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Market Madness
Kirby's Korner · October 15, 1999

Once again, Kirby's Korner gets to break a news story for folks interested in behind-the-scenes online travel activities.

I just learned that Antoine Toffa, who co-founded and spearheaded Trip.com, one of the two leading Web sites aimed at unmanaged business travelers, has resigned as president and chief executive officer. Speculation is that the company's board of directors wants someone at the top who can take the company public, and Toffa apparently didn't fit the bill.

During the past year, we've seen changes at the top of many online travel companies, both privately owned and public. Next week, we'll look at why.

But this week, as I indicated last week, we'll examine two companies that just announced they are going public, and what that means for travelers.

GetThere.com and Microsoft spinoff Expedia both provide online travel agency services and back-end systems between Web sites and travel suppliers. As you might expect whenever Microsoft is involved, however, they are different companies in most other respects.

Many in the travel industry expect Expedia to bring in much more money through its initial public offering than GetThere does, based solely on the Microsoft connection, even though, I would argue, GetThere has a business model that has proven in the past couple months to be more sound.

The question is not why GetThere and Expedia want to sell shares to the public. The question is: Why now?

My newsletter started tracking publicly traded stocks in the online travel field during the week of July 4. We started arbitrarily with the index "normalized" to 100. Since then, the value of the stocks of the five companies we track has dropped one third, finishing last week at 65.60.

This is not a sophisticated index; it follows the same model as the Dow Jones Industrial Average. The advantage of the index is that it provides a targeted look at public companies involved in the online travel field. And clearly, stock in the field has been hurt more in the past three months than has stock in the high-tech industry in general.

So why go public at the time of a "down" market?

One observer, noting the losses Microsoft said it has incurred on Expedia since it started the project, said, "When you've lost $87 million, maybe the chance to get back even two-thirds of value looks good."

Former GetThere employees tell me that company likely would have gone public last fall if the stock market hadn't dropped precipitously. Since then, the company has had to rearrange itself following management changes. Apparently, it only now has seen its way clear to an initial public offering.

But what, if anything, does this stock market activity have to do with travelers, those of us who look to these companies as sources of information and reservations, not as part of a 401K plan?

For Expedia, virtually nothing in the short run. Microsoft is retaining almost all controlling stock for at least a year, and speculation among Wall Street analysts is that it will keep at least 80 percent for the foreseeable future. Freed of a total dependence on the software giant, however, we'll likely see Expedia cut more deals, attempting to become the travel partner with other online entities in the same way Sabre's Travelocity.com is with Yahoo! and Preview Travel is with America Online and Excite@Home's Excite portal site. In other words, we'll see more of Expedia in the consumer market.

GetThere is a different story. Even before it said it wanted to issue stock to the public, it was withdrawing from the consumer market to concentrate on building travel booking systems for corporations, for airlines (such as United Air Lines), and for consumer Web sites; it has always handled the backend system for Trip.com, for example. As part of an investment deal, American Express is taking over GetThere's Internet Travel Network Web site. So we may end up using GetThere's technology more but not realizing it.

The problem GetThere will face is one all public companies face in the United States -- shareholder impatience. The company plans to reinvest profits to build its technology and reach. Will shareholders sit still for that, especially if the record-length upturn in the stock market sours?

I hope so. I like what the company is trying to accomplish. But, if not, consumers will be left with fewer choices. And any consolidation of choices spells trouble for those of us who want to get from here to there.

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