TripAdvisor's Kayak/Fly.com knock-off goes live

UPDATED:

We knew it was coming and now its live - in beta. TripAdvisor's new meta search product is being served up right on the home page. And TripAdvisor is sporting a breezy new logo with a an airplane and a new tagline to boot: get the best flights. then go.

Some early thoughts.....

TripAdvisor is pushing the "fees estimator" as a key selling feature... This handy item allows users to calculate the full cost of a trip including baggage charges. Somewhat humorously, it also will estimate on board charges - even down to if you want a cocktail. But, the fee estimator only appears to work for domestic tickets in the US.

Another interesting feature is the ability to display seat maps by clicking on "available seats" which opens a new window for airlines which are available for sale via Expedia. (Sorry, AA) And, of course, seatguru (another TripAdvisor property) reviews are also included with a separate click.

Hovering over a carrier's logo in the results page allows for some additional marketing messaging - try Alaska for example, and you'll see that they don't charge for the first bag. This is pretty cool functionality - but I'm not sure I would have found it had it not been pointed out to me by someone in the know!

Interestingly, TripAdvisor is also pulling in content from Travelocity, Hotwire and Expedia - but with little rhyme or reason from we can tell on a quick check of the site. Sometimes Travelocity is there, sometimes Expedia, sometimes both. It seems to be largely airline specific. The only constant is that none of the OTAs are shown with American Airlines - remember the Kayak/AA spat?

And, maybe showing TripAdvisor's parent Expedia's roots - its odd that the searching screen shows logos of intermediaries and distribution providers rather the actual suppliers that consumers crave. Indeed, many of the logos shown will probably mean nothing to most of the traveling public - we doubt many non-travel people know or care what ITA, Sabre or Amadeus are!

It also has some rather annoying "features" or lack thereof. While it is a beta launch, some lapses are glaring.

For instance, unlike Fly.com or Kayak.com there is no "search nearby airports" functionality - this really is annoying for those of us who live in multi-airport cities like New York or San Francisco.

The ability to sort for specific airlines is, frankly, backwards. If a user wants to zero in on a specific carrier (maybe because they have an addiction to AAdvantage miles or just love Virgin America) he/she must "unclick" all the other airlines rather than simply clicking on the airline they are interested in.

An interesting twist is showing layover time in connecting cities. Always good to know if I am going to be stuck in Atlanta for a few hours - but missing is the total elapsed time! Total elapsed time would seem to be a much better indicator than layover time - unless you are really desperate to spend some quality time in an airport along the way....

Still, given TripAdvisor's huge reach and loyal user base, we'll go ahead and predict this product (which doesn't seem to have a specific name) will ultimately be successful - if TA can convince people to think of them earlier in the travel booking process - before they have booked their airline tickets and are ready to think about hotels....

Expedia's Tripadvisor to launch new airline meta search site

At today's Goldman Sach's Technology and Internet Conference (BTW, this is the infamous conference that was moved three weeks ago from Vegas to San Francisco to maintain appearances) Expedia Inc CEO Dara Khosrowshahi briefly discussed the impending launch of TripAdvisor's new meta search engine. First alluded to in Expedia's Q4 earnings call and long surmised since TripAdvisor and ITA announced an agreement in January, it appears that it will go live soon. Very soon.

There is plenty of competition brewing in this space and Expedia is the last of the big 3 OTAs to enter the space. Travelocity has morphed igougo into something of a meta and Orbitz has long powered industry leader Kayak.com - along with every other fledgling meta search site out there. As we discussed earlier, TravelZoo has also launched a meta product under www.fly.com just a few weeks ago.

But, TripAdvisor may have the last laugh in this race. They have by far the largest user base and an incredibly loyal following of dedicated users. TripAdvisor is all about hotel and destination reviews today, but it does not seem that it would be too hard to get those same users to think about TripAdvisor earlier in their trip - when they are starting to plan and booking air.

We'll be back shortly with some traffic comparison numbers to muse further on the impending war of the metas!

New taxes on airfare coming your way in new Obama budget

The new Obama budget will increase the current the current $2.50 per segment (and ominously named) "September 11th Security Tax" to something higher - exact details have not emerged as of yet but expect it to be substantial. The government claims that the current tax covers only 36% of the actual costs of security screening.

While all airline tickets are already heavily taxed, this is the only tax that (currently) also applies to frequent flyer award redemption tickets. Its that little (and annoying) $5 or $10 that airlines collect from you when you make an award redemption.

