Travelocity bounces back with Site59

Shares of Travelocity.com Inc., on Tuesday regained nearly a third of recent steep losses caused by weak airline bookings when it announced a new last-minute discounted travel section of its Web site in cooperation with Site59.com.
Travelocity closed up $4.03, or 18 percent, to $25.93 on the Nasdaq stock market, climbing out of a three-week dive that ended on Monday at $21.40, off a 44.8 percent drop in value from a May 25 high of $38.79. The shares traded up as much as 25 percent reaching an intraday high of $27.50.
Travelocity`s recent drop was spurred in part by weaker-than-expected airline bookings and the early June launch of airline-backed online travel agency Orbitz.com, analysts said.
“The Orbitz.com launch probably caused some investors to worry since they felt its backing by 5 major U.S. airlines posed a more substantial threat to Travelocity than it probably does,” said Henry Harteveldt, senior analyst at Forester Research. “Travelocity`s fundamentals are stronger than they have ever been and the deal with Site59 is a sound strategic move. They`ll now be offering something for everyone.”
In the new partnership, privately held Site59 will offer discounted packaged deals including air, car and hotel reservations to Travelocity customers, 11 percent of whom leave the booking of their hotels until the week before they fly, according to Harteveldt. In the age of online travel planning, early birds don`t always get the worm.
“At some point the consumer knows you`re never full and that if they wait until the last minute they`ll get a deal,” said Bailey Dalton, analyst with C.E. Unterberg, Towbin.
With hotel occupancy averaging about 65 percent a night and travelers increasingly buying their airline tickets at the last minute, U.S. travel companies are left with $84 billion in travel and entertainment unbought each year, according to a survey by the Boston Consulting Group. By marrying those statistics together, Site59 offers last-minute planners discounted travel packages. And unlike services like Priceline.com, does so without revealing to the customer which part of the package is “distressed inventory,” or “leftover,” according to Site59 spokeswoman Pam Johnson.
Site59 aims to protect brand-name travel companies by hiding which part of their travel packages are “leftovers,” Johnson said. In addition, Travelocity customers are offered quirky extras, such as hot air balloon rides. “We`re going to see increasingly sophisticated ways of marketing package deals to consumers, and this is another one,” Dalton said.
Another extra Site59 has offered was called “Beef and Guns,” booking customers into a shooting range to “fire off 150 rounds of ammunition and then go and eat a big juicy steak,” Johnson said. “Our service offers travel ideas and was meant to compete with Blockbuster Video, not other travel agencies.”
Harteveldt said the deal will benefit Site59 since they will get the distribution benefit of Travelocity`s 27 million members as of the end of the first quarter, and the benefit of its marketing and advertising clout.
In another deal that investors might perceive as a threat to Travelocity and its online travel industry peer Expedia Inc., Cendant Corp, the franchising giant that owns the Avis rental car brand, on Monday said it would buy Galileo International Inc., the world`s No. 2 travel reservation network.
But analysts said Cendant`s move to strengthen Galileo`s online travel presence by merging its long-anticipated travel portal with Galileo`s online vehicle, TRIP.com, would have little affect on Travelocity.
“Travelocity`s valuation is attractive relative to its peers since Cendant`s travel portal has not yet launched and Gallileo`s TRIP.com has yet to gain any traction,” said Legg Mason analyst Thomas Underwood.
Underwood said he spent the morning calling investors recommending they buy Travelocity based on his projections that the company will post 50 cents profit in 2002. However, Monday`s Cendant-Gallileo announcement detailed a $2.9 billion stock and cash deal that may sharpen competition for Travelocity`s majority shareholder, Sabre Holdings Corp., Underwood said.
“Sabre will be more affected by the Cendant-Gallileo deal than Travelocity will.”
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