Orbitz Takes a Wrong Turn

Tom Harvey discovered by accident that the round-trip ticket to New York he had purchased on Orbitz, the online travel site, was really a one-way ticket. He called Orbitz co-owner American Airlines to confirm his vegetarian meal for the April flight, when the agent asked if he realized that he was not returning to San Jose.

Puzzled, Harvey says he called Orbitz customer service, which told him that while Orbitz could issue him a new ticket, he would have to pay double the fare because American had raised prices in the two days since his purchase.

So Harvey went back to American, pleading membership in AAdvantage, American's rewards program for frequent fliers. It took some convincing, Harvey says, but the agent gave him the benefit of the doubt. He overrode American's new fare and gave Harvey, a marketing director for a California public relations firm, his round-trip ticket at the original price.

American spokeswoman Erika von Hacht won't comment, other than to say that the airline is pleased with its relationship with Orbitz. For its part, Orbitz finds no mention of Harvey's name in its customer service logs and no record of the disputed flight. Employees did pull up a December flight from San Jose to Washington when supplied with Harvey's e-mail address, which is the way Orbitz identifies customers. When Harvey uses that same e-mail address to log into Orbitz's Web site himself, he finds a flight that he took in December—to Baltimore, not Washington.

Such confusion—which also includes errant ticket-price and itinerary information—isn't unusual, according to those who've tried travel sites. And neither is the result: Harvey has stopped using Orbitz and its competitors for business travel. He thinks the risk of a mistake is too high.

Orbitz is a company whose customers have a lot of alternatives—and little tolerance for imperfect service. Neither Orbitz nor its two main competitors (Expedia and Travelocity) have been able to differentiate themselves among consumers—six out of 10 Americans who have used online travel sites have no brand preference, according to Forrester Research.

But the more insidious problem—when you talk to someone like Harvey—may be the number of consumers who've had such bad experiences with online travel services that they've stopped buying through them altogether, and now use them only for research purposes. Since Orbitz's business model is to take a cut of each transaction, such a trend could potentially prove fatal.

Orbitz's future is already in question. A planned sale of stock earlier this year was delayed, and it isn't clear whether Orbitz's cash-hungry owners—American, United Air Lines, Delta Airlines, Continental Airlines and Northwest Airlines—will want to continue funding the fledgling service if the public markets remain depressed. (Travelocity and Expedia are already public.)

Orbitz Tech Specs

Orbitz was founded at the very height of the Internet stock-market boom, and its bet is very much an Internet-era bet: that it can use technology to provide the best, most automated and lowest-cost customer service in the travel industry. Its powerful search engine, which is built 80% in Java and runs across 400 Linux x86 servers, can return an average of 200 flight choices on 15 carriers in a single search of a reservation system. Its layered architecture allows its servers to be quickly swapped in and out.

Software automatically checks availability three times during the ticketing process—during searching, during booking, and just before the reservation is made. Customers who have successfully purchased tickets are routed through Orbitz's customer-care center, which monitors weather and news that affect travelers. Orbitz sends out around 70,000 alerts per day to travelers or their designated recipients, says service-center director Scott Ackerman. In Orbitz's latest survey, 96% of travelers said they received information—whether by e-mail, cell phone, pager, personal digital assistant, or voice mailbox—before they began their trip.

"The airlines can do some of this, but I don't see them watching what's going on in the world," says Ackerman, who spent 20 years working in the airline industry before joining Orbitz. "I think the airlines want us to do that—that's why they entered this partnership."

Ackerman supervises 13 of Orbitz's 200 or so employees, working elbow to elbow in a room crammed with televisions and computer screens. An ex-reporter monitors world events; a 21-year veteran of the airlines handles customer feedback. Flight Explorer software from Flight Dimensions shows every plane in the sky at any given moment, allowing Orbitz's two former air traffic controllers to monitor individual flights. FAA flight data is available to anyone, although people experienced in interpreting that data can get information to customers faster, Ackerman says. The wind blowing from a certain direction could delay flights, as could a runway shortage at a major airport.

Call-Center Chaos

Orbitz also constantly refines how it communicates with customers. The site's grid design, which lays out airlines and their lowest fares across the page so people can drill down for more information, is widely praised. But Ackerman's team found that consumers need help using all the information Orbitz's search engine can provide. So ticket-buyers are now prompted to search a day on either side of their intended trip and to consider alternate flight times and secondary airports to get lower fares.

The layout of the confirmation page also has changed, with times and airport names printed in bold. Such prompts help cut down on errors caused by customers not reading their itineraries carefully, although the prompts don't necessarily help with more complicated problems. For those, customers must call Orbitz's call center.

Call centers, of course, are the ugly stepchild of every online service. After all, online businesses only make sense if you assume that computers are more efficient than people. Orbitz's call center has proven to be a particular trouble spot for the company. After becoming disenchanted with its first call-center provider, Orbitz transferred the contract to UpStream, a division of Rosenbluth International that was recommended to Orbitz by United Airlines, another UpStream customer. UpStream COO Jerry Johnson says the complexity of Orbitz's offerings requires a call center with "very good knowledge" of the travel industry.

