Feed me, Seymour

asked Dan Westbrook, president of American Airlines Vacations, what he wanted to discuss during a panel I was moderating at the Travel Weekly Hawaii Leadership Forum earlier this month in Honolulu. Westbrook paused. "Partners," he said. "Ask me about choosing partners." And so I did.

And Westbrook answered with a bombshell.

"Everyone's concerned about the 'perfect storm' [SARS, economy, terrorism, war] that's affecting travel," Westbrook began. "But long-term, we need to be concerned with the 'Little Shop of Horrors' that's out there -- Expedia. 'Rule the world' may be a bit strong, but Expedia is interested in dominating travel distribution -- look at what they're putting together."

In the play and movie "The Little Shop of Horrors," a giant alien plant grants wishes to his caretaker Seymour in exchange for Seymour's delivery of human blood. Eventually, the plant devours Seymour. From the looks on their faces, apparently most of the audience had seen the show.

Now that he had their attention, Westbrook continued: "The question you need to ask yourself is: Are their economic interests in line with your economic interests? My concern is that too much power is being concentrated in one distribution channel. They can move a lot of products, but it's like the plant that eventually comes back to suck your blood. Feed me, Seymour. It's best to align yourselves with people who have the same interests, who, for example, have an interest in Hawaii and the success of the destination.

"This isn't about their character, or who they are. I'm just talking for myself, but I suspect most here have the same thoughts."

Based on the applause he received when he finished speaking, he may have been correct in his last assumption. Another panelist, Rick Garrett, president of Happy Vacations, began his presentation by congratulating Westbrook for "saying what I lack the courage to say."

Afterwards, Westbrook told me that "any supplier needs to pay attention and be concerned about how distribution channels are evolving, and whether they reflect your long-term interests. How is concentration in the market going to affect you, and what are you going to do about it? For us, our largest channel is travel agents who book through the GDS. But it may be prudent for someone else to rely on [Expedia] entirely. Everyone must answer the question for himself."

As it turns out, Westbrook may have picked the right topic to interest his audience, but the wrong argument by questioning Expedia's commitment to Hawaii. A "shocked and disappointed" Ron Letterman, who oversaw the sale of Hawaii tour operator Classic Custom Vacations to Expedia last year and is now chairman of Classic and senior vice president of Expedia, told me later that evening that "Expedia spent $80 million to acquire Classic. Hawaii is

the second most important market to Expedia [after Las Vegas] from a revenue perspective. From an investment perspective, it may be first. We have a strong commitment to Hawaii.

"We're middlemen. We need partners. We need to satisfy vendors, or we have no business. Vendors love us.

"In fact, a division of Expedia works with American Airlines, cross-marketing cars and hotels after someone has purchased a flight on www.aa.com."

Letterman was dismissive of the idea that one company can ever obtain "too much power."

"Look at the Caribbean -- for now, American Airlines Vacations with Gogo Worldwide Vacations completely dominate the market. Dan isn't worried about that. And despite their dominance, there was still room for Classic and others to get in there and make a play."

Still, some of Letterman's additional comments could be seen as lending credibility to Westbrook's fears of channel dominance. "Look," he said, "the Darwinian law of survival of the fittest really is in play, and we expect to be plenty fit. We want to be the largest and best travel provider in the world -- that's Expedia's ambition.

"Do we want to be the biggest player in Hawaii? Of course we do. There will be a culling of the tour operator sector, and the companies with superior technology and superior resources will have real advantages in the marketplace."

Letterman feels that the biggest is always going to be the target of the less big, and said he was surprised to hear Westbrook's remarks. "Dan's such a smart guy. But he's marketing fear. And I'm offended that he questioned our commitment to Hawaii. We have spent tens of millions on technology and hundreds of millions in marketing."

Westbrook later said he certainly didn't intend to offend Letterman -- "I have an enormous amount of respect for him" -- nor to start an acrimonious exchange. "My comments were directed to the future," he said.

In the end, they both have valid points. Westbrook's reference to the Little Shop speaks to the dangers of becoming too dependent upon a single channel that must increasingly be "fed." Hotel and car suppliers participating in Expedia marketing programs can get more visibility than those that don't. "It brings in the business, but at a very high cost," a participant in one of the programs told me.

And Letterman's correct that true market dominance is difficult, if not impossible to achieve. The Pleasant Holidays-AAA alliance means Expedia will always have a run for its money in Hawaii. It faces formidable competition in Mark Travel Corp. for Las Vegas and, frankly, a strong competitor in American Airlines Vacations in the Caribbean.

Come to think of it, Expedia's just a little guy -- a sprout compared with its towering parent, USA Interactive, which owns Hotels.com, TV Travel Shop, Interval International, Citysearch, Ticketmaster, evite, ReserveAmerica, Home Shopping Network and a host of other hungry mouths in need of feeding.

Getting nervous, Seymour?