February 16, 2011

Google Travel Deal Under Scrutiny

Google is promising better bargains and more convenience by melding the Internet search leader's wizardry with the Web's top airline-fare tracker, ITA Software.

That has existing online travel sites like Kayak, Expedia and Travelocity worried they will not stand a chance of competing, a scenario that could lead to higher fares.

The U.S. Justice Department is expected to decide on whether to allow Google Inc. buy ITA for $700 million.  The deal would give Google control over software that has helped power the reservation systems of U.S. airlines and a fleet of online fare-comparison services for the past decade.

The government review could serve as a test of how aggressively U.S. antitrust regulators intend to police Google as the company uses the wealth and influence gained from its dominating share in Internet search to expand into other lucrative markets.

According to Forrester Research, the U.S. market for online travel bookings totals about $80 billion annually.

The search giant said that owning ITA would lead to lower prices and more convenient ways to shop for tickets on the Internet.  Travelers might tell Google how much they could afford to spend to visit a warm place on certain dates, and the search engine would turn into a travel guide.

However, critics say that Google would be able to hobble other travel services by burying them in its search results or denying them ITA's latest technical innovations.

"Google will have leverage over the entire online flight industry," said Thomas Barnett, a former leader of the Justice Department's antitrust division.

Barnett is an attorney who represents Expedia Inc., which has banded with such online travel services as Microsoft Corp.'s Bing, Travelocity, Kayak Software Corp. and Farelogix Inc. to oppose the ITA deal.

Google promised it will not sell airline tickets or book travel arrangements on its own site.

However, competitors say there is no guarantee on who would get the traffic. 

Online travel companies also fear that Google would place its own travel recommendations on the top of its influential search results page.

Google already fields so many travel requests that its search engine accounts for about 30 percent of traffic to travel sites.  ITA's technology would enable Google to attract an even larger share of travel searches.

However, Google appears to want to improve its travel results so that it can retain users and sell more ads, rather than be interested in making commissions.

Travel advertisers account for about 10 percent of Google's annual revenue.

The fear is that if Google gets a larger share of travel searches, it would be in a better position to command higher ad rates from airlines, hotels, rental car agencies and other leisure services.

Not all opponents rely on ITA, such as Expedia who uses its own software.

Google believes those alternative tools show there would still be ample competition if it gains control of ITA.

However, Robert Birge, Kayak's chief marketing officer, said ITA has most comprehensive database because of its ties to most major U.S. airlines.

Birge said ITA also has the best tracking system to monitor the latest changes as carriers adjust their fares.

"They have access to data that no one else has," he told The Associated Press. "They know what airline seats are available at what price right now."


On the Net: