Wednesday, March 25, 2009

Marriott Rewards' new offer is great for consumers but shows how hard things have become in the resort market

Marriott's frequent stayer program, Marriott Rewards, just announced a stunning new offer whereby guests redeeming points for free nights at a slug of lavish Marriott resorts can get an additional free night without redeeming additional points. Members can burn the regular amount of points for a two night stay and take home a third night free. And this isn't being offered only on Sunday nights or at the Milwaukee Airport Marriott in January (no offense to Milwaukee) - its being offered all summer long at great hotels in Hawaii, Mexico, Costa Rica, Portugal and the UK among others.

Clearly, Marriott is having a hard time filling these resorts with typical summer leisure travelers. Group and meeting demand has also fallen precipitously at luxury resorts in particular - no company wants to be the next AIG hosting fancy getaways at fancy resorts. As such, Marriott is turning to their most valuable customers and offering them an additional incentive to come and stay at a Marriott.

For Marriott, this promotion enables them to reduce their Marriott Rewards points liability and stimulate some demand into these hotels - even guests staying for free still generally spend money on food and other hotel services (In fact, some studies have shown that guests staying on loyalty point rewards actually spend considerably more than guests who are paying for their rooms)

For travelers, as we've said before, this is yet another great reason to be burning hotel points and airline miles now - because you can! Demand is down and airlines and hotels are opening up frequent flyer/stayer award space. Don't look for seats on the Saturday before Christmas to Aruba but for less peak than peak of peak times, frequent flyer seats and rooms abound.

Thursday, March 19, 2009

The continuing OTA drama: Priceline jumps into the "me too" promotional game

This morning Priceline announced an airfare price reduction protection promotion. Similar to Orbitz's Price Assurance (which is not a limited time promotion) Priceline's Pricedrop Protection offers consumers a rebate back on their airline tickets if another Priceline customer books the same flights, dates etc at a cheaper price prior to travel.

We'll see if this "promotion" becomes a permanent feature or not but we bet it will - we've heard it has been highly successful for Orbitz in retaining customers and improving conversion rates.

In a fairly direct slam on both Travelocity and Orbitz (the latter has yet to announce a reduction in booking fees) Priceline claims "The new promotion, which is free to consumers, is ground-breaking because it makes the only major online travel agency to offer no booking fees and automatic Pricedrop Protection on its published-price airfares and vacation packages." This message is consistent with Priceline's value consumer positioning - it also increases the pressure on Orbitz to make a move with regard to booking fees. Someone else (who doesn't have booking fees) now offers pricing protection.... And what of Yapta?

Wednesday, March 18, 2009

Another holiday, another rumor that Google is interested in buying Expedia

Remember last April Fools Day when shares (and options) of EXPE shot up on rumors that Google was interested in buying Expedia? Well, yesterday was St. Patricks Day and yet again, the rumor mill was active that Google was going to take out Expedia.

Come on folks, this is just silliness.

First of all, while EXPE is clearly firing on all cylinders right now, its hardly the high-growth, new business model type of business that Google typically buys. Expedia is a great company for sure, with a great brand and great leadership but it is a big travel agency at heart - hardly very Google-esq. Of course Google would like to be deeper into travel but this isn't how (if they even decide to) they will do it. Just look at how things worked out for Yahoo! and Farechase as an example - not that we would hold up Yahoo! as an example of how to do much of anything right.

But more importantly, travel is one of Google's largest ad sales verticals. Do you really think they would potentially jeopardize the huge revenue stream from Expedia's current competitors (e.g. Priceline, Travelocity) and the suppliers themselves to own Expedia? Not a chance.

True, Google's Head of Travel, Rob Torres is an Expedia veteran and even still lives in the Seattle area, but we doubt he is looking to return to his old commute to Bellevue.

Tuesday, March 17, 2009

Travelocity to match Expedia on no booking fees

Today's Wall Street Journal is reporting that Travelocity will announce they are matching Expedia in removing booking fees for published airline tickets until May 31st.

As we previously posted, we don't think the removal of booking fees at Expedia (or Travelocity) is a temporary promotion anymore than it was for Priceline and Hotwire. Adding fees back in is hard - really hard.

It has taken Travelocity a week to digest this dramatic change in the landscape that has occurred and now they have gotten on board. And now Travelocity has matched Expedia - reminds us a little of how the airlines all miraculously match fares and add-on fees. This is a seismic change for the OTA industry - Expedia has put all of their chips "in."

Orbitz will be forced to match the fee reduction as well - the customer overlap is now just too large to ignore. According to Nielson/Net ratings data from 2007, well over 50% of visitors to Expedia also visit Orbitz or vice-versa. We doubt that some of the airline product innovations that Orbitz has developed (Orbitz TLC, Orbitz Pricematch) will be enough to convince finicky customers (just look at those retention rates!) to book with Orbitz vs. Travelocity or Expedia. If only Orbitz had spent as much time working on hotels as they have on air......

Wednesday, March 11, 2009

Expedia's bold move into the land of no air booking fees

This morning Expedia announced a new promotion offering free nights at 700+ hotels based on a three, four or five night minimum stay. This isn't particularly new or exciting as Expedia has long offered hotels this capability. What is earth-shattering is the reduction on booking fees on airline tickets.

Priceline started this trend over a year ago on what was at the time called a special promotion. It was quickly matched by Priceline's key competitor Hotwire (which is owned by Expedia.) But Pricline and Hotwire both had little to lose as neither one sold very much published airfare anyway. And, getting people to buy air, even without making any profit, was key to getting people to buy highly profitable hotels and cars in follow-on transactions.

