UPDATED – March 12, 2014
Well, in the world of travel distribution on the OTA side of the equation, if Travelocity was the “come home to papa” story, then Orbitz is the “child running as far away from the parents as possible” story. Well, at least one of its parents…. more on that later.
Orbitz was founded by four airlines (Continental, United, Delta and Northwest) and was later joined by American Airlines.
The airlines invested $145 million to try to reduce their distribution costs through other channels by directly connecting to the founding partner airlines and bypassing the GDS. All other availability for air, car, hotel, cruise, etc. came from a long term deal that Orbitz struck with Worldspan, who was then, still owned by Delta, Northwest and TWA, (which had just merged with American). This kept things “in the family”. And to make things really cozy, the airlines hired former Sabre CEO, Jeff Katz.
Well, one part of that strategy worked. By the time the 2003 Travel Weekly Power List was published, Orbitz had become the 9th largest travel agency in the US. But it had not yet succeeded in displacing either Travelocity or Expedia in the top OTA spot. It is well known that the code name for Orbitz before launch was T2, short for Travelocity Terminator.
Instead of staying the course as sole owners of Orbitz, the airlines decided to file an IPO in December of 2003, raising $316.7 million, giving them a much needed cash infusion. The airline owners did however retain 90% of the voting control and 70% of the ownership.
In September of 2004, it was time to cash out. The company was sold to Cendant in September of 2004 for $1.25 billion. Now that is what I call a good return on investment.
Cendant rolled Orbitz into its Travel group, which was later renamed Travelport, after one of Cendant’s acquisitions in the corporate travel arena. The old Travelport group in Seattle then merged their business in with Orbitz for Business, its former rival. Mitch Truwit took the helm in January of 2005.
In June of 2006, Blackstone acquired Travelport for $4.3 billion. Orbitz was included in the sale, but continued to operate as a separate business unit under the leadership of Steve Barnhart, who in 2009 left with a $2 million severance package after taking the company public in 2007, with a lackluster IPO that raised just $150 million. Travelport continues to own approximately 45% of the company’s stock.
Former Expedia executive, Barney Harford was hired in 2009 to replace Barnhart. He is still running Orbitz, which has a market cap of $977.52 million in March 2014, up from $233.83 million in June 2011.
Still, the shares are still well below the 2004 acquisition price of $1.25 billion, but the trend line is distinctly positive. over the long haul, with a strong recovery from the economic crisis beginning in early 2013.
Orbitz looks the closest of the OTAs to its original site, as they launched a full 5 years after Expedia and Travelocity and were able to learn and take advantage of the maturity of the Internet as a channel for selling travel.
for bank loyalty programs and online commerce sites. The operations of
the Travelocity Partner Network will be integrated into the Orbitz
Partner Network.
“The acquisition of Travelocity Partner Network
assets will accelerate our growth in the private label space and expand
the range of customized solutions we are able to offer to customers, in
particular in the loyalty area,” said Ronnie Gurion,
president of Orbitz Partner Network. “We look forward to welcoming the
customers and employees of the Travelocity Partner Network to Orbitz Worldwide.”
entered into a subscriber services agreement with Travelport that
included certain exclusivity provisions for its global distribution
services. From Jan. 1, 2015, Orbitz Worldwide will no longer be subject to these exclusivity provisions.
Stay tuned. Next in the Travel Industry Pedigree Series turns to Europe and OPODO, the European cousin of Orbitz.
Since this blog was published, Orbitz has achieved a $1b market cap and their stock price has had an impressive ride, with growth far outpacing its competitors.