Design Your Own Discount Getaway

The Web lets you customize -- from airfare to surfing class -- and still get a deal

If you've tried booking a vacation online lately, you may have gotten a new whiff of freedom. On travel sites Expedia, Travelocity, and Orbitz, you can mix and match airlines, hotels, car rentals, and even lift tickets or surfing lessons into one customized, money-saving package.

Called dynamic packaging, this feature liberates you from having to pick only deals designed by, say, an airline-owned tour company that insists you use its planes and partner hotels. Expedia pioneered dynamic packaging two years ago and now gets almost 30% of revenue from package buyers. Little wonder Travelocity and Orbitz rolled out packaging engines last year.

The travel sites say dynamic packaging means big savings for consumers. Travelocity says the average trip booked as a package is $115 cheaper than if you bought the components of the trip separately. Why? Airlines and hotels will discount more if they can do it without directly tipping off their full-paying customers -- by burying the reduced rate in a package rather than posting it on the site. Hotels also will often agree to lower prices on a big site in exchange for being put near the top of a city's hotel listings. Such placement can sell tens of thousands of rooms a year.

But will dynamic packaging give a traveler the best deal in town? To find the answer, we tested 10 domestic and international trips -- from weekend jaunts to family vacations and a honeymoon -- on all three sites and compared them with quotes from travel agents at the American Automobile Assn. We also checked some trips against the travel search engine SideStep, which scours the big agency sites and hotel and airline sites for discounts. The bottom line: AAA and SideStep were often able to beat the major sites' package prices. But dynamic packaging adds convenience and choice to vacation planning, as well as competitive prices. That's not a bad combination.

Expedia's vacation-packaging engine is clearly the best. It has packaged rates from more hotels in nearly every city -- 17,000 in all. And it has a long list of ground attractions. Dara Khosrowshahi, CFO of Expedia owner InterActiveCorp, says IAC sold 2,400 wedding packages, 900 tours of Graceland, and 3,300 helicopter tours of Manhattan last year. "More and more, Expedia is about the whole trip," he says. Orbitz and Travelocity say closing the gap is mostly a matter of time and shoe leather, as they fan out to convince hotels and local merchants to sell through their sites. A handful of ground attractions, including Disney World passes and ski lift tickets, are already available at the two sites.

EXCLUSIVE ACCESS. Some of Expedia's advantages will last a while. Because IAC owns Ticketmaster and distributes restaurant discount coupons through its Entertainment Publications unit, Expedia has exclusive access to such things as NBA tickets or a half-off deal at Outback Steakhouse. So it'll be a cold day in, well, Orlando before you'll see tickets to a Knicks-Magic game on Travelocity.

The convenience of packaging is a huge competitive edge, but our test suggests the sites may be overselling its money-saving power. On our fictional trip to St. Croix, I got lower prices going through SideStep and "buying" the airfare and hotel separately. We also gave our 10 trips to offline travel agents at AAA. Not only were they able to beat prices about half the time, but they also offered a long list of suggestions for things to do at our destinations that they could arrange for us. One thing our test showed for sure: If an agent knows he's competing against the Web's Big Three, he'll go the extra mile. "You say, 'compared to Expedia, Travelocity, and Orbitz,' and travel agents get worked up a bit," says AAA spokesman Justin McNaull.

Among the big online vacation packagers themselves, our test gave no clear verdict about who's cheapest. Travelocity and Expedia were within $10 of each other for their cheapest week in Hawaii, for example, and the lowest available prices for our Memorial Day-weekend jaunt from Dallas to Las Vegas at all three sites were within about $50 of each other; also, travel prices change every day. But we found the occasional glaring difference: On our Seattle-Chicago April weekend trip, Expedia delivered a trip featuring the hotel Orbitz tabbed as its best value for $200 less.

If price is your main motivation, sites such as Priceline and Hotwire offer deeper discounts. But they often won't tell you the name of your hotel in advance when you ask for, say, a three-star hotel in San Francisco's Union Square neighborhood. The more a site lets hotels obscure the discounts they're giving -- especially by not disclosing the hotel's name until after you buy -- the fatter the discounts.

Dynamic packaging offers lots of options, saves time, and may save money, too. If planning your whole trip in one place sounds like a big deal, you'll like the service. It's certainly an intriguing addition to the savvy shopper's toolbox.

By Timothy J. Mullaney

    Before it's here, it's on the Bloomberg Terminal.