Orbitz tells Congress: The travel industry needs us—we’ll offer more consumer choice and more com
As the likes of Sabre/Travelocity and Microsoft/Expedia chewed their nails—and the Interactive Travel Services Association wondered if they’d have to reconsider their refusal to allow new kid on the block, Orbitz, to become a member—an impassioned case was being made by Orbitz’ chairman and CEO, Jeffrey G. Katz, to the US Senate Commerce Committee on Internet Sales of Airline Tickets. It has been Katz’s task to present Orbitz’ case to Congress, and he firmly believes that they will be given a clean bill of anti-trust health in the run-up to the launch of their new internet travel web site later this year.
Everyone is understandably nervous about this highly competitive new kid on the block that’s promising to show travellers more airlines, more flights and more fares than any other travel web site. Orbitz is currently financed by United, American, Delta, Northwest and Continental Airlines—enough in itself to give the industry the jitters—but Katz insists that these airlines were initially the only people who fully understood the massive benefits that Orbitz’ new technology would offer. Within 18 months, Katz explained, the initial investment by airlines will be so diluted by other non-airline and public investment that the airlines’ stake in Orbitz will represent less than 50%.
“When launched,” Katz told the Senate Commerce Committee, “Orbitz will become the first web site offering travellers a complete and unbiased view of all airfare and schedule options on hundreds of airlines to destinations around the world. Orbitz’ contractual pledge to offer neutral travel information will enable consumers to evaluate and pick from the widest possible menu of flight choices, instead of just the narrow slice shown by existing web sites. Orbitz will also give all carriers, big and small, equal shelf space on the Internet.”
Acknowledging that Orbitz would have to work very hard even to become No.3 in the internet travel industry, Katz pointed out that Sabre/Travelocity, owned by the world’s largest CRS, and Microsoft/Expedia have already secured nearly 70% of all on-line bookings by third-party travel sites through a variety of exclusive deals and mergers and acquisitions of smaller web sites. The duopoly also has nailed down long-term deals with web portals, including AOL, Microsoft Network and Yahoo, giving them exclusive distribution rights on portals used by 90 percent of Internet consumers, Katz said. “To gain ground in an area that they dominate, we have to be far better than they are at offering customers what they want ...We are not asking for anything but a chance to compete.”
Orbitz’ undeniable edge is that it will be the first travel website to break from the anachronistic and inherently limited 25-year-old CRS (computer reservations systems) technology to use extremely powerful, state-of-the-art software systems for searching airfares, routes, seat availability and other functions. Data storage and computing power will be massively increased. Orbitz will, for example, have over 1,000 times more computing power than Sabre, the largest CRS—and at a fraction of the cost.
This new software is the result of many years of work, and was the brainchild of Dr. Jeremy Wetheimer of the MIT Artificial Intelligence Laboratory. Dr. Wertheimer had initially been working on the application of cutting-edge information search technology to such issues as DNA sequencing. As a diversion from his thesis, he undertook the development of the first totally comprehensive, totally unbiased air travel search software.
Jeffrey Katz explained to the Committee that “Anybody could introduce these new technologies. The processors are readily available. The data storage is readily available. Jeremy’s unbiased and comprehensive search and display software is readily available. Any of these CRS-based Internet sites could choose at any time to expand the telecommunications networks and data systems necessary to improve seat availability. But until Orbitz came along, nobody chose to do all these things.” He added that anyone in the general public can try out this software today at a test site (www.itasoftware.com), but as it is only a test site it doesn’t yet have the powerful Orbitz hardware behind it, and it cannot actually make a booking. However, even just as a test site, it has become very popular with consumers and travel agents seeking better information than they can get through CRS’s or through CRS-based Internet sites today.
“What Orbitz is all about,” said Katz, “is that we will search absolutely every airline, schedule, and fare possibility in response to your request to go from City A to City B and back - all half a billion to a billion possibilities - and we will do it in one second. We will search through approximately 100,000 times more options than the CRS will, or than the Internet site that uses a CRS for its searches will, in order to be sure we are showing you the best flight options at the lowest fares. In contrast, Sabre/Travelocity and Microsoft/Expedia are reliant on the old mainframe technology developed by giant, computer reservations systems.”
“Orbitz’ new technology will provide lower-cost competition that will help travel suppliers reduce the costs of electronic bookings. CRS fees, passed onto consumers in the form of higher ticket prices, have skyrocketed by 1400% since 1983”, Katz pointed out, adding that while Orbitz has been painted as a competitive threat, the site is really an Internet start-up presenting new opportunities for consumers and new on-line competition for the two largest players in Internet travel.
Jeffrey Katz ended his testimonial by reminding the Committee that, 25 years ago, the USA led the world in CRS technology and that if the new technology was not built by the Americans, then it would be built by the Europeans and used by consumers in the USA “...because there is nothing more international than the Internet. This technology is coming to computers in our neighbourhoods, whether Orbitz exists or not. The only question is, will it be brought by U.S.-based companies, or only by others?”