Here is an interesting description of the current taxes on an airline ticket have increased over the years. Its only going to get worse.

Expect the Air Transport Association (ATA) to fight this vigorously. Southwest will also fight this harder than the other carriers because they are hit harder by segment fee taxes than percent of revenue taxes due to their lower average fares, shorter flights and lack of higher-priced international services.

US Airways: OK, maybe the Ryanair model isnt for us...at least not without our competitors following

The AP is reporting that USAirways will stop charging customers for Cokes, coffee and juice... no date is mentioned, but one would think this will be sooner rather than later.

CEO Doug Parker acknowledged that "With US Airways being the only large network carrier to charge for drinks, we are at a disadvantage...." Um, yeah - ya think?

USAirways will continue to charge for other niceties such as pillows and blankets but at least you'll be able to get a free Coke and a smile (ok, the latter is debatable) on USAirways...

This sounds like typical airline codespeak for 'our competitors didn't match us like they normally do for fares, baggage fees, frequent flyer mileage changes, commissions, etc etc so we were left holding the bag....'

Or did USAirways lose the bag on this one?

Sir Richard responds to Alaska Air's claims of "un-Americanism" and kicks off VX's new Boston Service

Wow, thanks to the gang over at Crunch Gear for this great video and photos of the highlights of Virgin's inaugural flight from Boston. Yes, Sir Richard is in drag. Yes, there are cheer-leaders. Yes, there are wicked awesome accents. Probably not any Dunkin Donuts because JetBlue has that angle.

But watch the video past the semi-humorous comments from the Massport boss and Dave Cush - the real show (of course) starts when Branson arrives on the scene. And he has a clear message for Alaska Air that is (as those of us from Boston grew up saying) wicked pissa'

Boston gains Southwest....

Southwest Airlines announced Boston as their next expansion city this morning. Actual routes and service patterns were not defined as of yet but this is certainly good news for Boston area residents who currently trek to Providence or Manchester to take advantage of Southwest's service.

Southwest seems to have run out of the "niche" markets they have traditionally played in - markets that avoided big city airports laden with high costs and delays etc. For many years, Southwest eschewed markets such as New York LGA, Boston and Washington DCA in favor of smaller airports nearby such as Long Island's Islip, the aforementioned Providence and Manchester along with Baltimore.

In recent years, Southwest has returned with a vengeance to two markets it abandoned years ago - San Francisco International (SFO) and Denver. Southwest's operations in these two cities were competitive, offensive positions designed to keep Virgin America in check at SFO and make life hard for Frontier in DEN. So far, both seemed to have worked.

But of late, Southwest has pushed deep into territory that were not on Herb's radar during his tenure. First was Philadelphia where Southwest has built a large operation under USAirways' nose. Southwest will begin service to Northwest's (or Delta's) Minneapolis "fortress hub" later this year. And LGA will soon be a heart on Southwest's route map as well with the recent acquisition of bankrupt ATA's slots there.

And now Boston.

Currently, JetBlue is the largest carrier in Boston with nearly 17% market share as per the Bureau of Transportation Statistics. Boston is a interesting market in that, unlike many large cities today, traffic is split between many carriers - far different from American's Miami, Newark's Continental, Detroit's Northwest/Delta or even the duopoly at Chicago O'Hare of United and American. The remaining pie is split between American, Delta, USAir and United. Obviously, Delta will get a boost once Northwest is added in.

Airlines battle it out for market share in Boston, yet fares remain, on the whole slightly above average. Again, according to the Bureau of Transportation Statistics, average domestic fares in Boston for Q3 2008 were about $397 - placing Boston slightly above the domestic average fare of $362 but far below small cities such as Cincinnati (#1 at $596!) or even Washington Dulles ($451) or LAX ($418.)

So, to the obvious question of "where?" Where will Southwest fly from Boston? As we posted earlier, Virgin America will also arrive at Logan later this year with nonstops to both SFO and LAX. But don't expect to see Southwest launching trans-con flights from Boston anytime soon.

The top three destinations from Logan are Chicago O'Hare, Atlanta and New York LGA. Even with new slots at LGA, there is no chance that Southwest will burn them fighting the US and DL Shuttles.

If we were gamblers, we would expect to see Southwest launch service to Chicago Midway and Baltimore right off the bat. If they feel like tweaking JetBlue, an obvious additions could be Tampa, Fort Lauderdale and/or Orlando. Philadelphia could also be a strong market. St. Louis, Kansas City or Houston Hobby would also build on Southwest's strength's in those cities - all of which have high fares to Boston and aren't JetBlue markets (yet, anyway!)

