Concern grows over Google's acqusition of ITA Software

The internet search giant's acquisition of airline ticket price comparison software has led some observers in the online travel industry to voice concern that the US powerhouse will dominate the sector

Airlines and travel operators in Asia, Europe and the Middle East will want to know what proportion of their business they are in danger of losing to Google.
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There are growing concerns that Google may be planning to monopolise the global online travel industry in the same way it dominates the internet search industry.

In a move that could eventually change the sector in regions including the UAE, the US justice department has removed the final obstacle to Google's entry into online travel.

Earlier this month, the justice department gave the go-ahead for Google's planned US$700 million (Dh2.57 billion) acquisition of the flight data company ITA Software, based in the US.

The green light for the deal came despite a rising chorus of criticism and concern it could hamper competition in the online travel industry by giving Google the whip hand over other search sites.

If the US giant does come to dominate the online travel industry, there are also fears travellers may end up spending more for flights booked online and some existing online services could go to the wall.

In a letter to the anti-trust division of the justice department, Chris Koster, the Missouri attorney general and chairman of the antitrust committee of the National Association of Attorneys General, took up cudgels on behalf of travellers.

"This transaction causes me concern because of its potential impact on the ability of consumers to search online for competitively priced airline fares in a market that has seen rapid growth," wrote Mr Koster. "Ensuring that new sellers can gain meaningful entry into this market, and that all sellers can compete against each other fairly, is our mutual concern."

Peter Burris, an analyst for Forrester Research, has pointed out Google bought ITA Software mainly to get its hands on a cross-airline flight comparison tool known as QPX.

By purchasing the software rather than trying to develop it in-house, Google has radically reduced the time it would ordinarily take to make inroads into online travel.

Last year Google admitted online airfare price-search sites were highly complex in software terms and that the process of developing such technology was "daunting".

By buying QPX, Google has stolen a march on its long-term rival and software kingpin Microsoft.

The company's search engine Bing has only about 9 per cent of the online search market, according to the internet research group Experian Hitwise, while Google has more than 70 per cent.

But Bing Travel has until now been beating Google in online travel search with its increasingly popular airfare site Farecast.

Unfortunately, Microsoft's travel engine runs on search software licensed from ITA. In a move to safeguard competition, the justice department has imposed conditions on the Google-ITA deal. Google will be required to licence ITA's software to airfare search sites such as Bing Travel for a minimum of five years and also to continue to maintain ITA Software's research and development budget.

But the question now being asked by the online travel industry is whether the settlement has drawn enough of Google's teeth to ensure it does not dominate the industry.

The main fear is Google is now in a position to act as the main gateway for consumers to book online flights.

At the moment, a Google search for cheap flights simply calls up a popular selection of travel websites.

Equipped with the flight-comparison software it is acquiring from the ITA takeover, Google will be able to rank online travel services according to which one has the best deal.

Already Forrester Research has expressed concern Google could one day start charging travel websites for inclusion in its search programmes.

The takeover of IT Software also puts competitors such as Microsoft in "the awkward position" of relying on Google-owned technology, Mr Burris pointed out.

The online travel business is becoming more lucrative each year, according to Forrester. In the US, online business travel spending is expected to increase from $80bn this year to $111bn by 2014. But that is only a small part of the potential global market for online travel.

Airlines and travel operators in Asia, Europe and the Middle East must now ask exactly what proportion of their business they are in danger of losing to Google.

The question is particularly relevant tothe Gulf because the domestic travel industry is growing rapidly, partly as a result of political unrest in other areas of the Middle East and North Africa. For Dubai, tourism is becoming the second mainstay of the economy after the financial industry.

But with a growing proportion of travellers and holidaymakers around the world booking online, local tour operators and resorts will come to rely on internet traffic for the bulk of their revenues. If Google should extend its market dominance into hotel reservations and car rentals throughout the region, the booming UAE tourism industry could find itself serving the company's travel search engine.

Despite the concerns, industry insiders believe it will take Google some time to incorporate ITA's technology fully into its search offering.

In the initial phases, the company is likely to concentrate on basic airline fares. This could give local tour operators a breathing space of a year or two to ensure they offer added value such as Arabic-language services.