QUOTE AND NEWS
StreetInsider.com  Apr 14  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Management+Changes/Orbitz+Worldwide+%28OWW%29+Chairman+Clarke+Resigns/9376725.html for the full story.
Benzinga  Mar 19  Comment 
Goldman Sachs on Wednesday updated online travel forecasts and touched on changes ahead for the sector. Analyst Heath Terry believes the sector's growth “remains steady,” but tougher comps in Asia as well as foreign exchange headwinds in...
TheStreet.com  Mar 19  Comment 
NEW YORK (TheStreet) -- Orbitz Worldwide  has been downgraded to "sell" from "neutral" with an $8 price target, Goldman Sachs said Wednesday. The firm said the revision was a valuation call due to slowing growth. "We believe OWW could...
CNNMoney.com  Mar 19  Comment 
Investors weren't too thrilled by what they heard from Janet Yellen during her first meeting in charge of the Fed.
Benzinga  Feb 28  Comment 
Orbitz Worldwide (NYSE: OWW) announced today that it has acquired certain assets and contracts of the Travelocity Partner Network which provides private label travel technology solutions for bank loyalty programs and online commerce sites. The...
StreetInsider.com  Feb 13  Comment 
The following is a list of notable articles to help get you through the lunch hour: Microsoft (MSFT) Up as PC Partner Reports Strong Quarter -> Read this! FBR Keeps Orbitz (OWW) at Market Perform; Hotel Momentum Unlikely to Continue -> Read...
TheStreet.com  Feb 13  Comment 
NEW YORK (TheStreet) -- Orbitz Worldwide  shares are flying after the online travel agent reported earnings and sales above consensus. By midmorning, the stock has added 28.7% to $8.89. In the three months to December, the Chicago-based...
Wall Street Journal  Feb 13  Comment 
Orbitz Worldwide swings to a profit in the fourth quarter, with revenue getting a boost from an increase in bookings and hotel nights.
StreetInsider.com  Feb 13  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Earnings/Orbitz+Worldwide%2C+Inc.+%28OWW%29+Tops+Q4+EPS+by+5c%3B+Issues+Q1+Outlook/9164673.html for the full story.
Forbes  Feb 12  Comment 
Orbitz Worldwide reports its fourth-quarter earnings on Thursday, February 13, 2014, and the consensus earnings per share estimate is zero cents per share.Over the past three months, the consensus estimate has sagged from one cents. Analysts are...




 
TOP CONTRIBUTORS

Overview

Orbitz Worldwide (NASDAQ: OWW) is a travel booking service that connects customers to discounted airline tickets, hotels, car rentals, cruises and total vacation packages.

Only Three years after the websites' launch in 2004, Orbitz was acquired by Cendant in their travel division known as Travelport. Travelport is the world’s largest travel companies in the industry. In 2006, Cendant agreed to sell Travelport to The Blackstone Group which included Orbitz. Travelport then restructured into three divisions with Orbitz Worldwide being one of them along with Galileo and GTA. Orbitz Worldwide began publicly trading on the NYSE under the ticker OWW in July 2007.[1]

Company Portfolio [1]

Orbitz Worldwide enhances the ability to ease travel plans all within one website. In order to have the best online functions, Orbitz Worldwide has acquired several online market companies to create an industry leading company portfolio which includes:

  • Orbitz (www.orbitz.com)
  • CheapTickets (www.cheaptickets.com)
  • ebookers (www.ebookers.com)
  • HotelClub (www.hotelclub.com)
  • RatesToGo (www.ratestogo.com)
  • the Away Network (www.away.com)
  • Corporate travel brand Orbitz for Business (www.orbitzforbusiness.com)

All of the companies relate to the online market and are affiliated with Orbitz.

Company Level Analysis

SWOT Analysis

- OrbitzTLC™: OrbitzTLC uses its innovative technology to help travelers stay one "Step Ahead™." OrbitzTLC alerts their customers of flight delays for departures and arrivals, unexpected changes in gates, and flight cancellations. These alerts are sent using OrbitzTLC Mobile Access, Orbitz Insider Podcasts, RSS Feeds and OrbitzTLC Alert system, which alerts you by phone call and text messages.
- Dynamic packaging: Customers are provided with complete customization of their travel plans with packages for air, hotel and other products and are given at one bundled price.
- Flex Search™: Flex Search enables the customer with flexibility in plans to search alternate travel dates, times and airports to be able to find the lowest rate possible.
Insurancebookers™: Orbitz provides affordable travel insurance for all customers.
- Activities Tab: Orbitz and CheapTickets offers travelers the ability to purchase transportation, tickets to concerts, sporting events, theme parks and museums at the same time as their trip.
- Merchant Hotel Program: Orbitz Worldwide negotiates with hotels to make hotel rooms available at the lowest rates possible. Transactions completed using the merchant model result in higher net revenue for Orbitz Worldwide than bookings made via the traditional retail model.

