AOL to offer travel search

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DULLES, Va. - America Online took a minority stake in Kayak Software, and the two companies plan to launch a Web-based travel-search engine early next year.

The multiyear technology and marketing agreement signed Nov. 10 by AOL and Kayak, a travel-search start-up with former Orbitz, Expedia, Travelocity and Intuit officials at the helm, gives impetus to the comparison-shopping trend in travel.

The new AOL travel-search engine, which will be powered by Kayak, will be on "the open Web" - as opposed to the members-only AOL service - and meshes with AOL's strategy to move more retail business to the Web.

An AOL spokesman said the new search engine may build on AOL's new InStore retail site but that no decisions have been made as to the new travel-search offering's positioning and branding.

"We're at stage one in a multistage process," the AOL spokesman said.

Terry Jones, the chairman of Kayak, said AOL will be able to promote the travel-search offering to AOL subscribers and that it will have a "look and feel" different from the Kayak beta site. Kayak, he said, will continue to promote www.kayak.com and will pursue deals with other players.

Jones characterized AOL's investment in Kayak as strategic.

"They want to play, they want to play with us and they are putting their money down," said ones, the former CEO of Travelocity.

Forrester Research noted that $54 billion of the $145 billion online sales market in 2004 was for travel.

"This is a big marketplace and we want to get involved," the AOL spokesman said.

Travelocity, which powers Yahoo Travel and the AOL Travel Channel, has taken some wallops. Both services will coexist with the portals' search offerings, which will deliver consumers to supplier sites and probably non-Travelocity agency sites.

However, Travelocity's multiyear agreement with AOL remains intact and will continue to be featured on the 23-million subscriber America Online service, AOL.com, CompuServe and Netscape.

Using a variety of operational modes ranging from advertiser-driven displays to free search results, the meta-search companies aggregate inventory and transport consumers to supplier or online agency sites for travel bookings.

Some of the online agencies, however, see the search engines as stealing market share and commoditizing travel and have opted out of some of them.

The search field has shifting alliances. For example, Travelocity ordered Kayak to cease searching Travelocity.com and Orbitz has a commercial pact with Kayak.

Meanwhile, Orbitz recently pulled out of Mobissimo.com, and Travelocity moved in.

The AOL-Kayak deal follows Yahoo's purchase of FareChase and may lead to additional deals among the searchers, which include SideStep, Mobissimo, Travelzoo, TripAdvisor, Cheapflights.com, SmarterLiving.com and major search players like Google and MSN.

Henry Harteveldt, Forrester Research's vice president of travel research, noted that 80% of consumers use search engines to find retail sites, and that 25% of travel consumers say they feel overwhelmed by the number of Web sites and ways to buy travel online.

"This can help suppliers reach brand-neutral or uncertain travelers and people who don't know their options and bring them to supplier sites for less money than going through a travel agency," Harteveldt said.

GDSs, said Harteveldt, may be impacted by the travel-search trend, too.

"Search engines could be used by travel agencies to shop and book in the growing number of business-to-business agency portals that suppliers are creating," Harteveldt said.

To contact reporter Dennis Schaal, send e-mail to[email protected].

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