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