"They invested a lot of money in the call-center operation and then had to start all over at zero," says Forrester analyst Henry Harteveldt. "But Orbitz is only as good as its last sale." (Orbitz won't quantify its investment in its call center or otherwise discuss what went wrong with it.)

Stiff Competition

Besides the challenges in fine-tuning its service, Orbitz faces competition from better-heeled competitors that are constantly maneuvering to enhance their own offerings. In July, Expedia purchased Metropolitan Travel, an offline corporate travel agency in Bellevue, Wash., near where Expedia's original founder, Microsoft, is based.

Travelocity, through its owner Sabre (one of the mainframe reservation systems where the airlines post flight data), has adopted automated voice-response software that allows customers to retrieve schedules, confirm the status of flights and check rental car rates. Both companies allow customers to make reservations by phone, something Orbitz, of course, cannot afford to do.

While the vast majority of airlines cooperate with Orbitz, a few have been less accommodating. JetBlue lists fares but will not allow customers to buy tickets through Orbitz. Southwest Airlines sued Orbitz but settled last November when Orbitz agreed to stop displaying its fares, which Southwest claimed were inaccurate. (And in another potential legal challenge, the U.S. Justice Department is considering whether the airlines could use Orbitz to fix prices. An Orbitz spokeswoman downplays the DOJ inquiry, saying she expects it to end within months without any action being taken.)

Other low-fare carriers—including Frontier Airlines and AirTran Airways—also keep their lowest prices off Orbitz, protesting Orbitz's requirement that every carrier must list its lowest fares first. "You're signaling what sales you have on a daily basis to a Web site owned and managed by the nation's largest carriers," says Ed Faberman, the executive director of the Air Carrier Association of America. "It's harder for them to compete if they have to go to multiple Web sites."

Last month Orbitz launched Orbitz for Business, a tool that integrates company-negotiated fares into Orbitz's site. Employees can use Orbitz to book their own business travel, and companies can track how money is being spent. But Orbitz is a long way from matching the service standards expected by business travelers, says David Redman, who owns Carlson Wagonlit Moorpark, a franchise of the global corporate travel agency that built its business in the offline world.

After the terrorist attacks last year, Orbitz employees worked hard to contact customers and create a resource for information on the airlines, even after they evacuated their offices in a downtown Chicago building across from Sears Tower, a suspected target. But their efforts weren't entirely successful. For instance, Orbitz customers flying on Sun Country Airlines, a competitor of Orbitz co-owner Northwest, were never informed that the airline had canceled flights out of Boston. Orbitz says Sun Country failed either to update its reservation system or inform Orbitz directly like the other airlines.

Carlson Wagonlit Moorpark also was at the mercy of the airlines after the attacks. But Redman's agents stayed up all night to notify customers and rearrange their travel plans, sending them home by bus if necessary. "There are certain people I'm thrilled go to Orbitz—people who were constantly calling and changing small tickets," Redman says. Those customers are too small to require his services, Redman says.

To be sure, Orbitz is not standing still itself. In August, in partnership with American Airlines, the company announced Supplier Link, its latest technological advance. Orbitz's search engine can now bypass mainframe database reservation systems such as Worldspan and connect directly into American's mainframe reservation system, parsing data and showing it to the customer and American in the way each needs to see it to book a flight. American expects to save 77% on every ticket booked through Supplier Link because it no longer has to pay fees to Worldspan.

And Supplier Link could help reduce ticketing errors like the one encountered by Tom Harvey. Orbitz's search engine shows information in "near real-time," says Forrester's Harteveldt. It caches information from Worldspan every 10 minutes to cut down on the number of hits on the mainframe, allowing Orbitz to negotiate a lower transaction cost from Worldspan and pass savings on to the airlines. Airline ticketing is complex enough that 1% to 2% of the time, data in the cache is wrong. But as American increases the number of eligible tickets that go through Supplier Link, Orbitz customers are less likely to encounter itineraries that are no longer available or book reservations that are not properly confirmed.

Orbitz is working to connect to three more airlines through Supplier Link before the end of the year. So far, though, Harvey is not tempted to return. Orbitz is a good tool for research, he says. But now he books his business travel through an agency or the airlines themselves.

Orbitz Base Case

Headquarters: 200 S. Wacker Drive, Suite 1900, Chicago, IL 60606

Phone: (312) 894-5000

Business: Provides low-fare airline tickets and other travel services online; co-owned by five major airlines

Financials in 2001: $43.4 million revenue, $113 million pro forma net loss

Chief Information Officer: Kevin Malover

Challenge: Lower cost of transactions by making customer service, fulfillment and marketing more efficient

Baseline Goals: Increase the percentage of visitors who complete a transaction (6.2% in Q1 2002) Increase the percentage of revenue derived from non-air-travel sources (16% in Q1 2002) Complete integration of airline-reservation systems into Supplier Link, a powerful new database service, by the end of 2002

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in Baseline.