REDMOND, Wash. -- Initial public offerings in the travel technology
field are heating up again, with the latest move being Microsoft's
plan to spin off its Expedia travel unit, which operates the Expedia.com
on-line agency and licenses technology to other Web sites.
Expedia filed plans with the Securities and Exchange Commission
for an IPO for $75 million, saying Microsoft will be the majority
shareholder but has made no commitment to provide additional
financing to it.
Expedia veteran Rich Barton will serve as president of the
independent Expedia.
GetThere.com, a Palo Alto, Calif.-based specialist in
Internet-based applications for corporate travelers and supplier
Web sites, is going public, Worldspan is believed to be considering
an IPO of its own and Amadeus has filed initial IPO documentation
with the Spanish Securities Commission.
Madrid-based Amadeus said its offering is expected to involve a
primary issue of shares by Amadeus and a secondary offering of
shares held by Continental Airlines, which owns 12.4% of the CRS
company.
Air France, Iberia and Lufthansa are the other shareholders
currently, each with a 29.2% stake.
Microsoft's travel unit was started in 1994, and Expedia.com was
launched in October 1996.
By the end of August, Expedia.com had sold $700 million worth of
air, hotel and car rentals to 860,000 consumers, and the site had 7
million registered users, according to the IPO filing.
Despite the big dollar signs, profits remain as elusive for
Expedia.com as for its on-line agency competitors.
For fiscal 1999, which ended June 30, Expedia had a net loss of
$19.6 million on revenues of $38.7 million, and its accumulated
deficit to date was $87 million.
"We will need to increase our revenues to become profitable,"
the company said in its IPO filing.
Some of Expedia's revenues come from advertising and from
technology licensing fees.
But supplier commissions, predominantly airline commissions,
currently account for about 70% of revenues, and airline commission
cuts have taken their toll, the filing said.
Many airlines currently pay $10 for roundtrip domestic air
tickets booked over the Web and further cuts "could harm our
business," the filing said.
Additionally, "to date our results have been impacted due to
reservations placed with fraudulent credit card data."
One industry observer cautioned against taking a simplistic view
of losses when looking at Expedia, GetThere.com and other players
in on-line travel.
These are new companies in a new industry involving huge
up-front costs associated with building infrastructure, signing
customers and developing brand awareness, he noted.
"It's like a farmer planting corn with the expectation of a big
harvest later," he said.
Jim Hornthal, chairman of Preview Travel, a publicly traded
company that also has reported losses, said, "We think we're
investing in the business.
"We're buying customers. If we can't keep them, if they don't
buy a lot of travel, it's like buying a car and driving it
once."
Expedia's IPO filing revealed plans for continued heavy
spending. The company said it will launch a significant advertising
campaign next year and also will expand its national advertising
sales force.
The on-line agency also plans to expand its sales of more
"complex" travel products such as cruises and tours, and continue
to grow internationally.