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Orbitz will feel the most pain from the end of its exclusive relationship with Kayak, and will try to make up for it by forging new relationships with other metasearch players around the world.
Orbitz Worldwide and Kayak have had a close, but rocky relationship over the last few years, and now that their agreement has expired without being renewed, Orbitz is poised for a negative hit in 2014.
In the fourth quarter, Orbitz Worlwide’s standalone air revenue declined nearly 11% year over year — and this is while the Orbitz-Kayak agreement, which expired December 31, was still in place.
Speaking during the Orbitz Worldwide fourth quarter earnings call February 13, officials said the company had been generating meaningful revenue from airline ticket sales because of the Kayak relationship, and that air volume will be negatively impacted in 2014 because of the end of the Orbitz-Kayak contract.
Orbitz Worldwide CEO Barney Harford said there will be “headwinds” in 2014 as Orbitz received “a meaningful amount of volume related to exclusivity provisions in the previous agreement.”
Kayak CEO Steve Hafner was an early employ of Orbitz when it was founded, and Orbitz and Kayak had a close strategic relationship since 2004 when Kayak launched.
In April 2009, the two sides signed a long-term agreement, which had been amended and was subject to an arbitration dispute over the years. Under the pact’s terms, Orbitz gave Kayak full access to Orbitz’s travel content, and Kayak provided Orbitz with exclusivity in some of Kayak’s core search results.
Orbtiz paid Kayak for any transactions that Kayak sent to Orbitz, and various fees from Orbitz and sister companies CheapTickets and eBookers accounted for 19% of Kayak’s total revenue in the first nine months of 2010, for example.
Harford says Orbitz continues to work with other travel metasearch players, based on geographical and other factors, although he claimed that metasearch is less important to Orbitz that it has been in the past.
Still, the looming hit to Orbitz’s air volumes from the loss of the Kayak relationship couldn’t come at a more inopportune time as the online travel agency was already pinched by lower air transaction volume in the fourth quarter.
Officials said that Orbitz’s air business has suffered over the year because of its focus on hotels, and it plans to reinvest in the air business in 2014.
New agreements with Travelport starting in 2014 and with Amadeus and Sabre beginning in 2015 will help the Orbitz air business because it will be able to leverage these partners diverse strengths based on geography, technology and supply, officials said.