Google Deal Divides Travel Industry

 

Timhas a knack for making waves when it pushes into new arenas, and online travel is no exception. Six months ago, Google announced its intention to buy the company that made it easy for travelers to compare airfares, ITA Software, for $700 million.

Since then, the biggest players in online travel have drawn lines, for and against the deal, and regulators have sought more time and information for an antitrust investigation, which continues.

“What Google likes to do,” said Tim Wu, a law professor at Columbia, “is enter markets where it thinks the existing approaches are broken, and try to do a much better job.”

The acquisition, if approved, would let Google, the dominant search engine, digest ITA, which was founded in the 1990s by computer scientists at the Massachusetts Institute of Technology and has become the leading provider of flight data to airlines, travel agents, global distribution systems, flight comparison sites and technology companies. In the short term, said Professor Wu, author of the new book “The Master Switch” (Knopf) the deal could give consumers a better travel search experience. “In the longer term, however, the risk is that this deal could give Google such an advantage that travel search becomes like other forms of search, dominated by one engine, which could eventually stifle innovation.”

This fall, a coalition that included Expedia and Kayak formed FairSearch.org to push regulators to thwart the deal. Microsoft recently joined the cause. Kayak, in registering to file its initial public offering, suggested that a combined Google-ITA could present a risk to its business. Orbitz has stated publicly that it is neutral on the deal. Priceline, in a public filing, cited Google as a risk factor, while its president suggested at a telecommunications conference that Google’s entry into vertical travel search could be an opportunity, according to Tnooz.com. Others are taking a wait-and-see approach.

After examining the transaction, Senator Herb Kohl, the Wisconsin Democrat who is chairman of the Judiciary Committee’s antitrust subcommittee, wrote a letter this month to Christine A. Varney, the assistant attorney general in charge of the antitrust division of the Justice Department, urging a careful review and certain stipulations.

“This deal has the potential to greatly impact the robust online air travel search and booking markets relied on today by millions of consumers,” Senator Kohl wrote.

Professor Wu said the Justice Department could take up to a year to review the deal and would probably impose conditions on a combined Google-ITA to foster competition.

For its part, Google promises to honor existing ITA agreements and to add customers. It contends the acquisition will make comparison shopping easier and thus drive more customers to airlines and online travel agencies. It also says it has no interest in selling tickets.

Big customers of ITA Software like Rearden Commerce, an electronic commerce software company that helps book services and buy goods for both consumers and corporations, said the deal would allow for broader and deeper search queries, which would help its 7,000 corporate clients.

“ITA has been very innovative,” said Paul Todd, Rearden’s new chief products officer and the former Google executive who helped orchestrate the ITA transaction. “We expect the rate of innovation will only increase with Google.”

To be sure, Mr. Todd said, Rearden’s corporate customers are not necessarily aware that ITA provides the backbone of their searches.

The same is true for many business travelers, said Brett Snyder of the CrankyFlier blog. “Most don’t realize ITA powers the sites they use,” he said, including Bing Travel, TripAdvisor, Orbitz, Kayak, Hotwire and CheapTickets. “Travelers don’t really care. They don’t know anything will be different.”

David Bellos, owner of Teron Lighting in Fairfield, Ohio, for instance, uses Orbitz.com when he needs to arrange a quick business trip, as he did this month to Virginia Beach. Because he has Delta Diamond status, with 125,000 miles, he says, he knows “99 percent of the time, I will get an upgrade.”

If Delta is within $50 or $60 of the Orbitz fare, he said, he will book on Delta just for the upgrade. Otherwise, he will “take the best deal going on Orbitz.” If Google stepped into the fray, his strategy would not change, Mr. Bellos said.

To understand the dynamics of a combined Google-ITA, Henry H. Harteveldt, a travel analyst at Forrester Research in San Francisco, imagined how a Google airfare search could change.

Recently, he searched “cheap airfares San Francisco to New York.” In less than a second, he said, he had 4.6 million results and many links to Web sites.

With ITA part of Google, travelers could put in more requests, like travel dates. So, Mr. Harteveldt said, his new search could say “San Francisco to New York Jan. 5.” The results, he said, would feature “actionable information,” like airlines, schedules and fares, plus the Web sites that sell the tickets. But, he added, if an airline or travel agent had to pay Google-ITA to be listed in the results, “I see trouble brewing.”

Only one approach would be acceptable, he concluded: for sellers’ Web sites to be presented within a flight search’s organic results — without charge to the airline or online travel agent. Hard-core business travelers who routinely use ITA’s free Matrix software to research flights hope Google will provide enhanced search features. But they worry that Matrix will be restricted or its features somehow diminished. Still, Seth Miller, an information technology consultant in New York, said he was optimistic the deal would help his research. He said he used Matrix to book complicated trips with multiple stops.

“While I’m not likely to start an airfare search on Google,” said Mr. Miller, who estimated that he has flown 200,000 miles this year, “that could change if they manage to integrate the ITA engine into the main Google search page.”