Online Travel: Out With Old, In With Next Web

Cendant’s $4.3 billion sale of its Travelport division to the Blackstone Group announced last week, could be yet another sign that the traditional online travel agencies aren’t the Internet survivors they once were. While online travel bookings are still growing– eMarketer says the U.S. will account for $78 billion in online travel sales this year, up 20% from last year– the online travel agencies themselves are seeing slowed growth, largely because of a new found aggressiveness by both airlines and hotels that are getting web-savvy and the next generation of online travel aggregators.

Cendant’s Travelport division, which owns Orbitz and Cheaptickets saw lowered earnings last year, and Expedia, the number one site in the U.S., saw its stock drop dramatically, after the company slowed its growth and missed its earnings predictions. Though the sites are still growing, albeit slower than investors would like. A recent study from PhoCusWright says the top four online travel agencies, Expedia, Travelocity, Travelport and Priceline grew 29% in the first quarter of this year compared to last year. Decent, but that lagged the e-Travel industry’s total growth.

online travel sites break down
The main cuplrit is airlines like Southwest that have realized they don’t need to give up part of their revenues to bring in web customers, which are coming in on their own. Southwest Airlines says 65 percent of revenues from bookings were made from online sales last year, and was the number 5 most visited site in April 2006, according to comScore Media Matrix.

There is looming competition from online travel startups that are creating meta-search sites that find fares more quickly and easily than there older cousins, like Sidestep, Mobissimo, and Kayak. Farecast’s site predicts how airline tickets will fluctuate, helping the buyer purchase when the ticket is cheapest. The site went out of beta last week, though for now only operates for the Boston and Seattle areas. Waiting in the wings are other upstarts who are looking to combine social networking, blogging and community-based travel. None of them have any traction, but with $78 billion in spending at stake, there is room to grow!
In the dotcom bust, online travel agenices were among the few web companies that made it through the bad times and managed to show decent growth. While the companies are still growing, smart budget airlines and eager startups are starting to give them a real run for their money.

Bottomline: The old school online travel sites could become the likely buyers of newly funded start-ups, and their fancy services. With no-IPOs in sight, this is as good an outcome for a venture backed start-up?