Marketing Strategy

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Orbitz.com
The Marketing of its Initial Public Offering
Mona Habib Justin Gold Aleksandar Tomic Subra
Achanta Hiroyuki Araki Regan Richardson Will
Moss
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On May 20, 2002, the Company filed a registration
statement with the Securities and Exchange
Commission for an initial public offering. Is
the market ready to revisit the woolly world of
the Internet IPOs?
3
The Alliance
Orbitz
Founded by
American Airlines
Continental Airlines
Delta Airlines
Northwest Airlines
United Airlines
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Orbitz History

• Orbitz website officially launched on June 4,
  2001
• Giving customers access to 450 airlines, over
  39,000 hotels, and 25 car rental companies
• Gross bookings of more than 1 million on its
  first day and more than 3.3 million by its third
  day
• Within 90 days, Orbitz was the 3rd largest
  travel website
• Over 8 million current registered users (2001)

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Orbitz Mission Goals

• Initial Mission Statement Develop a travel web
  site that would serve people better.
• Orbitz ultimate goal is to help better serve
  the interest of the traveling public.

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Orbitz Objectives

• Expand customer base through efficient marketing
• Increase the mix of non-air travel products
• Retain customers through superior buying
  experience and customer care activities
• Establish and maintain the lowest cost structure
  in the industry
• Pursue new business opportunities

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Orbitz SWOT Analysis

• STRENGTHS
• User-friendly web site
• Low rates and fares for the general public
• Customer-oriented
• WEAKNESSES
• Web site may not attract customers attention
  (bland)
• Slow response to corporate inquiries

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Orbitz SWOT Analysis

• OPPORTUNITIES
• Expand the target market
• Expand resources
• Attract other partners
• Improve upon website recognition promote on
  t.v. and radio
• THREATS
• Competitors may offer better incentives to the
  consumers
• Travel disruptions
• Government regulation
• Market volatility

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Orbitz Buzz

• booking page with non-stop/multiple stops and
  price ranges pictured on one graph is excellent!
• ease of use, the most friendly web site
• this site is versatile, allows for change in
  itinerary (i.e., date, departure time, etc), with
  instant quotes.
• speed of (Travel Alerts) is impressive and
  great prices.
• this site is simple, concise, and with prices
  that are actually fare.

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Orbitz Marketing Strategy
Overall cost leadership To tell as many
customers as possible that it has more low
airfares than anyone else . Differentiation --
meeting customers needs in a new and an unique
way. Pervasive Brand Awareness Creating
Comprehensive Product and Service Offering To
develop a Sustainable Competitive Advantage and
Increase Market Share
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Orbitz Marketing Strategy

• Incremental Sales through ad hoc e-mails
• Orbitz within a few hours created an e-mail
  notifying subscribers of low fares initiated
  by Delta, 31 one-way
• Attracted tremendous volume to its website
• 1/3 to 1/2 transaction bookings on Delta that
  day
• Transactions averaged more than 70 each
• Low fare attracted customers who then bought
  more expensive fares

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Orbitz Marketing Mix

• The 4 Ps
• Product - intangible travel services that a
  customer receives through online booking
• Promotion - e-marketing initiatives, i.e.,
  pop-up ads, pop-under ads online storefront
  partnerships
• - print, TV, and radio sweepstakes and giveaways
• Place - services sold through Internet
• - Orbitz Traveler Care Alert, via mobile
  phone, text pager, email, PDA, My Orbitz
  voice mail box
• Price - lowest price on the planet

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Orbitz Target Population

• Median age 39
• Median household income 60,000
• 51 have a college or post college degree
• Average 3 leisure trips per year
• Purchasers of family vacations, romantic
  getaways, guided tours, cruises, etc.
• Over 2.5 years of online experience
• Source Nielsen Netratings - October 2001
  Forrester Research

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Online Travel Market - US Distribution Channels
(USM)
1998
1999
2000
2001
Source PhoCusWright, Inc., Sherman, CT USA,
2001
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The Online Travel Buyer

