- The Washington Times - Thursday, November 11, 2004

ASSOCIATED PRESS

America Online is aiming to put itself in the vanguard of the Internet travel business.

The Sterling, Va., Internet service provider plans to announce today that it will invest in an upstart that threatens to lure customers away from the industry’s most dominant players, such as Orbitz, Expedia and Travelocity.

The company is taking an undisclosed minority stake in Kayak Software Corp., one of a handful of companies whose software allows travelers to simultaneously scour the offerings of thousands of individual airline, hotel and car-rental Web sites.

The investment in the Norwalk, Conn., company is part of a larger strategy of AOL, a unit of Time Warner Inc., to establish stand-alone businesses that attract an audience beyond its Internet-service customers. In September AOL introduced InStore, a comparison shopping site.

The new, multiyear agreement between AOL and Kayak, which intend to start a travel search engine early in 2005, follows a partnership similar to the one Yahoo Inc. sealed with FareChase in July.

Both deals are somewhat of a blow to Travelocity, a unit of Sabre Holdings Corp. whose technology is the booking engine for the travel offerings available at the main pages of Yahoo and AOL.

“It will certainly put AOL and Travelocity at odds,” said Henry Harteveldt, an analyst at Forrester Research in San Francisco. “There’s no question that this will take some of the business that Travelocity is getting and divert it to suppliers who are available on Kayak.”

Travelocity isn’t taking the assault lightly. Chief Executive Officer Michelle Peluso last month accused Kayak of poaching her company’s inventory, and Kayak subsequently stopped listing Travelocity’s offerings.

Kayak also excludes Expedia Inc.’s inventory at the request of the Bellevue, Wash., company, a unit of IAC/InterActiveCorp.

“But this does not impact the breadth of the product that we offer to consumers,” Kayak co-founder Paul English said. “We can get access to other online agencies, as well as working with the suppliers themselves.”

Kayak is allowed to search Orbitz and OneTravel.com, for example, and Mr. English said the company is negotiating deals with other online travel agencies.

Other well-known travel search engines, or aggregators, include SideStep, Mobissimo and Qixo, the only one in the bunch that charges a fee.

Kayak plans to allow customers to post ratings and reviews, and its technology has the ability to remember customers’ travel preferences and filter the results of their searches accordingly.

“Think of Kayak.com as the Google-meets-Amazon of travel search,” said Kayak CEO Steve Hafner, who co-founded Orbitz.

More than $50 billion will be spent online in 2004 for flights, hotel rooms, rental cars and cruises, according to estimates from PhoCusWright Inc., a provider of industry data.

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