Online Travel Booking Wars Heat Up

Online Travel Booking Wars Underway

As the last of the online travel search engines to eliminate booking fees on most flights booked on through May, Orbitz Worldwide Inc. (owner of Orbitz.com and Cheaptickets.com ) has finally has buckled under pressure in the online booking war. Last month, Expedia.com and Travelocity.com waived booking fees on airline-ticket purchased through May 31, bowing to Priceline.com and Hotwire.com, both of which had eliminated the onerous fees some time ago.

The booking fee waiver is just the latest in the promotion wars between these online travel giants. In June of 2008, Orbitz announced a long-term program for airline-ticket reimbursement called “Price Assurance.” Last month, Travelocity launched a price guarantee on vacation packages purchased through May 31 and Priceline announced a price guarantee on both airline tickets and packages booked through June 1. In each of these cases, travelers are automatically reimbursed if they book an airline ticket or package and then someone else books the same ticket or package at a lower price.

The latest “no booking fees” promotion is a clear response to the severely reduced number of people traveling across the country in recent months – at least by air. What is unclear at the moment is whether the program will expire after May 31st. Analysts speculate that the deals may be extended for some time, if not made permanent. “We don’t think that putting this genie back in the bottle will be easy come late May,” said Tom Botts, a partner at Hudson Crossing LLC, a travel-industry consulting firm.

To a large degree, online search engines are suffering the same fate as traditional “bricks and mortar” travel agencies, which were severely impacted some years ago when airlines stopped paying booking commissions. Traditional travel agencies had no choice but to directly charge customers a ticketing fee. Understandably, their airline business trickled away as online booking became simpler and more prevalent. Traditional agencies were forced to turned to other sources income – cruise operators and hotels, for example, that still pay commissions.

If online booking fees become a thing of the past, it remains to be seen whether the search engines can sustain business with only revenues from hotels and other ancillary travel operators. Orbitz may suffer more than the other agencies, since analysts estimate that airline booking fees make up as much as 60% of the firm’s profit. Without this revenue, a “shake out will likely result in mergers and failures. It is definitely an interesting time to watch this infant industry.

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