Expedia hopes to claim a larger share of online travel market

Tuesday, April 16, 2002 | 11:09 a.m.

Expedia Inc., now the largest of the Internet travel sales companies, collects more revenue from sales on trips to Las Vegas than any other destination.

The Bellevue, Wash., Microsoft spinoff company, now controlled by Barry Diller's USA Networks Inc., won't disclose what percentage of its $2.9 billion in sales in 2001 was directly attributable to Las Vegas.

But Suzi LeVine, director of product marketing for Expedia, confirmed Las Vegas is the company's top destination despite not selling any tickets on the top airline serving the city, Southwest Airlines.

Expedia does not have a sales agreement with Dallas-based Southwest, which has nearly 40 percent of the commercial flights to and from McCarran International Airport.

Southwest prefers to sell tickets on its Internet site and doesn't have agreements with Expedia or other Internet travel companies. Selling from southwest.com, the airline leads the airline industry in online sales with $2.1 billion in sales in 2001.

LeVine, in Las Vegas this month to promote Expedia, said she wouldn't mind having popular discounters such as Southwest and jetBlue listed on Expedia's pages. Her company has surpassed rival Travelocity.com Inc. and is staying ahead of Orbitz, a site developed by five airlines, according to company reports.

The Internet travel industry is expected to grow dramatically in the next five years. Jupiter Media Metrix, a New York Internet research company, said online travel bookings -- airline tickets, hotels, car rentals and cruises -- would climb to $64 billion by 2007, compared with $24 billion in 2001.

"While the travel industry took a strong hit in the wake of the events of Sept. 11, the Internet as a channel for booking travel is not only growing stronger, but actually becoming the method of choice for many consumers and businesses for both bookings and information," said Jared Blank, an analyst with Jupiter.

LeVine said the secret of Expedia's success is in the agreements it has with thousands of suppliers. The company has the most hotels listed of any Internet site and it also has agreements with car rental agencies and cruise companies.

Terms of those agreements vary from company to company and are not made public. So, unlike agreements airlines have had with conventional travel agents that list a set percentage and cap for ticket sales fulfilled by an agent, Expedia has more varied agreements for each company.

For example, some agreements have percentages that vary with the number of tickets sold and others have clauses defining special promotions the partners can use to enhance sales.

"We work very hard with our partners so that they are motivated to continue to compensate us for the services we supply," LeVine said.

For example, Expedia account holders produce a profile that is stored in a company database. Using that database, special offers can be targeted to consumers that fit a specific marketing profile.

Another Expedia service called "Fare Tracker" e-mails the price of airfares on certain routes on a weekly basis so that consumers can monitor how much it costs to get to their favorite destinations.

Expedia also has the technology available for customers to choose their seats on flights and their cabins on cruises. It can also monitor frequent-flier mileage programs, keep travelers informed about labor actions that could affect travel and provide maps and routes.

By offering those features to consumers, Expedia attracts and maintains travel partnerships. Those special features are why company officials aren't worried that airlines, hotels and car rental agencies will abandon them and sell exclusively from their own Internet sites.

LeVine said with 11 million people shopping for travel on the Internet -- most of them leisure travelers -- and Las Vegas being an appealing destination, it's not surprising many of Expedia's correspondences deal with Las Vegas.

Part of Expedia's Las Vegas promotional package features two wedding chapels. The company thus has the capability of offering plane tickets, lodging, a car rental -- and a ceremony at either the Candlelight Wedding Chapel or the Little Chapel of the Flowers.

Las Vegas also has been a key part of Expedia's business growth. The company acquired Las Vegas-based Travelscape.com Inc. for $95 million in stock in early 2000. The company still has a 400-employee sales office in Summerlin.

Expedia expects to get an even larger slice of the travel market as more businesses book their own itineraries and the company signs more travel partners. This month, for example, Expedia announced it had signed a new partnership agreement with Continental Airlines.

Sherman, Conn.-based PhoCusWright Inc., a travel industry research company, reported last month one in five corporate travel transactions will be booked online by 2003 because the tightened economy has forced many companies to cut travel expenses.

Expedia also is expanding internationally, developing sites in the native languages of the Netherlands, Italy, France, Germany and the United Kingdom.

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