Online travel agencies duke it out for bookings

Thu Mar 19, 2009 3:13pm EDT
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By Kyle Peterson

CHICAGO (Reuters) - Online travel agencies, eager to spur spring bookings in the recession, are locked in a price battle that has some of them cutting fees and reimbursing customers if the price of their trip falls after they book. on Thursday offered a promotional price guarantee on airline tickets and vacations. The promotion follows a similar deal unveiled this week by Travelocity, and a fee waiver announced last week by Expedia Inc.

Orbitz Worldwide, which launched its own price protection policy last year, plans to announce a major hotel sale on Friday.

"Downward demand pressure on a commodity business usually creates these types of price wars," said Morningstar equity analyst Warren Miller.

The travel industry has suffered in recent months as the recession erodes travel budgets. The companies hope to boost bookings for the peak summer travel season despite consumer anxiety about the economy.

But at least one analyst is pessimistic. Expedia shares tumbled on Thursday after JP Morgan cut its rating on the company to neutral from overweight.

"We believe increased competition and pricing wars will cut into prior revenue streams and limit further market share gains," JP Morgan said in a research note.

Shares of Expedia were down 7.4 percent at $7.56 on Nasdaq. Priceline shares were down 2 percent at $77.99 on Nasdaq. Orbitz shares were up 1 cents to $1.25 on the New York Stock Exchange.   Continued...

<p>A traveller walks to his flight at Ronald Reagan National Airport as the sun rises in Washington, September 24, 2008. REUTERS/Jason Reed</p>