rom last week's events, you could
easily conclude that if you're in travel and you're not on the
Internet in a big way, you could get run over.
The week began with the news that Interactive Corp., the parent
of Expedia, plans to acquire Hotwire.com for $665 million in cash.
That's about 100 times the total net profit that Hotwire has
produced in its three-year life.
Hotwire.com
is, essentially, an online consolidator. It picks up distressed
inventory from airlines and other suppliers for sale on the Web at
a steep discount in a plain, brown wrapper. The inventory is opaque
-- the buyer doesn't know the name of the supplier until after the
sale. In exchange for this element of surprise, the buyer gets it
on the cheap.
So what does this transaction tell us?
For one thing, it tells us that the six airlines that are
part-owners of Hotwire probably need the cash. Most likely they are
more than willing to sell out and use the proceeds to liven up
their profit-and-loss statements for the fourth quarter, when this
deal is expected to close.
But it also tells us that the biggest online travel seller is so
enamored of the industry's bargain basement that it will pay $665
million, the price of two fair-size cruise ships, to set up shop
there.
Days later, American Express, the No. 1 name in travel in the
U.S., demonstrated its acute awareness that it is not the No. 1
travel company on the Internet -- and it wants to do something
about it.
Cynthia Valles, senior vice president and general manager of the
American Express Consumer Travel Network, put it this way at a
meeting of Amex agencies: "We need an online solution -- and we
need one fast."
We are unaccustomed to hearing such urgency in the voice of
American Express.
At about the same time, the No. 2 name in travel, Carlson,
demonstrated that it is as concerned as American Express that it's
an also-ran on the Web.
Carlson is said to be bidding on the U.S. assets of MyTravel,
the U.K. travel conglomerate formerly known as Airtours. The U.S.
assets include a number of cruise and travel retailers and
wholesalers, several of which end in dot-com, such as Flycheap.com and 1800AnyHotel.com.
These events and disclosures were quickly overshadowed at
midweek when Far & Wide Travel Corp. admitted its long-rumored
insolvency and headed for bankruptcy court, in what is likely to be
the biggest tour operator collapse in the industry's history.
As events unfold, many reasons will be cited for this collapse,
and among them will surely be Far & Wide's roots in the
brick-and-mortar world.
Citing data from Forrester Research, Interactive Corp. said 19%
of travel buyers on the Web make their decision on price alone,
"without consideration of individual airline or hotel brands."
To the Internet's biggest travel seller, it is apparently worth
$665 million for the opportunity to win the hearts and minds of
that 19%. For the remaining 81%, a battle of epic proportions could
be brewing.