Hotwire.com, a discount airline ticket site, has launched in the US.
The new site was launched this week in the US to provide discount airline tickets. But it is more than just another discounter. Backed by six major US airlines – American Airlines, United Airlines, Continental, NorthWest, US Airways and America West – Hotwire reflects a wider industry trend for airlines to increase the percentage of tickets sold through the Internet. Airline companies stand to make considerable savings in distribution costs through Internet sales. For example, the standard commission given to Internet sites is $10 per ticket, compared to traditional travel agency commissions that can exceed five times this amount.
By selling off empty seats airlines also create additional revenues. And by having their own site, with control over the price, they have greater influence over their customers. Importantly, Hotwire does not disclose the name of the carrier until after the ticket has been bought, thus protecting prices for regular fares.
Hotwire faces strong competition from Internet travel brands such as Priceline.com and Expedia, although it avoids Priceline’s name your own price and save concept. Hotwire offers guaranteed fixed prices and this will be its main selling point. In addition, the site also plans to position itself alongside Expedia and Travelocity as it introduces international flights and diversifies into offering hotel accommodation and car rental in future months.
Competition will intensify further next year with the launch next year of Orbitz.com, a travel service backed by over 20 major airlines, many of which are also involved in Hotwire.com. The launch of Orbitz has been hampered by a US Department of Transport investigation surrounding allegations that this new site will create an anti-competitive selling environment. US travel agents are concerned that they could be priced out of the market by such services. It is hard to imagine that the airlines will not win the day, though they will have to establish strong Internet brands to compete with the already established likes of Expedia and Priceline.