  • Weaknesses

In November 2010 American Airlines (AA) terminated their contract with Orbitz and no longer participates on Orbitz.com and other affiliated websites. In January 2011, American Airlines also ended their contracts with competitors Expedia.com and Hotwire.com and is now pursuing a direct agreement contract with Orbitz biggest competitor, Priceline. American Airlines represented 5% of the total net revenue in 2010, including the revenue generated from associated hotel, travel insurance and car rental purchases along with a base airline ticket purchase. [2] These types of contract terminations for Orbitz and their competitors have significant impacts on the travel industry as a whole. A change in Orbitz business model may be necessary if other airlines are looking to make direct connections to their consumers using competitors booking websites.

The travel industry experiences seasonal fluctuations in the demand for travel bookings. [3] Leisure travel, which is the majority of Orbitz customers preference, is booked the most frequently during the first half of the year when customers are beginning to plan future vacations and trips for the rest of the year. The global economy’s prolonged recession has also impacted the travel industry as well and many customers are not spending their disposable income on pricey vacations. The uncertainty in the global economy and no visible proof that it is on track to recovery leaves Orbitz Worldwide in a weak financial position with an unpredictable future.

  • Opportunities

Orbitz Worldwide has markets in the United States, Europe and Asia Pacific and is looking specifically to further its growth in the Asia Pacific market. Both Europe and Asia have increased their internet usage in the recent years and are becoming more involved in online website activity including vacation planning and using booking services to do so. Orbitz Worldwide has an incredibly diverse portfolio that was recently expanded to include two websites marketed for international bookings: [3]

- ebookers®: European version of Orbitz Worldwide. The website provides cheap flights, hotels and cars for travel within Europe.

- HotelClub™: The main focus of this website is on international hotel reservations and even provides customers with language preferences and the ability to select currency denominations relative to their country of presence.

The hotel industry’s loss is Orbitz Worldwide’s gain. A hotel’s inventory is the number of rooms available for that day and night and is considered perishable inventory. The relationships Orbitz has with suppliers are based on offering customers, which become their own customers, the lowest rates possible. Orbitz aims to provide the most reliable service that leads to loyal customers. Orbitzs’ loyal customer base is expanding to include older generation shoppers that are becoming more trusting of the internet technology and on-line shopping. The “Baby Boomer” generation bookings have a strong importance on being cheap and convenient. Three of Orbitz Worldwide websites are opportunities for increased revenues from this specific generation:

- CheapTickets®: This website emphasizes “cheap” not only for flights, hotels, cars and cruises but also for vacation activities once you have arrived to your destination. CheapTickets provides access to concert, theatre, sports, and other tickets once your vacation has been booked.

- RatesToGo™: A website catered to the last minute planner looking to travel and book a hotel within 28 days or less.

- the Away Network™: Whereas other partnered websites help to book the flights, hotels and cars, this website allows users to explore and plan using travel guides.

  • Threats

Company Risks[4]

Travelport and the investment funds that control Cendant own 56% of the outstanding common stock and indirectly have control of Orbitz Worlwide. This leaves Orbitz at incredible risks as they are limited in the ability to have complete control of the company. Orbitz relies on Travelport to issue letters of credit on behalf of their own credit facility and as of December 31, 2010 Orbitz had $492 million of outstanding borrowings. This greatly limits business operations because such a large amount of debt owed restricts the amount of liquidity and leverage the company has. Orbitz has also granted Travelport a perpetual license which legally allows them to use the innovative intellectual property used by each Orbitz Worldwide website, which poses an enormous threat as they can quickly become a competitor.

Orbitz revenue is entirely dependable on the travel industry as a whole, which is incredibly volatile due to the many risks within it. A decrease in travel bookings can result from factors including:

  • volatile economic conditions and availability of disposable income
  • international and/or homeland security issues with acts or threats of terrorism
  • war and other political issues
  • health epidemics or pandemics
  • natural disasters like hurricanes, volcanic eruptions and earthquakes
  • changes in regulations governing the airline and travel industry
  • fuel prices for airline travel and car rentals
  • increased airport security that could reduce the convenience of air travel
  • changes in currency and foreign exchange rates

Business Segments[5]

Hotel Booking

Orbitz uses its hotel booking service to provide customers thousands of hotel choices at competitive prices. Recently Orbitz has introduced Price Assurance to their hotel booking process. This initiative is looking to make the consumer more comfortable with booking online by offering a guarantee that if the price of the hotel goes down from the time you book they will refund your money.

A major focus for Orbitz has been to market and invest in their Hotel Club Company which offers the ease of booking hotels in over 140 different countries. This proxy company along with Asia Hotels is helping Orbitz broaden their market reach to these emerging markets of Asia and Europe.

Flight Booking

Orbitz offers a comprehensive flight planning service with a vast array of different airline companies to choose from. Orbitz TLC is a new process in which Orbitz shows the customer the price of a flight after their first search. This new booking technology makes Orbitz the only online travel company to achieve this transparency. Orbitz has also eliminated many of the fees associated with online flight booking.

