Financial crisis hits online travel companies
Ferry Online Travel News 13/11/2008
Current financial conditions have deteriorated to the point of travelers shunning even cheap trips offered online.
Often when travelers feel a need to economise they go online to find cheaper deals offered on travel operator websites. The economic gloom has seen a decline in these sales as well, making online companies less than optimistic about what’s in store.
There are three main publicly-traded online travel agencies (OTAs) – Expedia, Orbitz and Priceline.com – and the results posted for the third quarter were mixed. All three did indicate, however, said they were cautious about expectations over the coming months due to the worst global economic conditions seen in 80 years.
"That's not a tide that we can swim against at the rate we did in Q3," the chief executive of Orbitz, Steve Barnhart, told Reuters during an interview.
Shares in Expedia and Priceline fell by more than 50 percent during the third quarter, and Orbitz shares dropped by 40 percent.
Barnhart noted that OTAs are often able to stimulate travel demand even when conditions are slow. "We are somewhat counter-cyclical," he said. "We can be a force in stimulating travel demand."
Orbitz reported a third-quarter net loss, and has indicated that it will cut 10 per cent of its workforce, as economic prospects for the fourth quarter make cost-cutting necessary.
Expedia, the largest of the three, reported that its net profits also declined during the quarter, and commented that conditions have led to "broad pullback" by the traveling public in their spending over the September-October period.
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