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January 22, 2001

Cendant Goes Out On Its Own To Build Travel Portal

Company budgets $100 million for site to sell airline tickets, hotel rooms, and car rentals

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ith online sales representing 10% of its revenue, travel and real-estate conglomerate Cendant Corp. is placing a $100 million bet on the Net. The New York parent of Avis Rent A Car, Century 21 real estate, and nine hotel brands with more than 500,000 rooms is building an online travel portal to compete with Travelocity, Expedia, and Orbitz, the airline-backed site slated to open this spring.

Cendant had joined eight other hotel chains, including Hilton, Hyatt, and Marriott, to create Honest Broker, an industrywide travel portal. But with little to show after nine months, Cendant wrote off the investment, which it declined to state, and budgeted $100 million to build its own consumer portal. By mid-August, the site will sell airline tickets, hotel rooms, car rentals, time-share rooms, and vacation packages.

"Any time you get a group of five or six entities with different customer segments and different ownership structures trying to create a new venture, it's difficult to find a strategy that works," says John Paul Nichols, executive VP of Cendant's hotel division. Cendant wanted to develop a lower-cost distribution channel, while its compatriots saw Honest Broker "as a retail site with some technology," he says.

The Cendant portal may have an advantage over consortium-led sites. For example, airline booking systems such as Sabre and Worldspan are federally regulated to ensure that all inventory is displayed fairly and priced the same for all travel agencies, but an independent portal linked directly to Cendant's property-management systems could offer Cendant rooms for less than they cost on the open market.

Wyndham International Inc. has expressed interest in buying Cendant's Honest Broker seat. However, analysts remain skeptical about both sites' chances. The Cendant project's $100 million operating budget for 2001 and 2002 is little more than what Orbitz will spend on marketing alone, and Cendant faces problems trying to sell other people's inventory. Says Philip Wolf, president of travel technology consulting firm PhoCusWright, "Honest Broker without Cendant is like OPEC without Saudi Arabia."