Orbitz's Long, Strange Trip To A New Online Platform

The online travel company has been bought, sold, taken public twice, and left with an IT mess. Now it's betting on a major tech upgrade to smooth over all that turbulence.

By John Soat
InformationWeek
February 9, 2008 12:01 AM (From the February 11, 2008 issue)

The hallways outside the elevators have been built to look like a set out of Star Wars, the break rooms feature foosball and air hockey tables, and downstairs on the eighth floor, a Guitar Hero contest is going on, all employees welcome. A flashback to the dot-com boom of 1999, somewhere in Silicon Valley or the Pacific Northwest? No, it's present day Chicago, of all places, and right before Christmas. It's the headquarters of Orbitz Worldwide, the Internet travel site, and I'm there to talk about the company's most ambitious project to date, a new global technology platform. I can also jump in on the Guitar Hero contest, if I want. I decline.

I was invited to Chicago late last year by Orbitz's director of communications, Brian Hoyt. I had contacted Hoyt after noticing an Orbitz SEC filing concerning "Departure of Directors or Certain Officers." In a tersely worded statement, Orbitz said "Bahman Koohestani would be stepping down from his position as Chief Information Officer of the Company." This piqued my interest, and I jumped on the first decently priced flight to Chicago I could find.

For Orbitz, it's been a long, strange trip, and likely to get stranger. Born in controversy, the company is struggling to compete in a market where margins are thin and business models are changing fast. It's made some savvy technology moves, investing heavily in open source and Java (see story, "Orbitz's Journey To A New Platform"). Now it's undertaking a major upgrade to improve its online platform and enhance its ability to do business worldwide. All of this has to happen without disrupting Orbitz's ongoing operations, and just as it has parted ways with the person who led the upgrade effort.

Orbitz's new online platform, code-named Austin, "is the most important asset we have." Jack Staehler, Group VP of Technology

The company's headquarters are in the Citigroup Center building in downtown Chicago, housing about half of Orbitz's 2,000 full-time and contract employees. The office space, occupying three floors, is being renovated; new logos are being painted on the walls reflecting the company's name change last July from simply Orbitz to the more accurate Orbitz Worldwide.

Launched in 2000, Orbitz was funded by five major U.S. airlines: American, Continental, Delta, Northwest, and United. It was conceived as an end-run around the then-dominant global distribution systems, especially Sabre, which charged fees for transacting airlines' reservations, and as a competitor to the increasingly popular online travel sites Expedia (NSDQ: EXPE) and Travelocity.

Orbitz went public in December 2003, and nine months later was acquired by Cendant, the powerful real estate and hospitality company that already owned similar properties such as CheapTickets.com, HotelClub, and RatesToGo, and shortly thereafter bought a European online travel site, Ebookers.com. In 2006, Cendant sold its travel properties, collectively known as Travelport, to the private equity firm Blackstone Group for $4.3 billion. Last July, Blackstone took Orbitz--now Orbitz Worldwide and incorporating the consumer travel sites collected by Cendant--public again.

All this makes for a messy financial picture. One analyst said Orbitz has "a financial statement complex enough that a doctoral student could base a dissertation on it." For third-quarter fiscal year 2007, ended Sept. 30, the company reported a net loss of $32 million on revenue of $221 million. From a high of $15 when it was offered last summer, the company's stock is now trading around $6.50. By contrast, Expedia is trading around $23.

It's also made for something of a tangled mess in terms of IT. For instance, the most recent IPO requires Orbitz to unhook its back-end systems--financials, human resources, etc.--from those of Travelport, its parent company for more than three years.