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Orbitz Reaches New Heights

Better technology results in a competitive advantage

by Jen Muehlbauer

Most companies take precautions to avoid reinventing the wheel. But what if the wheel is in desperate need of reinvention? That was the problem that Chicago-based Orbitz faced as it prepared to enter the online travel industry in spring 2000. The travel-services provider had the option of either basing its system on a legacy application, or building an entirely new infrastructure. It chose the latter, and in less than six months became the third-largest and fastest-growing travel site in the U.S.

Orbitz CTO Alex Zoghlin describes the company's launch as a rebellion against Travelocity and Expedia, services that dominated the online travel market in 1999 and 2000. At the time of Orbitz's founding, Microsoft owned 70 percent of Expedia; and Sabre, a leading travel technology company, currently owns 70 percent of Travelocity. The two industry leaders had a five-year head start that included exclusive advertising and promotional deals with Web portals. (Travelocity powers travel sales on Yahoo and AOL, while Expedia sells tickets on Microsoft's MSN.)

Viewing Orbitz as a disadvantaged competitor may require you to suspend your disbelief however, because the company's founders are the five biggest United States airlines companies: American, Continental, Delta, Northwest, and United. This backing afforded Orbitz the money and time that it needed to challenge the other established services. Orbitz was prepared to compete on other levels, too. Says Zoghlin, "Taking on two giant corporations in a market they've dominated for five years—what could be more fun than that?" His theory was that if Orbitz wasn't completely different and better than its competitors from the start, it might as well not bother.

Zoghlin and his co-workers asked themselves how Orbitz could differentiate itself. The answer was with technology. The group figured that the average online travel customer in 2000 visited more than three Web sites before buying a ticket. No one site displayed all available flights, and consumers wondered whether there might be a different, better deal elsewhere. "I lovingly call this 'commerce interruptus,'" says Zoghlin. "You search, but you pull out at the last second."

This colorful metaphor set the stage for Orbitz's first and perhaps most difficult technical problem: providing more search results than competitors. And the company appears to have solved it. When I recently searched Orbitz for a round trip flight from New York to Los Angeles on an arbitrary date with no other restrictions, the results were 284 possible flights available for purchase directly from the site. Plus, there were hundreds more flights that required a phone call to the airlines for purchase. Travelocity, on the other hand, offered only eight available flights for the same journey. Expedia had just 31. (See the screenshot.)

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