As online travel agencies grapple with each other for market share, they are also contending with their suppliers, such as airlines using their own Web sites to reduce middleman costs.

While data from Hitwise, an Internet research group, confirms that competition among travel sites is fierce, it also indicates that the rising class of metasearch sites might give agencies the edge.

Analysts who follow the online travel sector have seen signs of increased competition all summer: Expedia Inc.'s gross bookings rose in the second quarter, but not as quickly as they had the year before.

On Tuesday, shares of Priceline.com Inc. tumbled after an analyst downgraded the stock. Stifel Nicolaus analyst Scott Devitt reined in investors with comments about the stock's valuation, as well as his take on the competition.
"We do expect Expedia to become more aggressive with its sales and marketing dollars in the third quarter of 2006," he wrote.

In May, Hitwise took a look at how Web surfers moved from site to site. Nearly 44 percent of visitors to travel sites immediately went to another site in the travel category to comparison shop -- a higher rate than in the shopping category, Hitwise said.

Online travel agencies such as Expedia and Priceline.com sent 59 percent of visitors off to another travel site, more than the 51 percent airlines, rental car companies and other transport sites shipped off to competitors.

But the one-stop shopping sites might have an edge over suppliers: Travelers are increasingly flocking to metasearch sites such as Kayak, SideStep and Yahoo Inc.'s FareChase, which pluck the best prices from travel agency sites, along with individual airline or hotel sites.

Expedia, the No. 1 travel site in the U.S., had 15.6 million visitors in July, a 13 percent drop from last year, according to Nielsen/NetRatings. Kayak, on the other hand, saw traffic more than quadruple year-over-year to 2.8 million visitors in July.

When Hitwise looked at the traffic leaving Kayak during one week in June, it found that the metasearch site sent nearly twice as many surfers to online travel agencies as to transport sites, which includes airlines and rental car companies.

But sites like Kayak may not be a big win for any one travel agency site in particular. In a note to investors in August, Morgan Stanley analyst Christopher Gutek wrote that the sites may be eroding brand loyalty among price-conscious travelers.

Shares of Expedia rose 55 cents, or 3.4 percent, to $16.87 in afternoon trading on the Nasdaq, where they hit a year high of $27.55 on Feb. 2 and a year low of $12.87 on Aug. 2.

Priceline.com's stock fell 41 cents, or 1.2 percent, to $32.99 in afternoon trading. The shares reached a 52-week peak of $33.75 on Aug. 29 and a year low of $18.20 on Oct. 28.

Source: Associated Press