Ta da! Orbitz launches! So how are its prices? Hmm…

5th Jun 2001

Orbitz is up—and finding great prices for its users.
Or so says Arthur Andersen, the independent auditing firm, according to a press release Orbitz issued today, when the site officially launched. The release quoted audits by two independent companies that found favorable results for Orbitz.
The Arthur Andersen study found that when it comes to finding low fares, Orbitz meets or beats low fares offered by its largest competitors in more than four out of five searches (80%). It also quoted a study by Horizon Research Corp. of 500 travel Web site users. That study reported that consumers who shop online for travel prefer Orbitz three to one for the broadest array of low fares over Travelocity and Expedia.
Sounds good—until you look at a report by the investment bank Pacific Crest, which specializes in technology, communications and commerce. Recognizing that Orbitz’ key competitive advantage was to have access to fares not available to its competitors, which presumably would allow Orbitz to offer better fares, Pacific Crest did a pricing audit. (Orbitz quietly went live last week).
And Pacific Crest found that Orbitz failed to deliver on its key value proposition.
It ran multiple price scenarios from major cities to popular vacation destinations and found that Orbitz ranked last compared to Expedia and Travelocity when it came to price. It found the best prices on Travelocity, which found the lowest price 70% of the time (this included ties for lowest price). Expedia found the lowest price 60% of the time. Orbitz found the lowest prices 30% of the time. In addition, Travelocity found a low price not found by competitors 40% of the time compared to 30% for Expedia and 0% for Orbitz.
The upshot of the Pacific Crest findings: Orbitz is facing an uphill battle against Expedia and Travelocity. It has to establish a brand, build scale and show better pricing. And, it is competing against established, well-capitalized companies. Still, Pacific Crest considers Orbitz a serious competitor—it has barely launched, it has time to improve and there certainly is space in the market for another player. However, Pacific Crest believes Orbitz’ potential threat to existing players has been far overstated and it rated both Expedia and Travelocity as a strong buy.
Wall Street appeared to concur with that conclusion—at least for the first full official day of Orbitz’ existence. Travelocity closed at 33.59, up 80 cents from its opening and Expedia closed at 32.18, up $2.38 and close to its 52-week high of 32.77.


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