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(c) Elliott Publishing.

Marriage Made in Heaven?
Kirby's Korner · June 25, 1999

I said last column I would write this time about management changes in the online travel field, and how they can affect us all. Since then, however, we have seen the biggest change in online travel in more than two years.

The announcement that Travelocity.com is buying Preview Travel -- or, as the companies put it, that the two are merging -- deserves an examination. And this will lead nicely into a discussion next week of management changes, unless another unexpected event occurs.

First, however, I should clarify the comments I made about Antoine Toffa leaving Trip.com. Toffa told me after the column was posted that he was not forced out of the top job there but, indeed, left voluntarily. He acknowledged a conflict with the board of directors, saying that he wanted to move the company in certain directions faster than the board did.

The Travelocity-Preview Travel deal -- combining two of the three largest online agencies -- will have more effect on online travel buyers than anything the industry has seen so far. When the merger, expected to be completed in the first quarter of 2000, goes through, it will instantly make Travelocity the most recognizable online travel brand. The Preview Travel name will disappear, and the new Travelocity will have sales deals on Yahoo! Travel and the Go Network, where Travelocity runs the reservations system currently, and on the Excite and Lycos portals, where Preview Travel operates.

More importantly, Travelocity will be the booking engine on the America Online proprietary service and all America Online properties, including AOL.com, CompuServe, the Netscape portal, and Digital City. (Preview Travel currently has the stronger deals on these outlets, although Travelocity is on Netscape and CompuServe.) The AOL proprietary service alone has 18 million subscribers, making it nine times larger than its nearest fee-for-service online rival.

Travelocity and Preview Travel together expect to sell more than $1 billion in travel this year. According to Don Carty, acting head of Travelocity owner Sabre and chairman of Sabre's parent company, AMR Corp. (which also owns American Airlines), the new company will have more than 50 percent more members than its nearest competitor, Microsoft's Expedia.com.

Two more telling points: Carty says the new Travelocity will be the third-largest e-commerce Web site overall -- after Amazon.com and eBay -- and among the 10 largest travel agencies in the United States.

Readers of this column know I'm skeptical of huge operations in travel and favor competition. To give size its due, however, a top-10 agency should have some leverage in dealing with airlines and other suppliers, helping to assure a fair price for travel sold online and, perhaps, helping to move the airlines' online travel commission structure back to a realistic scheme.

The question is whether any resulting savings will be passed on to consumers. This early in the online travel sales game, the major players are hemorrhaging money, so my guess is Travelocity will see the savings as a way to shore up the bottom line. And that may not be a bad things for those of us who want to buy tickets from someone other than an airline five years down the road.

The merger brings complementary strengths together. Travelocity has a name I've always liked (combining, in a clever way, "travel," "velocity," and "city"), and the company has a good technological base. Preview Travel is one of the largest outlets online for vacation packages and has, bar none, the widest and strongest network of retail outlets in cyberspace today.

Just before the Travelocity-Preview Travel deal was announced, Roger Ballou, a travel industry veteran and current chairman of the Global Vacation Group told a travel technology conference that in the online world large companies and small companies would thrive. Mid-size firms are the ones in trouble, he said. Some of the smaller online agencies are profitable now and have been for some time; this recently announced merger supports the other branch of Ballou's first proposition.

We'll have to see what happens to companies like Trip.com to know how the middle tier will fare.

David Kirby is the editor of the Interactive Travel Report. His column appears on Friday. You can reach him at dbkirby@pressroom.com.