But now Expedia has followed. This is billed as a promotion, but we would not be surprised to see it become permanent, just as it did at Priceline and Hotwire.

Clearly there will be winners and losers.

Consumers are the big winners as they will gain a major distribution outlet for fare shopping and comparing that will now have prices equal to the supplier sites.

We don't think Priceline has too much to fear because while their sales of air have grown significantly following the removal of fees, they are still a much smaller player with the majority of their profits and revenues coming from the sale of hotel rooms But clearly, Expedia has taken notice.

The biggest loser in this is probably Orbitz. Orbitz derives a much bigger share of their revenues and profits from these fees. In fact, Citi analyst Mark S. Mahaney calculates that Orbitz (OWW) derives nearly 60% of their operating profits from these fees vs. just 10% for Expedia. Expedia's strong stand-alone hotel product and robust cross-selling may enable it to make up for the loss of booking fee revenue on other products.

And another question mark will be the meta-search sites such as Kayak, and Kayak in particular depends on significant revenue streams from its partnership with Orbitz. If Orbitz's fee goes to zero, it will be hard, if not impossible, for Orbitz to continue paying Kayak a referral fee.

Which brings us back to an interesting question: Is there more than meets the eye here with Tripadvisor's new air meta-search product? (Note: Expedia also owns Tripadvisor) If Expedia is now at partity with supplier sites (e.g., etc) on a meta-search site, they stand to benefit from a substantial up-tick in traffic......

Tuesday, March 10, 2009

Denizen: Hilton's 2nd new brand in as many months

Hilton announced their latest brand, Denizen, here in Berlin this morning. Denizen will be Hilton's entire into the "lifestyle brand" category pioneered by Starwood Hotels' W brand. Not coincidentally, Denizen will be led by former W boss Ross Klein.

And why "Denizen?" Merriam-Webster defines Denizen as "an inhabitant" and while takes a more suave approach with "a person who regularly frequents a place; habitué: the denizens of a local bar." Klein defines Denizen as meaning literally "citizen of the world" which is somewhat humorous given the next definition from "a person admitted to residence in a foreign country ; especially : an alien admitted to rights of citizenship" - that sounds like the startings of a debate on immigration.

Denizen sounds to be cut from the same cloth as W in many respects - a focus on large, urban destinations, cutting edge design, anticipating guests' needs in advance, cutting edge technology etc. Sounds a bit like Marriott's Edition as well.

No actual confirmed locations were announced but the usual suspects (along with a few new, non-W cities) were listed:
Abu Dhabi, Austin, Beverly Hills (California), Buenos Aires, Cancun, Hollywood (California), Istanbul, Jerusalem, Las Vegas, London, Los Cabos, Miami, Montreal, Mumbai, New York City, Panama City and Washington D.C.

Lets hope the hotels run better than the new website, which is crawling along at a very pokey pace today.

Virgin America: Brother can you spare a dime?

Today's WSJ is reporting that Virgin America (VX) has lost the support of their US investors. The investors, Cyrus Capital Partners and Black Canyon Capital had negotiated a "put test" with Virgin Group when they funded the fledgling carrier some two+ years ago.

As we discussed earlier, US law (inanely) requires that US based carriers must be 75% owned by US entities and those entities must have at least 50% of voting control - an issue Alaska Airlines has already raised with the Department of Transportation in anticipation of this situation coming to a head.

Virgin America must now seek to raise additional capital from a particularly weak negotiating standpoint - a likely investor will nearly be able to name their terms given the situation.

Thursday, March 5, 2009

So, how will TripAdvisor do it? Here's how....

Many in the travel industry are questioning if TripAdvisor's new flight meta search product can change TripAdvisor's position in the "travel funnel." Today, TripAdvisor sits at the top of the hill during the hotel planning process which generally follows air. Google any hotel or city and TripAdvisor is more than likely at the top or near the top of the organic (non-paid) search listings thanks to great content and years of SEO.

But for hotel bookers who have already booked their air, TA is too late. did a nice piece today detailing air visits pre- and post-TA visits. According to their numbers, "when TripAdvisor users shop for flights, only 13% will do so on the same day as their usage"

Here is where TripAdvisor's huge advantage in organic SEO comes into play. Try a simple google search such as "Boston to Miami Flights" Guess who is #3 in this search - Yes, TripAdvisor. Not bad to be number three in organic search three days after launch! (Note: I don't search for flights this way but I think my mom does.)

Clearly, these strong organic (and free) search results will give TA a big head start in the meta-wars with and

Monday, March 2, 2009

Latest Salvo in Boston-LAX/SFO Virgin/American Airlines Fight: Triple Miles

American Airlines (AA) is pulling out all the stops to make life difficult for Virgin America on their new Boston to Los Angeles and San Francisco flights. First, as we already discussed, AA has already added flights and changed to larger aircraft on the LAX route.

Now American has added triple frequent flyer miles to the mix. American is clearly hell bent on defending their turf and making life as difficult as possible for little Virgin America. Harnessing the powerful AAdvantage program to drive and retain customers is a typical move for the major carriers but the amount of miles (triple) and the length of this offer (until the end of May) is unprecedented in recent times.

And, to add salt to the wound, notice that AA is using an image of Big Ben as a potential redemption destination! Maybe AA's customers can drop in on Sir Richard BrAAnson while they are in London?