Municipalities have reservations on OTAs hotel room tax policies

Today's New York Times has finally given the ongoing Online Travel Agency (OTA) tax issue its due in the mainstream (non-travel) media.

The tax issue arises because the OTAs (Expedia, Travelocity, Priceline, Orbitz et al) contract with hotels for hotel inventory under what is known as the "merchant model." The online version was perfected by Hotels.com years ago but has been standard practice in the hotel industry since Mary and Joseph were walked a couple of thousand years ago. In a nutshell, the OTAs are given a reduced, wholesale rate which is lower than the regular rate the hotel offers guests if you call or visit the hotel's website etc. The OTA collects the taxes based on this rate which is the rate the hotel is actually charging the OTA. Of course, the guest pays more to the OTA (it is called profit margin generally) but the OTA remits taxes to the local tax authority based on the amount that they have contracted with the hotel - the amount that actually is passed to the hotel.

Example:

Using simple math, if a hotel is charging $100 per night and the tax rate is 10% and you book directly with the hotel, you'll be charged $110 when you check out of which $100 goes to the hotel and $10 goes to the tax man.

Let's assume you buy the same room via an OTA and the OTA has contracted with the hotel for the SAME room for $85 (a 15% gross margin.) You'll pay the OTA the same $110 when you book. The OTA will then remit the $85 back to the hotel, along with $8.50 in taxes.

So, if you are a tax collector (or a lawyer operating on a contingency fee) you look at this situation and think you are losing out on $1.50 in tax.

This "logic" defies standard practice that has been around long before the advent of the Internet. The wholesale model has been around for years - ever bought a package tour? Tour operators (e.g. Liberty GoGo, Thomas Cook, Apple Vacations) that price, market and sell package tours have worked with wholesale rates since their inception. They pay occupancy taxes based on the rates they actually pay at the hotel - just like the OTAs do.

Indeed, one of the lawyers leading the charge for Anaheim says ' “That’s the insidious nature of this scam,” said Patrick O’Connell, a lawyer at Baron & Budd, a Dallas-based firm that represents municipalities seeking tax revenue. “The hotel pays tax on the amount that the hotel was paid.” ' Wow, what a concept - the hotel pays tax on the amount of money that crossed its doorstep.

Consumers are not harmed in this situation - Joe Hotel Guest would have paid the same amount if they had bought it directly or via an OTA. In fact, Joe Hotel Guest probably booked at an OTA because he found value in booking there - maybe it was wide variety of hotels, maybe it was great content, maybe it was a special package rate.

Finally, we think local cities, towns and counties should think about how many visitors Expedia, Priceline, Orbitz and Travelocity bring their way. These days especially, they should be happy for additional travelers who spend money in local restaurants, shops attractions, rental car agencies and yes, hotels.

January US Airline Agency Sales off 25% - demand plumets faster than airlines can remove capacity

The Airlines Reporting Corporation (ARC) has posted January US travel agency sales and the numbers are, in a word, shocking.

A bit of background first. ARC is a company owned by the major US airlines that facilitates payments between the airlines and all travel agencies (including OTAs such as Expedia et al). If a ticket was bought at a travel agency in the US, the revenues flow through ARC. Airlines' sales outside the US, as well as their own airline.com (e.g. delta.com, aa.com etc) revenues do not flow through ARC. Roughly 50% of US airline revenue is handled by ARC and it skews heavily towards business travelers.

The raw data is here but year over year, actual ticket sales numbers plunged by nearly 25% while revenues plunged by an even greater amount - nearly 27%. This is one of the first indicators we have of what is to come for the airlines now that the holidays are over and the true recession has set in. Most analysts have pegged capacity reductions at around 10% year over year - revealing a great chasm is opening between demand and capacity.

Indeed, the carriers' worst fears are being realized - demand is falling faster than they can reduce capacity. Things were not supposed to work out this way.

These declines are also telling for the Global Distribution Systems (GDSs) . Galileo, Worldspan (both owned by Travelport), Sabre and Amadeus are no doubt seeing similar declines in airline segments as nearly all of ARC's revenue is delivered by the GDSs. With their heavy debt loads from their privatizations, things may get interesting quickly for Sabre and Travelport.

Alaska Airlines goes after Virgin America (again)

As we discussed in an earlier entry, Alaska Airlines previously told the DOT that they were not going to file their quarterly Form 41 passenger and revenue data unless Virgin America was compelled to do the same. Last week, Virgin America complied and filed their data since inception.

