Why is preview on the skids?

What’s wrong with Preview Travel?

The company got excommunicated from the American Society of Travel Agents a few weeks ago. It lost its president and CEO just this week and in January the head of the agency side of the company left.

Much more troubling, its stock price isn’t keeping pace with the rest of the blazing-hot Internet group.

While Amazon.com’s stock soared more than 1,300 percent last year, Preview’s shares merely treaded water. Its price hit a 52-week high of $44 last July 2, then fell to its current trading price at around $22, despite posting a less-than-expected loss of 61 cents per share in the fourth quarter of 1998. Analysts were looking for a loss of 66 cents per share.

By comparison, Pegasus Systems’ stock is flirting with all-time highs as this column goes to press. Never mind companies such as Yahoo! or America Online, whose stock also went through the roof.

Is something happening at Preview? I asked around.

Three analysts continue to maintain “strong buys” for the stock, and two analysts have a “moderate buy.”

“It’s fairly obvious what’s going on,” says Paine Webber analyst James Preissler. “What lifted all the other Internet stocks was holiday shopping. As you know, the fourth quarter isn’t the biggest for leisure travel. I would expect to see things improve in the first or second quarter.”

Writing in a recent issue of her Weekly Web Report, BancAmerica Robertson Stephens analyst Lauren Cooks-Levitan asked a similar question.

“As investors have been loading up on e-tailing stocks, we wonder why Preview Travel has been discarded,” she notes. “One likely reason for the oversight is the [fourth quarter] seasonal slowdown in travel planning. Unlike other e-tailers, which have benefited from investor anticipation of a huge increase in online shopping this holiday season, Preview Travel has had little news to drive excitement. But . . . the company has been chugging along.”

I’m not sure I can buy the seasonal argument. Although it explains some of the stock’s lackluster performance, it can’t account for Preview’s complete exclusion from the baffling run up in Internet retailing stocks. I think there are other forces at work here, and I bet the company’s expulsion from ASTA has something to do with it.

Neither side is very talkative about Preview’s banishment from the travel agent organization. ASTA spokesman James Ashurst would say only that Preview’s advertising campaign violated his group’s bylaws. Scott Radcliffe, Travel’s spokesman, told me, “We feel that their decision is very unfortunate.” Preview chairman Jim Hornthal was unavailable to comment on the action.

People familiar with the events tell me the advertising campaign in question slammed brick-and-mortar agents. ASTA warned Preview to stop the local spots. Preview then apparently took the commercials national.

The message Preview sent to Wall Street is clear: We’re not like the rest of the travel agents. We’re better. We’re like the other e-tailing companies out there whose stocks have shot into the stratosphere.

Is it possible that Preview planned to defy ASTA all along? That getting kicked out of ASTA was a well-planned media event designed to give Preview an identity distinct from its brick-and-mortar competitors? The value of belonging to ASTA is questionable for companies such as Preview. But if the expulsion was planned and staged, then it’s also clear that it failed.

Since its removal from ASTA, Preview’s stock price continues to drift, even as its online retailing rivals climb. Analysts predict these high fliers will have to come back down to earth soon.

There’s no telling what that will mean to Preview or the other publicly traded travel companies. Let’s just say there isn’t much further down for Preview’s stock to go without setting off a lot of alarms in the interactive travel business.

Christopher Elliott is the author of Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals. Critics have called it “eye-opening” and “inspiring” — it’ll “grab your attention and won’t let go.” Order your copy now on Amazon, Barnes & Noble or iTunes.

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