Hotels doing their part to beat the online rate competition

In a classic big-fish-eats-little-fish scenario, InterActiveCorp, parent company of Expedia, has been gobbling up smaller online travel companies.

The Internet travel portfolio of IAC, of which media mogul Barry Diller is chief executive, now includes Hotels.com, Hotwire and Travelnow.com.

What does this consolidation portend for consumers?

“I’m not seeing any incidence of consumers being harmed,” says Henry Harteveldt, travel industry analyst with Forrester Research. “Does the potential exist in the future? Absolutely.

“Someone could create a Pottersville on the Internet,” he says, alluding to the shantytown created by the miserly Mr. Potter in the film classic “It’s a Wonderful Life.”

Could the Internet become an electronic Dillersville? For now, Harteveldt sees continued robust competition in the online travel industry. Expedia, Orbitz and Travelocity may continue to dominate the $41-billion-and-growing online travel industry, but no one travel site can be all things to all consumers.

Erik Blachford, chief executive of Expedia and IAC Travel, says that IAC is simply trying to reach different markets by acquiring existing specialty businesses, such as Hotwire, rather than starting them from scratch.

“We tried to put the [Hotwire] model directly on Expedia.com, and suppliers didn’t think that was a very good business,” Blachford says. “Acquiring Hotwire made more sense.”

It may be a desire to control prices that is, in fact, affecting consumers more than industry constriction. Hotels, for instance, are increasingly offering their lowest rates only through their own websites. Pricing parity between online and traditional channels, which include using a travel agent or calling the hotel directly, is increasingly common, according to a September survey by a hospitality and leisure analyst at banking firm Thomas Weisel Partners.

It has become harder for consumers to find great hotel deals on the Internet, the report says, partly because hotels and hotel chains have created their own online distribution channels and are doing a better job of managing pricing.

The study concludes that consumers usually can find the best prices by checking with the hotel directly, calling the hotel’s toll-free reservation line or using the hotel’s website.

So are deals dead? Not at all. Here’s how to find them:

* Check the big sites first. They still may have specially negotiated deals. We recently found a great deal on Expedia at the luxury Hay-Adams hotel in Washington, D.C., that beat its offer through its booking engine, Leading Hotels of the World.

* For hotels, check sites such as Hotels.com, Lodging.com and Travelweb.com. (Travelweb was cited in the survey as meeting or beating the price offerings of the competition 20% of the time, though the competition did not include such sites as Travelocity or Lodging.com.)

* When you find a hotel or airfare you like, check that airline or hotel’s site or call its toll-free number.

* If you still can’t find your deal and don’t mind not knowing the hotel or airline details, try an opaque site such as Hotwire or Priceline. The Weisel study found that Hotwire offered an average of 39% off hotel prices compared with other distribution channels. For advice, visit Biddingfortravel.com, an online forum that supports informed bidding on Priceline.

The bottom line for consumers is that finding the best deal requires effort.

“Unless you see a deal that is really attractive, consumers should shop around,” Harteveldt says.

James Gilden can be reached at www.theinternettraveler.com.