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What about Orbitz?

by Edward Hasbrouck, author of "The Practical Nomad"

The newest major online travel agency, airline-owned Orbitz.com, claims to offer access to "all fares". But while true in the most literal sense, this claim -- and Orbitz marketing based on it -- is likely to mislead consumers unfamiliar with the technical distinction between "fares" and "prices", to their considerable detriment.

As I discuss in my FAQ on airfares and in my Practical Nomad book series, "fares" are ticket prices published and offered directly by airlines. The regulatory system governing airline ticket sales permits travel agents -- but not the airlines themselves -- to sell tickets, quite openly, for less than the prices in the tariffs published by the airlines. These "off-tariff" or "consolidator" prices are the major reason to buy tickets from a travel agent, rather than directly from an airline. It's rare for the lowest available price to be a published fare, or available directly from any airline.

When I asked Orbitz CEO Jeffrey Katz how offering only published fares is consistent with a promise to show "all" choices, he claimed that Orbitz would offer access to 97% of the price possibilities. That's completely incredible to anyone familiar with the decentralized way consolidator prices are set. Each airline has many consolidators, each of which sets its own selling prices. Published fares are actually a small minority of the universe of available air ticket prices.

Pressed on this point, spokesperson Carol Jouzaitis shifted to a claim that Orbitz will offer access to all "publicly-available" prices. But that's bunkum. Consolidator prices are publicly available from tens of thousands of travel agencies, including online agencies like Onetravel.com that are among Orbitz' major potential competitors. On some international routes, most tickets are sold for less than the published fares.

Orbitz CEO Jeffrey Katz, marketing director Roland Jacobs, and principal spokesperson Carol Jouzaitis have all told me categorically that Orbitz does not offer consolidator prices. Jacobs told me he had never been at a meeting where the possibility of any consolidator prices had even been mentioned.

By limiting the prices it offers to published fares, Orbitz is making itself the airline ticket equivalent of a price-comparison site that only compares manufacturers' suggested list prices -- and forgoing most of the potential added value of a travel agency over the airlines. If you want discounts, you have to go to a discounter. Not to Orbitz, which has committed itself to selling only at list prices dictated by its suppliers.

When my latest book, The Practical Nomad Guide to the Online Travel Marketplace (published in March 2001) went to press, both Travelocity.com and Expedia.com offered only published fares, so it appeared that Orbitz would be no worse than its largest competitors. Since then, however, both Travelocity.com and Expedia.com have added some consolidator prices (although only a few, and nowhere near as many as online and offline agencies that emphasize primarily consolidator prices). This change by the largest competitors means that Orbitz has launched with access to notably fewer prices than its largest competitors. In light of this, Orbitz claims to comprehensive airline ticket price information are at best misleading, at worst fraudulent.

[Published in edited form in Interactive Week magazine, 11 June 2001.]

[Disclosure: Since 1998, I have been on the staff at Airtreks.com, which specializes exclusively in around-the-world and other multi-stop international tickets. Orbitz.com and the other Internet travel agencies discussed in this article all specialize in simpler one-way and round-trip tickets, and primarily in domestic tickets for travel within the USA.]


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