In weak moments, I find myself pining for Travelocity, which at times appears to have disappeared behind the iron curtain of private equity and debt.
Since parent company Sabre, acquired by private-equity firms Texas Pacific Group and Silver Lake Partners in 2007, hasn't released any earnings statements for 2009, except to bondholders, it is tough to get a precise handle on Travelocity's performance.
But, it is clear that Travelocity has not been nimble in reacting to -- let alone spurring on -- market developments.
Travelocity was very slow in matching the hotel-booking fee cuts that Orbitz implemented earlier this year. (I did a very brief survey of hotel pricing -- four hotels in Los Angeles, New Orleans, Chicago and New York City -- in recent days and found that Travelocity's total price indeed was lower than the total price on Orbitz.com at three of the four properties. So, apparently Travelocity has matched, at least in some markets.)
Lorraine Sileo, vice president of research at PhoCusWright, notes that Travelocity did not react "aggressively in its response to competitors’ promotions and fee cuts. Even its PriceGuardianpromotion, if you recall, was only for packages and not for air or hotel-only like some of the others."
In a hotel-shopping study for June that PhoCusWright conducted with Compete, Travelocity was fourth (behind Expedia, Hotels.com and Priceline) and ahead of Hotwire in monthly unique visitors. (Notice that Expedia Inc. companies -- Expedia.com, Hotels.com and Hotwire -- had three positions in the top five.)
And, Travelocity was dead last among the top five in its hotel-conversion rate at 3%. (Priceline converted 7%, Hotwire 6%, and Expedia and Hotels.com were at 4% each.)
And, although Orbitz announced last week that it would cease charging cancellation and change fees for hotel bookings, matching earlier moves by Priceline and Expedia, Travelocity has yet to take any action in that regard.
Travelocity spokesman Joel Frey says: “We’ve been putting a lot of effort into ensuring that we offer travelers the best possible hotel deals and options on our site. And, clearly we’ll make sure we’re competitive on change fees.”
Jake Fuller, senior analyst of finance and analytics for PhoCusWright, has data that show Travelocity lagging its competitors in the second quarter. He says Travelocity’s global bookings fell 17% in the second quarter, compared with a 12% drop at Orbitz and a 5% decline at Expedia. In its own contrarian way, Priceline’s global bookings rose 13% in the period.
Fuller believes Travelocity fell behind its peers in global bookings in the third quarter, as well, although the other publicly held OTAs have yet to report their results.
"Travelocity’s parent Sabre was taken private and carries a relatively high debt load, which makes it harder to match moves by better capitalized peers," Fuller says. "High margin fee income is hard to give up when debt service is a concern. A higher debt load also makes it more difficult to match the marketing efforts of Expedia or Priceline."
There has been much speculation that a way forward for Travelocity would be a merger with one of the other OTAs.
Orbitz wouldn't appear to be a great partner in that vein because it, too, is saddled with debt.
Alas, although the Travelocity Roaming Gnome may be cavorting with chaps, be they more than "a smidge taller," around the world, I fear he is a bit handcuffed.