Orbitz Takes a Wrong Turn - ' Stiff Competition '

Stiff Competition

Besides the challenges in fine-tuning its service, Orbitz faces competition from better-heeled competitors that are constantly maneuvering to enhance their own offerings. In July, Expedia purchased Metropolitan Travel, an offline corporate travel agency in Bellevue, Wash., near where Expedia's original founder, Microsoft, is based.

Travelocity, through its owner Sabre (one of the mainframe reservation systems where the airlines post flight data), has adopted automated voice-response software that allows customers to retrieve schedules, confirm the status of flights and check rental car rates. Both companies allow customers to make reservations by phone, something Orbitz, of course, cannot afford to do.

While the vast majority of airlines cooperate with Orbitz, a few have been less accommodating. JetBlue lists fares but will not allow customers to buy tickets through Orbitz. Southwest Airlines sued Orbitz but settled last November when Orbitz agreed to stop displaying its fares, which Southwest claimed were inaccurate. (And in another potential legal challenge, the U.S. Justice Department is considering whether the airlines could use Orbitz to fix prices. An Orbitz spokeswoman downplays the DOJ inquiry, saying she expects it to end within months without any action being taken.)

Other low-fare carriers—including Frontier Airlines and AirTran Airways—also keep their lowest prices off Orbitz, protesting Orbitz's requirement that every carrier must list its lowest fares first. "You're signaling what sales you have on a daily basis to a Web site owned and managed by the nation's largest carriers," says Ed Faberman, the executive director of the Air Carrier Association of America. "It's harder for them to compete if they have to go to multiple Web sites."

Last month Orbitz launched Orbitz for Business, a tool that integrates company-negotiated fares into Orbitz's site. Employees can use Orbitz to book their own business travel, and companies can track how money is being spent. But Orbitz is a long way from matching the service standards expected by business travelers, says David Redman, who owns Carlson Wagonlit Moorpark, a franchise of the global corporate travel agency that built its business in the offline world.

After the terrorist attacks last year, Orbitz employees worked hard to contact customers and create a resource for information on the airlines, even after they evacuated their offices in a downtown Chicago building across from Sears Tower, a suspected target. But their efforts weren't entirely successful. For instance, Orbitz customers flying on Sun Country Airlines, a competitor of Orbitz co-owner Northwest, were never informed that the airline had canceled flights out of Boston. Orbitz says Sun Country failed either to update its reservation system or inform Orbitz directly like the other airlines.

Carlson Wagonlit Moorpark also was at the mercy of the airlines after the attacks. But Redman's agents stayed up all night to notify customers and rearrange their travel plans, sending them home by bus if necessary. "There are certain people I'm thrilled go to Orbitz—people who were constantly calling and changing small tickets," Redman says. Those customers are too small to require his services, Redman says.

To be sure, Orbitz is not standing still itself. In August, in partnership with American Airlines, the company announced Supplier Link, its latest technological advance. Orbitz's search engine can now bypass mainframe database reservation systems such as Worldspan and connect directly into American's mainframe reservation system, parsing data and showing it to the customer and American in the way each needs to see it to book a flight. American expects to save 77% on every ticket booked through Supplier Link because it no longer has to pay fees to Worldspan.

And Supplier Link could help reduce ticketing errors like the one encountered by Tom Harvey. Orbitz's search engine shows information in "near real-time," says Forrester's Harteveldt. It caches information from Worldspan every 10 minutes to cut down on the number of hits on the mainframe, allowing Orbitz to negotiate a lower transaction cost from Worldspan and pass savings on to the airlines. Airline ticketing is complex enough that 1% to 2% of the time, data in the cache is wrong. But as American increases the number of eligible tickets that go through Supplier Link, Orbitz customers are less likely to encounter itineraries that are no longer available or book reservations that are not properly confirmed.

Orbitz is working to connect to three more airlines through Supplier Link before the end of the year. So far, though, Harvey is not tempted to return. Orbitz is a good tool for research, he says. But now he books his business travel through an agency or the airlines themselves.