• 60 male
• 32 18-34 years of age
• 23 have incomes over 100,000
• 33 have children
• 80 use Internet daily

Source PhoCusWright, Inc., Sherman, CT USA,
2001
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The Online Traveler
Which is the Most Important?
Price
Reliability
Service
Ease of Use
Source PhoCusWright, Inc., Sherman, CT USA,
2001
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The Online Traveler
Who has the Best Price?
Source PhoCusWright, Inc., Sherman, CT USA, 2001
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Leading US Travel Services Online March Bookings
2002
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Top Three Online Travel Agencies
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The Competitive Environment

• The 4 Ps
• Product - Travelocity and Expedia offer
  traditional style of travel booking services
  similar to Orbitz
• - also offer complementary products (cars,
  hotels, etc.)
• Price - Priceline offers the lowest price with
  several major restrictions
• - Other companies offer similar or somewhat
  higher price

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The Competitive Environment

• Promotion - competitors offer similar promotions
  such as special price offers, and prize-type
  promotions
• Place - draw customers by adding banners on
  several web sites as their portals
• - Expedia has an advantage of having MSN, Excite
  and Amazon as their portal
• - Travelocity has affiliated itself with
  LookSmart, Prodigy and Price.com
• - Priceline has its portal on Ebates and
  247malls, both discounts-coupon sites

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Comparison Pricing
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The Competitive Environment

• Traditional Travel Agencies
• Being squeezed by airlines as they cut
  commissions
• Monopoly on travel information has been eroded
• Fine-tuning efforts to target specific segments
• Main Advantage Emphasis on the personal touch
• Recommendations are what travel agents do

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Online Travel Agencies Perceptual Map
Multiple
Orbitz
Expedia
Travelocity
Trip.com
Priceline
Services Provided
OAG
AirGorilla
Hotwire
Southwest Airlines
CheapTickets
Few
Worst Value
Best Value
Value for Money
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The History for Internet Stocks

• Great hype machine, if it sounds too good to be
  true...
• The pursuit of Internet gold
• Initial Public Offering
• accelerated appreciation
• stock options, well in the money
• the newest profession, day trader
• Business Models built on advertising, not profits
• As the Bubble Bursts

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E-Loan (NASDEELN)
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The NASDAQ Had A Great Fall
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The Dot-Com Demise
Yahoo
Amazon
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The Current Market

• Is the market ready for an Internet IPO?
• Investors more skeptical having been burned by
  the dotcoms, Enrons and Worldcoms of our day
• PayPal launched the first successful dot-com IPO
  in many months (IPO priced at 13.00)

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PayPal (NASDPYPL)
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Orbitz IPO Launch

• Initial Public Offering
• Raise 125 Million for Operating expenses and
  Acquisitions
• Plan to trade on NASDAQ under symbol ORBZ
• Number of shares, not yet determined

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Orbitz Stock Demand Opportunities

• Online travel booking accounts for 24 billion
  out of 220 billion of the travel industry
• Expected to double in 5 years to 64 billion
• Demand for online travel stocks, Hot Issues
• Expedia stock rose more than 330 since 9/11
• Orbitz balance sheet stronger than Expedias at
  its time of IPO
• 75 of Orbitz entire revenue in last 3 months

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Comparison
Orbitz
Expedia

• Revenue 43.4 mill.
• 75 of all revenue ever collected in 1Q02
• Demand for online travel stock
• Twice sales, marketing and administration
  overhead
• Stronger balance sheet
• 39 mill. cash
• 59 mill. current assets
• 52 mill. equity
• Backed by 5 airlines

• Revenue 38.6 mill., IPO 11/99
• Growth spanned 3 yrs before IPO
• Weaker balance sheet
• 0 cash
• 7 mill. current assets
• 0 mill. equity

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Orbitz IPO Launch Strategy

• Continued popularity of online travel industry
• Timing relative to market conditions and
  activity
• Comparability to other online travel companies
• Growth potential
• Reputation and expertise of the underwriter
• - Goldman Sachs Co., Credit Suisse First
  Boston (CSFB)