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A Key Move in the Hotel Biz

There's more jockeying for position in the online hotel room reservation space, and this time it's Priceline making the moves.

In the face of problematic airline ticket sales given the threats of war and terrorism, the Norwalk, Conn.-based name-your-own price-travel company inked a distribution pact with Travelweb, a consortium of five major hotel chains.

Priceline.comPriceline.com will take an equity stake in Travelweb through an $8.5 million investment and Jeffery H. Boyd, Priceline's president and CEO will get a seat on Travelweb's board.

Coming out on the short end in this particular deal is USA Interactive's Hotels.com , which will lose its spot as the room reservation service on Priceline's Lowestfare.com operation.

Priceline said it expects to integrate Travelweb's hotel inventory on the main Priceline site and Lowestfare.com beginning in the second quarter.

Travelweb is owned by Marriott International, Hilton Hotels, Hyatt, Six Continents and Starwood Hotels & Resorts and it has agreements with the owners of 4,500 hotel properties in those chains to sell discounted rooms.

Bob Diener, president of Hotels.com, was quoted as saying that he doesn't see Priceline's deal with Travelweb as particularly significant and he said Hotels.com currently has relationships with 8,000 hotels. Hotels.com will still supply foreign hotels.

Still, one analyst called it a blow for Hotels.com. Deutsche Bank's Marc Falcone told Reuters that "the hotel companies would rather have buyers use Travelweb and have more discretion over pricing" as opposed to letting Hotels.com set rates.

Rival travel operations Orbitz, Expedia and Travelocity also are busy making hotel deals , too, as air travel has slumped.

Hotel booking is now one of the fastest growing online travel categories, according to Jeff Katz, Orbitz president and CEO. And Expedia CEO Erik Blachford said recently that hotels "are a key component" of the company's travel packages business, which also is being promoted heavily.

Travelweb makes individual discounted deals with local hotel properties, and the rooms are then marked up and sold and the profits are shared with Priceline.