Monday, April 7, 2008

Travel search takes off as airlines go into tailspin

By Christopher Calnan

As air traffic is dragged down by high fuel costs and airline executives reach for sickness bags, travel-search traffic is picking up online -- and that has meant business taking off for New England companies whose Internet search technologies support travel-related websites.

With cash-strapped consumers busy looking for deals, the boost in online travel-search has meant stronger revenue and acquisition activity by local companies. For example, earlier this week, Boston-based Smarter Travel Media LLC, which operates Smartertravel.com and BookingBuddy.com, acquired for an undisclosed amount New York-based Airfarewatchdog.com LLC.

How high are the travel sites soaring? Online travel search engine Kayak Inc., with operations in Concord and Norwalk, Conn., expects to generate revenue of $140 million this year compared with $47 million in 2007, co-founder and CTO Paul English said. In 2005, the year in which Kayak launched its meta search website that aggregates the results of other sites, the company posted $3 million in revenue, he said.

"When the economy gets a little soft, Kayak certainly doesn't suffer," English said. "People become more intense about shopping when the economy slows down."

Travel hub

Kayak and Smarter Travel are just two examples of the New England hub of travel-related web and software companies that are seeing a business bump.

Cambridge-based ITA Software Inc. develops software for airline websites and online ticket agencies, including Kayak and the No. 2 online ticket agency Orbitz Inc. Other local online ticket agencies include Norwalk, Conn.-based Priceline.com Inc. and CheapFlights Ltd., which is based in the United Kingdom with a North American headquarters in Boston.

ITA Software CEO Jeremy Wertheimer said he's not expecting any decrease in business during the sluggish economy.

In Needham, TripAdvisor LLC has been on a buying binge, completing at least six acquisitions during the last two years. One of its acquisitions is the also-acquisitive Smarter Travel. TripAdvisor, in its own turn, was an acquisition target when it was picked up in 2004 by the No. 1 online ticket agency Expedia Inc.

TripAdvisor's growth-through-acquisition plan has yet to play out, spokesman Brian Payea said. "We're always looking for opportunities and we're expanding overseas as well," he said.

Meanwhile, U.K-based CheapFlights, which in 2003 opened a Boston office with three workers, has since grown to 30 workers. The local operation is now generating 50 percent of CheapFlights' overall traffic, director of marketing Carl Schwartz said.

Such websites rely on advertising revenue, and none are reporting a slowdown. Schwartz doesn't expect a drop unless the economic doldrums extend late into the year.

The online travel industry is projected to generate revenue of $80 billion in the United States this year, according to Gregory Saks, a director of travel for Compete Inc., a Boston-based online market research company. Expedia alone attracts 12 million to 15 million visitors per month, he said.

Travel industry websites attracted 286.4 million unique visitors in February compared with 275.3 million in February 2007, according to comScore Inc.

Smarter Travel editor Anne Banas said it's too early to tell how online travel companies will be affected by the economy. But so far, business is strong as consumers adjust by traveling shorter distances and staying at more affordable hotels.

"The bottom line is, they're still booking travel."