Orbitz Worldwide’s Future Relies on Leaving its Airline Past Behind

Having been hired as Oribtz Worldwide CEO more than four years ago to reduce its reliance on selling airline tickets, Barney Harford almost sounded as though he was giving a valedictory address today during the online travel agency’s third quarter earnings call.

Orbitz Worldwide had notched its third consecutive quarter of hotel room night growth (up 22%), and for the first time in the company’s history, hotels and vacation packages accounted for half of total revenue in the trailing 12 months.

“We are putting our weight behind insurgent strategies” and using our assets to advantage, Harford said, after being asked by an analyst about the competitive environment.

Those so-called insurgent strategies include the recent relaunch of the Orbitz Rewards program, which is skewed toward emphasizing hotel bookings through Orbitz mobile apps, and the use of Big Data, data analytics, and reworked landing pages to maximize conversions of lookers into bookers.

American Express Partnership

Sustaining attractive-looking numbers on hotel room night growth will be challenging.

Orbitz officials stated that its partnership to power American Express Travel, which kicked off in the third quarter of 2012, contributed 7 percentage points of the 22% growth in hotel room nights last quarter.

So that 22% Orbitz hotel room night growth, which bested Expedia’s 20% in the third quarter (and with Priceline yet to report), comes from a relatively low base, and doesn’t benefit the Orbitz brand, although it does give Orbitz a little more clout with hoteliers when negotiating deals.

That hotel room night growth could be tough to keep going.

In fact, Orbitz officials today projected that room-night growth in the fourth quarter would decelerate to a mid- to low-teen percentage.

And, revenue growth, officials said, would be impacted in the short term by the margin hit that ensues when Orbitz hands out Orbucks for hotel redemption.

Still, with American Express downsizing its leisure travel business over the last year, Orbitz is counting on other behind-the-scenes private-label partnerships to contribute to hotel room night growth.

A looming private label deal with Jetset Travelworld Group in Australia, which will operate under the Helloworld brand, could pick up some of the slack — or at least officials are counting on it to do so.

JTG is considered the number 2 travel agency in Australia with around $4.74 billion in bookings, and little online presence.

A Mobile Strategy

As evidenced by the revamped Orbitz Rewards program and investments in its mobile apps, Orbitz is making a big bet on mobile to further its ambitions.

Harford said more than 60% of same-day hotel bookings for the Orbitz brand now take place on mobile, and for Orbitz Worldwide as a whole, mobile accounts for 27% of bookings.

A lot of the mobile traffic comes directly to Orbitz, Harford said, meaning it is lower cost than having to advertise on Google or other outlets to attract it.

On other issues, an analyst asked Harford how the Travelocity-Expedia partnership might impact Orbitz.

Harford said Travelocity has “been a challenged brand for awhile” and it’s not clear that its partnership with Expedia “will change the trajectory.”