Today, Alaska Air fired another shot across the bow by asking the DOT to review Virgin America's status as a US Carrier. For those of you not aware, our fine government requires that all carriers based in the US to be 75% owned by US citizens and "effectively controlled" by US citizens. During Virgin America's start-up days, the incumbent US carriers convinced the DOT that Virgin America was, in fact, controlled by Sir Richard Branson, resulting in the replacement of original CEO Fred Reid.

Lets talk for a minute about the silliness of this law. This law, which has been on the books in various forms for eons, was created back when airlines were thought to be an integral part of our national defense system. Way back when, we didn't want some foreign power to come in and scoop up our airlines and move all of their planes to far-off lands.

However, the world has changed dramatically since those times. Now, the law's biggest effect is to constrain US carriers' in their ability to raise foreign capital. In these times especially, when capital is so dear, it is bone-headed that our government continues this form of regulation.

Heaven forbid that some great airline (say Singapore Airlines) would come in and buy a US carrier (say United) and provide funding that enabled United to actually have a decent product, employ thousands of Americans and run an operation akin to what Singapore Airlines, arguably the best airline in the world, is able to do. We allow foreign operators to own our airports (Chicago Midway for example), our railroads, buildings, roads and all manner of infrastructure. But not our precious airlines. Because our airlines are so good at what they do, right?

Alaska Airlines claims they are just looking to ensure all US carriers are held to the same standard. Fair enough, but what a silly standard in these times.

Virgin America provides Americans with a great product to fly on, employs thousands of Americans, buys loads of American products and pays plenty of American taxes - shouldn't that be enough?

Travelzoo (TZOO) launches Fly.com - competitor to Kayak

Travelweekly is reporting that Travelzoo has launched a new meta search product at Fly.com with the catchy tagline "See the world, search on Fly"
Fly.com is in beta but already has some interesting features not found on competitors such as Kayak or cfares including an innovative summary tab of results that saves users from having to wade through hundreds or even thousands of results to easily compare airlines.

Fly.com also returns "premium fares" for first or business class in the same search - a nice feature for business travelers in particular, especially these days when deals on first class tickets (domestically anyway) abound.

We also like the easy to use option that allows users to select individual flight segments right from the schedule display. (See below for an example - "show all results with this departure flight")

Its still in beta mode - we aren't quite sure why the logo for "all" in the matrix display is a piece of paper but it looks really good overall.

It will certainly interesting to see how much muscle TZOO puts behind this new product - 13M+ TZOO email subscribers could generate a ton of traffic.

Note: Travelzoo is a Hudson Crossing LLC past client

Rep. Oberstar (D - MN) Proposes Bill to Limit Airline Anti-trust Immunity - We Propose Limiting Congress

Congressman Oberstar has introduced new legislation that would not only limit future airline anti-trust immunity but also re-examine the existing pacts that have already been negotiated and approved. Anti-trust immunity (ATI) allows members of an airline alliance to jointly coordinate fares, schedules and sales efforts. Normally, airlines are required to compete against each other in these areas but when they form marketing alliances (a la Star, oneworld or Skyteam) they frequently ask for Anti-trust immunity in order to fully realize the benefits of such tie-ups.

To be blunt, with all due respect, we feel that Congressman Oberstar is far off the mark with his concerns. Continental has already commented and was much more delicate (for obvious reasons) in their response than we will be.

In the news release, Congressman Oberstar claims that "He said competition among carriers is declining, resulting in higher fares, especially on routes between the United States and Europe."

Really? Congressman, have you noticed the flury of new route announcements offering new and enhanced service to Europe in the last six months? Your own constituent, Northwest Airlines has added new flights from Seattle, Minneapolis, and Detroit to London Heathrow in the last nine months. (OK, so Seatte didn't work out so well.) Delta has added slugs of new service including routes such as JFK-Malaga, Spain, JFK-Prague to name just a few. And lets talk about the explosion of new flights from London Heathrow following liberalization there. Continental has added flights from Houston, Newark and Cleveland. Delta has added Atlanta and New York. And new service hasn't been limited to just US carriers - Air France tried (and failed, mind you, because of TOO MUCH competition) to operate London Heathrow-LAX flights, BA's new subsidiary OpenSkies has added flights from JFK to Amsterdam and Paris-Orly. Need I go on?

