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Summary:

Cendant’s $4.3 billion sale of its Travelport division to the Blackstone Group announced last week, could be yet another sign that the traditional online travel agencies aren’t the Internet survivors they once were. While online travel bookings are still growing– eMarketer says the U.S. will account […]

Cendant’s $4.3 billion sale of its Travelport division to the Blackstone Group announced last week, could be yet another sign that the traditional online travel agencies aren’t the Internet survivors they once were. While online travel bookings are still growing– eMarketer says the U.S. will account for $78 billion in online travel sales this year, up 20% from last year– the online travel agencies themselves are seeing slowed growth, largely because of a new found aggressiveness by both airlines and hotels that are getting web-savvy and the next generation of online travel aggregators.

Cendant’s Travelport division, which owns Orbitz and Cheaptickets saw lowered earnings last year, and Expedia, the number one site in the U.S., saw its stock drop dramatically, after the company slowed its growth and missed its earnings predictions. Though the sites are still growing, albeit slower than investors would like. A recent study from PhoCusWright says the top four online travel agencies, Expedia, Travelocity, Travelport and Priceline grew 29% in the first quarter of this year compared to last year. Decent, but that lagged the e-Travel industry’s total growth.

online travel sites break down
The main cuplrit is airlines like Southwest that have realized they don’t need to give up part of their revenues to bring in web customers, which are coming in on their own. Southwest Airlines says 65 percent of revenues from bookings were made from online sales last year, and Southwest.com was the number 5 most visited site in April 2006, according to comScore Media Matrix.

There is looming competition from online travel startups that are creating meta-search sites that find fares more quickly and easily than there older cousins, like Sidestep, Mobissimo, and Kayak. Farecast’s site predicts how airline tickets will fluctuate, helping the buyer purchase when the ticket is cheapest. The site went out of beta last week, though for now only operates for the Boston and Seattle areas. Waiting in the wings are other upstarts who are looking to combine social networking, blogging and community-based travel. None of them have any traction, but with $78 billion in spending at stake, there is room to grow!
In the dotcom bust, online travel agenices were among the few web companies that made it through the bad times and managed to show decent growth. While the companies are still growing, smart budget airlines and eager startups are starting to give them a real run for their money.

Bottomline: The old school online travel sites could become the likely buyers of newly funded start-ups, and their fancy services. With no-IPOs in sight, this is as good an outcome for a venture backed start-up?

  1. I think it’d be a hoot if Terry Jones and co sold Kayak to Travelocity for a pile o cash. Talk about a hammer to the funny bone. (for those who don’t know… Mr. Jones was the chief muckety muck at Travelocity back in the day)

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  2. Hi:

    Your links to other websites are not working. They take me to your main page.

    Suresh

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  3. Suresh, sorry about that. Just fixed those broken links.

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  4. Om – I’m a bit confused. You say that:
    - eMarketer is projecting 20% YOY growth in online consumer travel spend
    - PhoCusWright estimated that the big 4 OTAs grew 29% YOY in Q1 (I’m assuming that’s revenue growth)
    - but that the Big 4 grew slower than market

    How can that be? From what you have above, it seems that the OTAs grew 45% faster than the market. Am I wrong in assuming the 29% is revenue growth?

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  5. Mobissimo with its global presence and with services in the USA, India, France and now the UK – http://www.mobissimo.co.uk – is probably the best placed of all the meta travel search engines as it also works with the all important regional budget carriers. Also, its ActivitySearch tecnology is superb.

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  6. Most online travel agencies cannot be trusted. You can perform a simple search “company name” “complaints” and you will find hundreds od horrible stories. In my case, EXPEDIA lied and lied and lied and tried to keep money from my credit for a service that was never provided. I decided to run a website (http://www.victimsofexpedia.com) to alert as many people as I can.

    Other unlucky travelers created: http://www.shameonexpedia.com and http://www.shameon orbitz.com

    good luck

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  7. Also check http://www.citytherapy.com, a European based social networking travel 2.0 site where people create their profile and add their favourite parties, events, restaurants, bars, clubs, shops and hotels to their profile.

    Mainly focused on European city travel, this one combines pan-European event listings, social bookmarking features and city entertainment.

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  8. […] Yesterday Groople said it has raised $6 million led by ArrowPath Venture Partners and FA Technology Ventures for its group-targeted travel. Every week we get news of online travel companies raising money, adding social and community features, and trying to diversify their sites in a variety of ways. Online travel is a relatively low capital business, a lot of investors and startups figure: why not try it out! […]

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  9. What if a social site offers multiple networking themes like health, travel and general friendship? Any suggestion?

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  10. Yeah online travel agencies are growing rapidly both in developed and developing countries……

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