Recently, Travelport had indicated that there might not be any major impact on travel as a result of an economic slowdown.

Published: 13 Feb 2008

Recently, Travelport had indicated that there might not be any major impact on travel as a result of an economic slowdown.

Now, assessing the impact of a slowing US economy, Expedia has indicated that there may be a "mixed bag" for online travel agent. Reuters highlighted that during an economic downturn discretionary spending on travel could decline, hurting bookings.

On one hand, as airlines work to fill planes to capacity and charge higher fares, online travel agencies have a harder time selling seats, reportedly said Expedia CEO Dara Khosrowshahi. "Higher prices are not good for consumer demand ... that is to some extent a headwind for OTAs."

On the hotel side, however, there are signs of softer demand, which means more inventory is available to online travel sites, Khosrowshahi said. "There are better (hotel) promotions than there have been in the past year. Our customers respond well to promotions."

The Expedia CEO also said there have been some signs of group cancellations at hotels, which have turned to Expedia to fill the rooms.

Khosrowshahi said consolidation is inevitable among all these travel sites as the market matures. He said Expedia expects to spend more on acquisitions in 2008 than it did in 2007 when it spent about $100 million.

Recently, Travelport's President and CEO Jeff Clarke mentioned that travel does respond to changes in economic growth, but price cuts have helped maintain volumes. "As an intermediary in the industry we get paid primarily on the transaction," he had said. "Consumers tend to be very price elastic and so, when prices go down, more consumers travel. We've seen some decreases in prices and that has increased certain volumes. So we have not seen a material slowdown in travel yet."