Next "Oberstar called the immunity grants 'a de facto merger of these airlines,' and said the result is less competition. He said in 1990 there were six airlines competing on the route between Paris and New York's Kennedy Airport, while today there are only three, with SkyTeam alliance partners Air France and Delta Air Lines Inc. controlling 75 percent of the market."

Again, really? Lets look at who was operating JFK-Paris in 1990. If memory serves, that would probably be Air France, American, TWA, Pan Am, Air India and one other "5th Freedom" carrier operating to the US via Paris.

I don't know about you, but I don't really miss TWA or Pan Am. Air India isn't exactly my first choice of airlines either.

Now we have Air France operating a slug of flights (all codeshared with Delta), American operating two 767-300 widebody flights daily plus new competition from British Airways via OpenSkies. And this does not include the rise of flights from Newark which includes nonstop flights on Continental (3 daily flights this summer) plus Air France, plus BA's new acquired Le' Avion (yet another new competitor)

And finally, back to your constants, Congressman, lets look at the unparalleled success that Northwest Airlines has been able to achieve through a very tight alliance with KLM. This was one of the first alliances and the first to be granted full ATI. Without ATI, there is emphatically no way that your home-town airport, Minneapolis-St. Paul could support even one daily nonstop to Amsterdam, let alone the three widebody nonstops per day that Northwest and KLM will be operating this summer. Without the ability to share in costs and risks, coordinate schedules and fares etc, these flights simply would not exist. Similarly, Northwest and KLM have combined forces to operate a number of other routes that would never see service without full ATI such as Hartford-Amsterdam and Memphis-Amsterdam. I am sure the tax-payers in both of those cities are proponents of ATI because of the new service it has afforded them.

The best benefit for consumers and our ailing airline industry would be to allow for increased Anti-trust immunity as it actually provides more service in an already brutally competitive industry. We don't need six carriers operating from JFK to Paris. If JFK to Paris is so lucrative, any airline could start flying it tomorrow.

We should allow more ATI, not less. Now that London Heathrow has been opened to flights from all airlines, oneworld should promptly be given ATI. Similarly, now that Continental has taken the bold step of switching alliances (from Skyteam to Star) lets allow them to vigorously compete under the ATI umbrella.

Congressman Oberstar, please let us know when you are ready to hold hearings on this matter - we are ready to share the traveling public's voice.

Virgin America releases financial results (DOT Form 41 data)

At long last, Virgin America has decided to release their financial results which the Department of Transportation requires of all US-based carriers. The raw data is not yet available but Virgin America issued a press release with some highlights. Since inception, Virgin America has refused to file this data due to "competitive concerns." In essence, Virgin argued that because they operate a relatively simple fleet and route structure that competitors would be able to calculate Virgin's costs, yields, margins etc. Read all about it in the DOT filing here. Alaska Air finally said they wouldn't file any more either if Virgin didn't have to.

Load factor was impressive, clocking in at 81% in Q3 (the most recent quarter reported) but total losses were even more impressive - $174M on revenue of $260M.

Once the actual data is released, we'll have even more data to play with - should be interesting to look at those trans-con yields

Opentable.com: No reservations for the IPO or reservations about an IPO?

On Friday, Opentable.com issued a press release indicated that they had filed for an IPO. Apparently not daunted by the current financial malaise, Opentable wants to go public.

While we applaud them for their fortitude, it seems a curious time for such a bold move given not only the current situation in the financial markets but also the state of the restaurant business.

Restaurants are hardly in an expansion mode - just in New York City alone, we see a lot more restaurants closing than opening. Stories abound of restaurants reducing menu prices: value meals are the latest fad at four and five star restaurants in NYC as the economy continues to sag and consumers cut back on spending. This is going way deeper than just Bennigans closing down.

If restaurants really believe that Opentable can actually drive incremental demand (the oldest line in the travel industry, by the way) then maybe there is hope that participation drives customers faster than it drives costs.

And what about growth prospects beyond just adding more restaurants in existing markets? The only business more fragmented than the hotel industry has to be the restaurant industry. So, every new market that Opentable expands to requires feet on the street explaining the model and getting restaurants to sign up. And just how far down the food chain can Opentable go? Does a Friday's in Grand Junction (where I involuntarily ate last week) really need to be on Opentable? I doubt that people in Grand Junction are clamoring for online reservations...

So, in a down economy, with less people eating out (and therefor using Opentable) and less restaurants taking reservations (they pay a fee to Opentable) is this really the time for an IPO? We bet there wont be many reservations for that table.