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Fortnightly No 2000/4 - Paris, Wednesday, August 2, 2000

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  Orbitz.com: no future?  

Does anyone still really think that Orbitz.com is going to pose a real threat to Travelocity and Expedia?

The site was announced over nine months ago now with lots of hype about the major innovations in online travel sales it was going to introduce; it was about to take us into the scientific era of online e-tourism.

However, these announcements have turned out to be somewhat premature, to say the least.

Web time, you said?

First of all, one may seriously wonder if the founders of Orbitz really have any idea of what web time is.

The first and only tangible thing T2 has managed to produce so far - seven and a half months after the project was announced - is a name for the site! Although I will refrain from making any comments about the choice of the name Orbitz, it seems to me that taking over seven months just to come up with a name is symptomatic of an economy which is completely out of sync with the Internet - or else it is simply that getting several partners to make decisions is not as easy as the project's founders thought it would be.


It has to be said that with 30 participants - all competitors, what's more - finding a point of common agreement must be close to impossible.

Anyway, the fact is that the site's official launch date still hasn't been announced yet.

In my opinion, all this adds up to the first big mistake made by the Orbitz project: lots of hype but nothing tangible to follow.

Orbitz is not the only project in this situation either. A lot of other companies still thinking in traditional offline terms are tending to announce online projects much too far in advance, with the result being that they are systematically launched late, or sometimes not even at all.

This may satisfy the directors and sometimes the stock exchange, but it is certainly not the right way to reassure future visitors, who are going to get fed up with all these empty promises and will be much more difficult to turn into loyal customers later on.

What about the team?

One of the biggest hurdles new e-commerce sites face is being able to attract the right people with the skills needed to make the project succeed.

However, to lure talented Internet people specialised in eTravel, away from other companies, money is not enough. In addition, building a winning web team often has a lot to do with how well the chemistry between the members of the team works.

And, if an e-tourism site doesn't start off with a team of top-quality people ready to do their utmost to make the project a success, there is little chance that it will succeed.

The web is no longer in its infancy and e-tourism is now in the hands of experienced professionals well-versed in e-marketing techniques, and is represented by international companies.

It is difficult not find Jeff Katz's statements to the US Senate Commerce Committee on 20 July a bit troubling. Katz indicated that he has now got a team of 15 working towards the launch of Orbitz. Two months ago there were only 8 people on the team!

The Travelocity/Sabre group has 11,000 employees today. How can anyone seriously imagine that Orbitz - a small company with a staff of 15 - is going to be able to compete seriously and rapidly with top notch players such Travelocity or Expedia, or eBookers in Europe?

In fact, the project was set up in a back-to-front way. Instead of starting by building a proper team and finding the right person to manage it, Orbitz.com's founders handed the project, lock, stock and barrel, over to a consulting firm, the Boston Consulting Group.

Calling in consultants to help define an online strategy is, of course, an excellent idea. But expecting them to take over the role of company director in a sector as specific as e-travel is not realistic.

Being a consultant and an expert in e-tourism myself, I can confidently say that the added value I bring will never be to manage my clients' companies directly. A consultant's added value lies, above all, in his ability to analyze, and forecast, not to actually run a company.

Handing the project over to a group of consultants, however respected they may be, and waiting so long to recruit the Orbitz team, is the second big mistake made in setting up the project.

What online experience has Orbitz got?

I consider that online experience, acquired by e-tourism sites over a period of several years, is an asset which cannot be reproduced by a simple "copy, paste" operation, as Orbitz seem to have imagined.

The scalability constraints that large e-tourism sites - who now get millions of visitors per month - have had to deal with, are an example of just how important this online experience is.

Orbitz does not have this experience, and yet it boasts that its site will be a showcase for technological innovation.

Orbitz says it going to change users' ways of travelling. Although we cannot, for the moment, judge how innovative its future e-services will actually be, we can quite legitimately wonder whether it is not going use its visitors to beta-test the site?

New e-services, a new site, new customers: a lot of time will be required to set all this up and sort out the teething troubles. Given that the race to capture e-travel customers actually began over three years ago, won't the time that Orbitz will inevitably need to get rid of the bugs inherent in all new sites cost it dearly? Will it ever, in fact, be able to catch up with the older, more experienced sites?

Under-estimating this point is, to my mind, Orbtiz.com's third big mistake.

