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.
Priceline.com 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.
Priceline said it would reimburse travelers up to $300 for a flight, $600 on vacation packages that include a hotel, and $300 for airfare and car rental packages if another Priceline customer makes an identical reservation at a lower price.
The temporary price guarantee is similar to one offered by Orbitz.
Priceline, which in 2007 discontinued booking fees on airline tickets, said it also would waive booking fees for car rentals and vacation packages for the duration of its promotion.
Travelocity this week said it would reimburse its customers between $10 and $500 if the price of a vacation package falls after booking. The company also said it would waive booking fees for domestic and international flights during its promotion, which ends May 31.
Expedia last week said it would waive booking fees for all flights booked through May 31. The travel agency also said it would give its customers the last night free of a three-, four- or five-night hotel stay.
Orbitz said that starting Friday it would offer discounts of 30 percent or more on hotel room booked through May 24. The company said the discount was its biggest hotel sale ever.
(Reporting by Kyle Peterson; Editing by Brian Moss)