Online travel makes for strange bedfellows at Sabre

For Sabre Inc., which runs one of the big computerized reservations systems as well as Internet-based booking agency Travelocity.com, the growth of the online travel business is putting the company in all sorts of interesting positions when it comes to sorting out its friends and its foes.

Last week, for example, Hotwire.com -- an airline-backed venture that plans to start selling discounted plane tickets via the Internet in September -- announced a deal with Sabre to provide the necessary connections between Hotwire's Web site and the airlines on which its customers will book flights. Sabre will also provide fare-searching capabilities and manage reservations for Hotwire, the two companies said.

With six of the seven largest U.S. airlines acting as silent investors in Hotwire, the San Francisco-based company is positioning itself as a challenger to Priceline.com in the online discount-fare business (see story).

But Sabre now has put set itself up as a key technology provider to both Hotwire and Priceline. Last month, Sabre said it had signed an agreement to handle some of Priceline's reservations, which previously were handled exclusively by rival computerized reservations system provider Worldspan Inc.

The deals with Hotwire and Priceline also create the likelihood that Sabre will book flight reservations in competition with its own Travelocity unit. But that's just the nature of the Internet, said Tom Klein, Sabre's president for emerging business.

"We're looking for diverse business models in the e-commerce world," Klein said. "We want to be the largest provider of business-to-business products on the travel side, and sometimes that means dealing with [multiple] competitors or competing against ourselves."

Another twist is Travelocity's vocal opposition to Orbitz, a soon-to-be-launched airline ticketing site funded by the nation's five largest airlines. Last month, Travelocity CEO Terry Jones claimed at a Senate Commerce Committee hearing that Orbitz would pose a threat to fair competition by allowing the airlines to offer exclusive fares via its Web site (see story).

Chicago-based Orbitz insists it won't offer special deals that undercut fares available through other travel agents, and spokeswoman Carol Jouzaitis said Sabre's deal with Hotwire indicates that there may be some gamesmanship involved in Travelocity's opposition to Orbitz. "It appears Sabre doesn't think airline-backed sites are that bad, particularly if the money's green," she said.

But Klein said Sabre doesn't see the same kind of threat in Hotwire that it does in Orbitz because the airlines don't have as prominent an ownership role in the former company. "The primary issue is not whether Orbitz should or should not be in business," he said. "It's that they need to make information available in a fair and equitable way."

Lorraine Sileo, an analyst at online travel research firm PhoCusWright Inc. in Sherman, Conn., said Hotwire and Orbitz have different enough business models to make broad comparisons between the two a difficult proposition.

Hotwire CEO Karl Petersen noted that his airline investors are all nonvoting partners. For his part, Petersen said he sees no conflict in having Sabre support his site along with both Priceline and Travelocity. Hotwire is focusing internally on developing front-end ticket auctioning capabilities and needed a reservations system to provide it with schedules and flight-booking capabilities, he added.

Henry Harteveldt, an analyst at Forrester Research Inc. in Cambridge, Mass., said the airlines' minority ownership of Hotwire make it substantially different from the majority ownership model adopted by Orbitz. And Hotwire needed to partner with a top-notch reservations system to guarantee that its auction prices come in below published fare rates, Harteveldt added.

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