A couple of proxy companies that also participate in airline booking are Cheaptickets and Orbitz for Business. Cheaptickets offers airline and hotel booking for the price conscious consumer. Orbitz for Business focuses on the business travelers and their needs for airline booking and hotel booking.

Vacation Packages

With Orbitz vacation packages you get the best of both Orbitz Hotel Booking and Orbitz Flight Booking with added savings. By booking the flight and hotel together Orbitz offers great discounts only available with the package. Orbitz offers these vacations packages in many places worldwide that include the U.S., South America, Asia, and Europe.

Car Rental

Orbitz offers car rental services in which you pick the date and return of the car and they supply the company. Orbitz offers rental cars from top companies such as Alamo, Avis, Budget, Hertz, and National. You can also package in car rental in your vacation package for additional savings on your trip.

Cruise Booking

Orbitz offers a cruise booking service in which you choose destination and date and Orbitz finds cruises that match your search. Orbitz offers cruises on over 20 different cruise lines and to over eight different parts of the world including Europe, Caribbean, and Alaska.

Financial and Operating Metrics

Orbitz track record of net income is surprisingly poor, considering they have not had a positive net income in any year listed in their recent 10-K filing, which includes as far back as 2006. The years 2008 and 2009 are the worst, posting $299 million and $337 million losses respectively. In 2010 things have turned in the right direction as Orbitz had a net loss of $58 million, an 83% change in one year. For the year 2010, the net loss per share is $0.58. Revenues have also increased in 2010 to $757 million from $738 million in 2009, an increase of 3%. Another measure to look at is gross bookings, to evaluate the amount of business is being done and to measure the amount of additional business. In this area Orbitz has shown an increase of 14% from 2009 to 2010. Total gross bookings for 2010 were approximately $11.37 billion.

Image:Wikinvest financials.jpg


As we can see Orbitz is far behind competitors in operating metrics. Orbitz has been working towards a higher working capital and also decreasing their long term debt over the past year.

Industry Analysis

Competition

Orbitz, Inc. competes with a variety of firms that can be classified into various groups. A large amount of their competitors fall into the online and offline travel company category. In addition to travel companies, Orbitz competes with individual airline, hotel, and other travel service companies that consumers can book through directly.[3] Orbitz also competes with companies such as TripAdvisor LLC and other similar travel research companies, as well as search engines and meta-search companies such as Google.[3] A more extensive listing of some of Orbitz top competitors in the online and offline travel company segments are listed below.

Online Travel Companies: expedia.com, hotels.com, hotwire.com, venere.com, Travelocity.com, lastminute.com, bookings.com, agoda.com, priceline.com, opodo.com, rakuten.com, wotif.com, asiawebdirect.com.[3]

Offline Travel Companies: Liberty Travel, American Express Travel Related Services Company, Inc., Thomas Cook Group PLC, TUI Travel PLC.[3]

Porter's 5 Forces Analysis

Threat of New Entrants: High – In this online travel industry there are virtually no barriers to entry as it is relatively inexpensive to create a website.

Bargaining Power of Suppliers: Medium - Orbitz Worldwide’s suppliers are using the websites' services to reduce their inventory but have many outlets to do so considering the level of competition within this industry. Suppliers can bargain payment terms and access to inventory with each online travel outlet and has to ability to withdraw from contacts if they do not see a positive result on their end.

Threat of Substitutes: Low – Orbitz Worldwide is the substitute for a direct connection to airline and hotels for travel bookings.

Competitive Rivalry within the Industry: High – Orbitz Worldwide competes with online and offline travel companies and agencies, suppliers and their own direct connections to customers, search engines and meta-search companies.

Bargaining Power of Buyers: High – Customers using Orbitz Worldwide are using the service for bargaining purposes only. Orbitz customers are trying to put a travel package together for the least expensive price possible. Orbitz has a policy that if the price drops for an airline ticket or hotel that a customer booked on Orbitz, and another customer purchases the same ticket or hotel for a lower price a refund is sent for the difference. Customers can receive up to $250 for airline tickets and $500 for hotel bookings. [6] This policy attracts more customers who are bargain shoppers to the website services because even though they might have ended their bargaining with a purchase through Orbitz, another customer may even help further the bargaining process.

References

  1. 1.0 1.1 1.2 Orbitz Worldwide (www.orbitz.com) Investor Relations, Corporate Profile
  2. Orbitz (OWW) Form 10-K, Fiscal Year 2010, Company Strategyp.12-13
  3. 3.0 3.1 3.2 3.3 3.4 3.5 Orbitz (OWW) Form 10-K, Fiscal Year 2010, Industry Conditions, p.11
  4. Orbitz (OWW) Form 10-K, Fiscal Year 2010, Risk Factors p.16-21
  5. Orbitz (OWW) Form 10-K, Fiscal Year 2010, General Business Description, p.5-6
  6. Orbitz (OWW) Form 10-K, Fiscal Year 2010, Orbitz Brand Portfolio, p.5
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