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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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slide1

Orbitz.com

The Marketing of its

Initial Public Offering

Mona Habib

Justin Gold

Aleksandar Tomic

Subra Achanta

Hiroyuki Araki

Regan Richardson

Will Moss

slide2

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?

slide3

The Alliance

Orbitz

Founded by :

American Airlines

Continental Airlines

Delta Airlines

Northwest Airlines

United Airlines

slide4

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)
slide5

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.”
slide6

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
slide7

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
slide8

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
slide9

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.”
slide10

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

slide11

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
slide12

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
slide13

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
slide14

$24,230

ONLINE TRAVEL AGENCY

AIRLINE WEB SITES

HOTEL WEB SITES

CAR RENTAL WEB SITES

OTHER WEB SITES

$12,887

$6,974

$2,556

Online Travel Market - US

Distribution Channels (US$M)

1998

1999

2000

2001

Source: PhoCusWright, Inc., Sherman, CT USA, 2001

slide15

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

slide16

The Online Traveler

Which is the Most Important?

Price

Reliability

Service

Ease of Use

Source: PhoCusWright, Inc., Sherman, CT USA, 2001

slide17

The Online Traveler

Who has the Best Price?

Source: PhoCusWright, Inc., Sherman, CT USA, 2001

slide18

Expedia

Travelocity

Orbitz

Southwest Airlines

CheapTickets.com

Other

Leading US Travel Services

Online March Bookings 2002

slide20

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
slide21

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
slide23

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”
slide24

Online Travel Agencies

Perceptual Map

Multiple

Orbitz

Expedia

Travelocity

Trip.com

Priceline

Services Provided

OAG

AirGorilla

Hotwire

CheapTickets

Southwest Airlines

Few

Worst Value

Best Value

Value for Money

slide25

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
slide29

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)
slide31

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
slide32

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 Expedia’s at its time of IPO
  • 75% of Orbitz’ entire revenue in last 3 months
slide33
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

Comparison

Orbitz

Expedia

slide34

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)