Fasten your seat belts -- it's going to get rough

Straight out of Orlando, we bring you eTravelWorld confidential -- the unexpurgated tale of an industry trying to figure out exactly how technology will make everyone rich.

Speaking of money, Orbitz CEO Jeffrey Katz created the biggest buzz in his first public appearance by referring to his company as "a small Internet start-up." True enough, Orbitz does have only 50 employees to its name, but its airline owners are on the hook for a $300 million down payment to see if the company can engineer a significantly better travel-booking engine than anything that has come before it. Many audience members took umbrage at Katz's David-and-Goliath comparison. "It's kind of hard to trust him on anything else after he says that," one observer remarked.

Yet Katz can be somewhat forgiven because his company is challenging a decades-old travel technology system. Airlines and computer reservations systems run on Transaction Processing Facility mainframes that can bang out transactions like nobody's business. Orbitz is hoping its PC farm model will be the equivalent of cracking a previously unsolved differential equation in a world that has put a lot of money on the people who can figure out 2+2 the most times in a given day. Jeremy Wertheimer, founder of Cambridge, Mass.-based ITA Software's fare search engine, which holds the key to Orbitz's ability to search more fares and find lower prices than the establish travel technology players, faced a fair amount of skepticism during his presentation at the conference. It was clear that a belief in a better search engine is a religion that has yet to catch on with the masses.

The gap was particularly noticeable among the marketing folks and the techies. Some of the self-professed geeks in the trade show area admitted to secretly rooting for Orbitz. Why? "It's kind of like Revenge of the Nerds," one tech-side guy said. "The beautiful people are terrified some guy with horn-rimmed glasses is going to steal the homecoming queen."

Richard Barton, CEO of Redmond, Wash.-based Expedia Inc., downplayed Orbitz's potential impact, intimating that its new technology is little more than the flavor of the week.

"Right now, there's infinite demand for that product, but when reality sets in, I think they'll find something quite different. . . . Everything looks good on paper," he said.

And you might want to listen to Barton, because the Big Five airlines backing Orbitz have decided he's one of their main competitors. Despite the fact that Expedia and its main rival, Fort Worth, Texas-based Inc., probably won't see a profit until 2002 at the earliest, Orbitz is spending three times more than its takes to get elected president, just for a shot at competing with those two online travel agencies. Katz minced no words when asked about his airline owners and the potential for them to monkey around with the distribution market.

"Not one of you would invest in this business unless the airlines would also invest," he told the crowd, and then everyone got very quiet quiet for a few seconds.

The Chutzpah Award for the conference goes to Daniel Ko, CEO of, a reservations system that launched last week. He walked up to a microphone during Barton's session, introduced himself and then riffed on what his company is all about. When he finally got to his question, it was basically a version of, "Isn't what Qixo does awfully important, and couldn't a company like yours benefit from partnering with someone who could do that for you?" Barton took the question in stride, saying "I used to do the same thing myself." He then reminisced about the days of trying to get people to remember the word Expedia and warned that Ko faces an uphill battle putting the word Qixo (pronounced "kicks-o") on everyone's lips.

One of the other hot topics at the conference was the impending Priceline/Hotwire war in the airline seat auction market. Norwalk, Conn.-based Inc. has William Shatner and his beatnik-chic commercials, but Hotwire has six of the nation's seven largest airlines backing it. Missing from the Hotwire equation is Atlanta-based Delta Air Lines Inc., the earliest backer of and initial equity investor in Priceline. Delta got rich in the deal, and supposedly the other airlines are still fuming. Rumor has it that Delta's competitors will stop putting their inventory on Priceline once Hotwire ramps up. At one panel discussion, executives from United Air Lines Inc., American Airlines Inc., Northwest Airlines Inc. and Continental Airlines Inc. insisted that nothing is written in stone and that they're interested in selling over whichever channel helps fill up the planes.

This all begs an important question: Is Delta being frozen out from Hotwire? Technically, the airlines are silent, nonvoting equity holders in the San Francisco-based online auctioneer. Yet, as one travel start-up executive put it, people with money rarely believe their cash should be seen and not heard.

"I get 15 calls a day from silent, nonvoting partners," she said.

And those of you who have cash might want to rethink investing your money in any wireless outfits at this time. In the lobby of the Hyatt Grand Cypress, where the conference was held, I happened to walk by an airline executive who was talking on a cell phone with one of his subordinates back home. For those of you who don't know, this summer marked the dawn of a few-dozen "industry-leading, best-in-breed" wireless flight-tracking and -booking tools from the airlines and reservations giants. This executive happened to hail from one of the three airlines who long ago founded the reservations networks, and rather than use that oh-so-simple wireless tool, he had his folks at home log on to the reservations system to alter his flight plans. Not exactly a vote of confidence in the house technology.

Of course, the suspicion about wireless travel applications is that the industry is really using this first round as one big beta test. Developers at the conference were quick to point out you can't sell your average American cell phone at a rummage sale in Norway. Supposedly, everyone's waiting for enhanced screens and international wireless standards to take hold in the states. Then perhaps airline executives will feel a little more comfortable logging on to change an itinerary, instead of calling the home office.

The difficulty of getting anything done at an airline arose in one panel. American Airlines managing director for product management Scott Hyden said his development teams could engineer all sorts of wonderful, passenger-friendly conveniences but that he has to move 100,000 employees every time he makes a change.

"They're like drinking water out of a fire hose with all the new procedures. . . . It's got to be measured so they can keep up with us," he said.

And finally, Cambridge, Mass.-based Forrester Research Inc. senior analyst Henry Harteveldt delivered the ultimate good news/bad news message to travel companies looking to turn a profit online. He said that roughly one-third of the population would shift from being browsers to buyers in the coming two years. Those new buyers could potentially put Web players in the black. The problem is that the next wave of Internet shoppers have roughly half the amount of money to spend each year on travel, which means that if prices don't come down, they're only taking day trips.

One executive wondered which stone his company would squeeze for that blood.

"I'm thinking the next conference I attend is going to be held at a Waffle House," he said.

Copyright © 2000 IDG Communications, Inc.

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