How to attract customers? Partnerships and portals.

Orbtitz.com's two direct competitors - Travelocity and Expedia - have already captured 70% of the market, and have signed exclusive partnerships with the biggest portals representing 90% of the worldwide flow of users. How, then, can Orbitz hope to gain a foothold with a site which doesn't even exist yet?

It is true that its founders - five of the largest American airline companies (United, American, Delta, Continental and Northwest) - have announced that they will send their customers to Orbitz.

Personally, I feel somewhat doubtful about this naively optimistic statement.

The e-travel battle is not just being fought between the airline companies on one side and the mega e-tourism portals on the other, it is also being fought amongst the airline companies themselves and it's difficult to see them sending their customers over to Orbitz with any great enthusiasm.

Thinking that they will easily be able to catch up commercially is the fourth big mistake Orbitz has made.

Orbitz.com, a new UN?

It has taken 7 months to choose a name, over 9 months to find a CEO, 9 months to set up a team of 15 people and … and who knows how much longer it will take to launch "the" website which will revolutionize online travel booking.

The founders of Orbitz are not newcomers to the web, though; some of their sites have already sold more than a million airline tickets online. Apparently the money for launching the project is not lacking either. So why, after all this time, haven't we seen anything more concrete yet?

My feeling is that, unfortunately, Orbitz has been affected by the new web syndrome: rival players forming alliances together in order to face an outside threat.

Every month new online groups of major players in different economic sectors in both the BtoC and BtoB markets are being announced.

These alliances between competitors are motivated by two totally different reasons. For some it is quite simply a question of setting up a purchasing group - a marketplace, in other words. But some of the other players, who feel threatened, think that by standing together they will have a better chance against the attacks of their web aggressors.

I would like to make a comparison here with the United Nations. Its function has always been criticised and considered by many to be inefficient. The only cases where the beginnings of a union are apparent are when one country is being aggressed by another to such an extent that the UN is finally pushed into taking a clear standpoint … and we all know what the results of this are.

Marketplaces integrating BtoB purchasing are economically justified and it's possible to imagine that any conflicts between the participants will be ironed out thanks to the economies of scale and operating costs these kinds of purchasing partnerships give rise to.

On the other hand, I feel much more doubtful about the chances of success of partnerships formed solely to stand up to a web offensive. I don't think these kinds of alliances are strong enough to overcome the many problems they engender.

This comment, valid for all group projects of this kind on the web, also applies to the Orbitz project.

In addition, Orbitz is about to face another problematic issue - there are simply too many partners.

Not only are there about thirty airline companies involved in the project today, but when Katz testified at the US Senate, he said that no single member of the project holds more than 30% of shares today, and that this figure is going to go down to 15% at the most.

It is never very easy to make a success of a project where there are two partners whose interests are not necessarily convergent. When three partners are involved, an alliance of two against one is almost always the outcome. With more than thirty partners, the project is likely to become totally impossible to govern.

We shouldn't forget, either, that the American authorities are paying close attention to Orbitz as they are concerned that the alliance of the airline companies may result in a monopoly. This doesn't make things any the easier for the airlines, who do not dare take a high profile position in the project now.

The fact that the partners find it difficult to speak with one voice and take decisions without any hidden aggressiveness will no doubt be the fifth big difficulty which Orbitz will have to face.

Hotwire.com: Orbitz.com's main enemy

Orbitz.com hasn't even been launched yet and the same airlines have already announced that they are creating Hotwire.com, a site specialized in low price flights and e-travel bargains.

Of course, Hotwire is not based on exactly the same business model as Orbitz, but it is still in direct competition with one of the seven promises made by the Orbitz site - probably the most important one, in fact.

Orbitz has positioned itself from the outset in this niche by promising to offer the best deals available, mainly by selling off unsold tickets at the last minute at low prices.

So what is the difference between this and the strategy announced by Hotwire.com?

Hotwire.com is therefore the sixth difficulty with which Orbitz.com will be faced tomorrow.

Although I don't want to be a prophet of doom, I feel that these six problems will make it practically impossible for the Orbitz site to succeed.

Added to which, while Orbitz is still getting its act together, no one expects Travelocity and Expedia to sit quietly on the sidelines twiddling their thumbs.

So for Orbitz.com, no future? Everything seems to be clear but... with so many partners and "bankers" would these obstacles be real? I guess not!


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