellation and exchange capabilities, and a travel arranger function. The company also unveiled details on several partnerships with travel distributors, including Pegasus, Worldspan and subsidiaries of both Rosenbluth and Navigant International.
Not only has Orbitz signaled its intention to compete with providers of corporate self-service reservation products, but said: "Our ability to offer products and services that will attract a significant number of business travelers to use our services is not certain. If it does not occur, our growth may be limited."
"You'll never see an Orbitz salesforce talking to travel managers," said Orbitz chairman, president and CEO Jeff Katz, former president of Sabre, in a pre-IPO interview with Business Travel News. "Since we don't have corporate relationships, we've made it known to the airlines that reporting exists for them and their clients. Many have asked about it, but no one is using it yet." While reluctant to sell a corporate version, Orbitz in its IPO statement described its intention to secure "arrangements with airlines so bookings made through Orbitz are credited to corporate volume discount agreements."
Orbitz was not specific about the timeframe for the business travel enhancements, citing the IPO-related quiet period imposed by the Securities and Exchange Commission. Some airlines also did not comment on that basis, but conversations with carrier sources placed the initiative in the earliest stages.
Asked about corporate bookings through Orbitz, US Airways vice president of sales Steve Tracas said, "It still is too early to tell. We are talking to corporations about a number of things. All online agencies are moving into the corporate arena to meet the needs of customers, so it is not surprising. It is a natural progression." US Airways is the largest U.S. carrier that does not own part of Orbitz.
Orbitz also is seeking to enhance its car rental offerings, potentially including the booking of corporate discounts. For hotel inventory that complements what is available from Orbitz's GDS partner, Atlanta-based Worldspan, Orbitz entered into a three-year contract with Dallas-based Pegasus Systems' TravelWeb to access prepaid lodging inventory from Hilton, Marriott, Hyatt, Starwood and Six Continents, as well as Utell.
Worldspan enhanced its relationship with Orbitz last November to provide the latter "with the functionality to compare an old itinerary with a new itinerary and recalculate the new fare. In the third quarter of 2002, we will begin paying Worldspan fees for automated ticket reissues. The agreement will terminate on April 30, 2003."
Yet, Orbitz's stated plans made no mention of features some corporate travel buyers deem important, including configurable policies, preferred vendor displays, profile management, pre-travel authorization, meetings functionality and corporate negotiated hotel rates. Phoenix-based ON Semiconductor global travel manager Colleen Guhin was skeptical. "If I can't get the data, then forget it, but if I can, I would consider it," she said. "But policy would have to be part of it. I'm not going to give up anything."
Nevertheless, a travel distribution channel that lowers costs for suppliers is of interest to many buyers, regardless of the features it may not yet offer. Some buyers said that even what limited information Orbitz had released thus far is worthy of consideration. "At the end of the day, all people really want are low prices," said a Corporate Travel 100 buyer who requested anonymity. "If it takes off, I don't know how anyone will be able to pass on the low fares."
Fare differentials could become particularly acute if airlines begin to sell Orbitz in the same way they did the global distribution systems that most of them no longer own—by boosting discounts in return for transactions on the preferred reservations system.
"The midmarket probably is the vulnerable area, let's say largely represented by the National Business Travel Association," said Belmont, Calif.-based Travel Tech Consulting president Norm Rose, who recently updated his corporate booking market analysis. "There will be a lot of push and fireworks there over the next 12 to 18 months. I'm not sure Orbitz would want to deal with the CT100." Travel managers from three major technology companies were stumped when asked what such corporate tools as Sabre's GetThere offer in addition to what Orbitz outlined in its plans. "Nothing," one said. Another added: "Not a lot of progress has been made outside of what's already been rolled out. The GetThere advisory board has given them a lot of good ideas for enhancements, but we've yet to see the results of those recommendations. It's generally a budgetary or bandwidth issue—yawn!"
At GetThere's March advisory board meeting, participants discussed GetThere's new platform—including a user interface that resembles Orbitz's fare display, which is provided by Cambridge, Mass.-based ITA Software under an agreement recently extended to 2007—its near-term plans to access Web fares and longer-term plans for bookings made directly in the supplier's host reservations system.
The emerging battle between Orbitz and the GetTheres of the world, though, is but a component of a larger war between the airlines and the GDSs, particularly Sabre (BTN, May 13). Airlines created Orbitz to compete with the GDSs and their online agencies, such as Sabre's Travelocity, as well as to unleash air bookings from the GDS mainframe using direct connections to their host reservation systems—many of which are managed by GDSs.
To avoid disintermediation, Sabre has promised to do the direct connecting itself. While GetThere's direct connect with American Airlines awaits substantial usage, Orbitz in April launched its first single airline site under a three-year deal with AA. "This booking function works directly with our software using our supplier link technology," Orbitz stated. "AA paid us a total of $677,825 for the initial development services."
Orbitz said non-GDS bookings via the supplier link technology would be introduced to some of its charter associates—including 42 airlines, five major U.S. hotel chains and seven rental car firms—by the second half of 2002. Northwest Airlines also enlisted Orbitz to run its Web site beginning in the second half of this year for 30 months.
Worldspan holds a contract in effect until October 2011 to back Orbitz "for bookings on suppliers that do not have direct-connect agreements with the site." As part of the setup, "Orbitz agrees to process a majority of its GDS bookings through Worldspan," according to the Orbitz IPO registration.
Further extending its work with managed business travel distributors, Orbitz in April signed a five-year service agreement with a unit of Philadelphia-based mega agency Rosenbluth International to use its North Dakota call centers for telephone and e-mail customer support using interactive voice response with speech recognition. Orbitz also said it plans "to base most of the personnel who provide this service in India by the end of 2002." Orbitz uses the fulfillment services of Etravelexperts, with offices in Eden Prairie and Mankato, Minn., under a five-year agreement.
Orbitz also signed a deal that is exclusive for less than a year with Santa Ana, Calif.-based Aqua Software, owned by Navigant International, to bring Orbitz's content to the agency point of sale using software under development by Aqua. The deal was positioned as a solution for agents to automatically conduct Web fare searches in the background of their point-of-sale application, with the results then integrated into the same window as the GDS content. Aqua then would be capable of reporting to clients on Orbitz purchases; Aqua president Mark Ferguson has not talked with Orbitz about adding corporate negotiated rates into the mix.
Meanwhile, Orbitz revealed its net revenues in 2001 totaled $43.4 million, while net losses were $103.2 million. The company said in 2001 it booked more than $800 million in travel. Among Orbitz's founding airlines, AA owns 26 percent; a UAL Corp. affiliate, 26 percent; a Delta affiliate, 18 percent; Northwest, 16 percent; and Continental, 14 percent.
Orbitz also acknowledged the potential for government regulation, noting that it has been and is under investigation by the U.S. Departments of Justice and Transportation and various state Attorneys General.
"DOT regulations prohibit airlines from discriminating against competing GDSs in favor of GDSs that those airlines own or control," Orbitz stated. "We do not believe that our activities subject us to these regulations, as we do not believe that we operate a GDS within the scope of the regulations."