Travelocity and Expedia continue to slug it out in online travel

Expedia Inc., the online travel spin-off of Microsoft Corp., this week reported $450 million in gross bookings for the second quarter. That was a record for Expedia, but it still trailed behind the $610 million in second-quarter bookings that archrival Inc. announced two weeks ago.

Both companies continue to lose money: Expedia reported a net loss of $42.4 million on revenue of $69.9 million for the second quarter, while Travelocity said it lost $13.5 million on revenue of $46.8 million. But both Expedia and Travelocity already have managed to eclipse the total level of bookings that they reported for all of last year.

Despite the continued losses, Expedia's and Travelocity's performances have exceeded levels predicted at the beginning of the year, said Lorraine Sileo, an analyst at online travel research firm PhoCusWright Inc. in Sherman, Conn. Aside from Inc.'s discount-ticket selling service, no other online travel ventures are "even close" to the amount of business being done by Expedia and Travelocity, she added.

Expedia has a higher viewership on its Web site than Fort Worth, Texas-based Travelocity does, according to Sileo. That should "pay dividends down the road" for Expedia, she said, but the key for the company "will be converting more lookers into buyers."

Expedia and Travelocity face new competition from Orbitz, an upcoming online ticketing venture that's being funded by the nation's five largest airlines. Orbitz plans to launch its Web site later this year, although it's currently being investigated for potential antitrust issues by two federal agencies and the Senate Commerce Committee (see story).

But Henry Harteveldt, an analyst at Forrester Research Inc. in Cambridge, Mass., said Expedia and Travelocity are gaining enough dominance in the online travel business that it will become more difficult for new companies to challenge them. The two online travel giants also will likely begin to absorb more of their existing competitors, he predicted.

For now, Harteveldt added, Expedia and Travelocity are going toe-to-toe in a battle to add more travel-booking capabilities to their Web sites. "It's almost like which one of the twins is trying to prove he's tallest," he said.

For example, Expedia this week entered the wireless world by making flight status, driving directions and travel itineraries available to users of its Web site via personal digital assistants and Internet-enabled phones. During the second quarter, Expedia diversified its offerings by adding lodging packages and a new fare-searching engine -- capabilities that consumers are still getting used to, Harteveldt said.

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