Expedia Inc.'s Hotwire and
Travelport's Orbitz reached an agreement under which Hotwire next
year will resume a prior role and provide opaque travel inventory
to Orbitz.
Priceline.com has
been Orbitz's exclusive partner for opaque travel services -- where
you often don't know an airline's name or flight times before
booking -- in 2006.
But, apparently the
switch back to Hotwire isn't a case of Hotwire treading on rival
Priceline's turf.
Priceline.com
President and CEO Jeffery Boyd told financial analysts recently
that Priceline "decided not to renew our online partnership with
Orbitz."
"While Orbitz is a
good source of traffic, when you factor in the likely dilution,
meaning customers that we paid Orbitz a commission for that would
have shopped at Priceline anyway, the transaction did not meet our
ROI (return on investment) hurdles," Boyd said.
The business model
for the Orbitz-Priceline partnership was that Priceline paid Orbitz
a commission -- or marketing payment -- for each Priceline
transaction delivered through Orbitz.
Boyd said that
although the decision to part ways with Orbitz may deprive
Priceline of 5% of its merchant volume in 2007, it will free up
marketing dollars where the ROI is greater.
Hotwire previously
provided opaque inventory to Orbitz when major airlines launched
Orbitz in 2001 and continued to do so through 2005.
But, Priceline took
on that role for Orbitz in 2006 as part of a marketing agreement
that also covered Orbitz's use of Priceline's Travelweb merchant
hotel business.
Orbitz's transition
back to Hotwire on Jan. 1 means that Orbitz is partnering anew with
a unit of online rival Expedia.
Meanwhile, in
another Hotwire development, Expedia Inc., in the third quarter,
took an impairment charge of $47 million related to the value of
Hotwire's trademarks and trade names.
At the end of 2005,
Expedia Inc. valued Hotwire's trademarks and trade names at $90
million, but determined in an annual review during third-quarter
2006 that the fair value of this intangible asset needed to be
downsized by more than half.
IAC/InterActiveCorp, Expedia Inc.'s former parent, acquired
Hotwire in 2003 for $666.7 million in cash.
To
contact reporter Dennis Schaal, send e-mail to [email protected].