Southwest to Frontier: Not so Fast

Southwest today made a counter-bid for Denver-based Frontier Airlines. Regional airline Republic (which operates regional jets on behalf of United, Delta, USAirways and others) made a bid for Frontier back in June which we previously commented on.

With this move, Southwest is playing spoiler in a quest for control of the Denver market which it re-entered with gusto in January of 2006. Since then, Southwest has consistently added frequencies and new markets from Denver.

Southwest says it will operate Frontier as a separate subsidiary (for a time) with full integration possible at some future date. This is similar to how Southwest approached Morris Air and American Trans Air (ATA) in previous growth spurts. Morris Air worked out well, ATA, in the final assessment (post liquidation probably did as well with Southwest picking up slots at LGA and gates at MDW.

With Southwest operating Frontier as a separate subsidiary, one can be sure who will be pulling the strings. Most importantly, Southwest will have control over Frontier's pricing and route planning. Should the sale go through, expect Frontier to rapidly exit markets where they currently compete with Southwest such as DEN-LAX, DEN-SFO, DEN-MDW etc. A code-share relationship will undoubtedly be quickly implemented to drive cross-sales and connecting traffic. Cross loyalty program participation is also a sure thing. And, one would bet that the Frontier/AirTran frequent flyer and cross-booking (on each other's websites) relationship would end quickly.

But don't expect Frontier's shiny new Airbus aircraft (with those fun animals!) to be repainted into Southwest's livery anytime soon. Rather, Southwest could gradually reduce Frontier's flying as they accept additional 737s (which they have to put somewhere.) This would create a gradual switch-over from Frontier to Southwest and ensure Southwest had places to put all the 737s they have on order.

In one quick, and relatively cheap purchase, Southwest will eliminate a key competitor in a major market, leaving them to focus on competing with United. And how hard can that be given the current state of UAUA? Brilliant move, WN!

New York Air Market Continues to Heat Up: American Offering Double Miles

The highly competitive market in New York continues to just get hotter. Today, American launched a new promotion offering New Yorkers double AAdvantage frequent flyer miles for the rest of the year. On all routes, all fares, worldwide.

This is clearly a response to a similar offer that Delta made a few weeks ago for which was broader in some respects (you don't have to live in NY) but also more targeted because you need to be a Delta American Express card holder.

What is interesting is that American felt the only place they needed to match the offer was the NYC market. The New York area has increasingly become a battle ground between Delta, Continental and American. AA and DL (especially DL) have added extensive new flights from JFK, AA has opened a new terminal at JFK. Continental continues to operate the largest operation of any of the carriers, albeit over at Newark - NY's third airport even though it is in New Jersey. (Which simply allows Delta to claim more flights from New York meaning the state rather than the metropolitan area - funny, they dont make the same claim in Cincinnati where the airport (CVG) is actually in Kentucky!) But we digress.

Complicating the story is Continental's impending move from the Skyteam Alliance (of which Delta is part of) to the Star Alliance which has not had a strong New York presence. Many NY travelers split their loyalty between Delta and Continental and credit their miles on both into one program. This is about to change as consumers will no longer be able to credit CO flights to DL and vice-versa. This change, set to happen this fall, raises the stakes for both carriers to hold on to the other's travelers.

Oh, and if you want those double miles on AA, go here and register....

Who Really Wins in the Cities/Towns vs OTAs? Lawyers!

No matter where you stand on the current battle(s) between the Online Travel Agencies (OTAs) and the various municipalities who are currently suing them over occupancy taxes, you'll probably have to agree that the outcome reported today in the Madison Record (a weekly legal journal covering the Madison County, IL courts) is not a good one.

Some great reporting from this unlikely source reveals that nearly 80% of a recent case settlement by the fair city of Fairview Heights, IL against eight OTAs went to the lawyers who handled the case. The settlement for Fairview Heights was $315,000 of which the attorneys collected $227,000 plus another $31,0000 in expenses.

This isnt meant to be an anti-lawyer tirade (Indeed, the lawyers in this case only billed at about $50 an hour in total) but a concern about who really wins in these cases. We don't yet have the answer, but a situation where the OTAs cough up all sorts of money and most of it goes to pay legal bills rather than to the cities (where mayors and city council members are claiming that all this money will be used for the benefits of their citizenry) is hardly a good outcome for anyone.

Hotels.com loses trademark status

In a quiet post on the Media Post website we found an interesting article about hotels.com losing their trademark status. It appears as though the word "hotels" is simply too generic a word to trademark, and even "hotels" with the ".com" added is too generic. Despite the efforts of several surveys to convince the courts otherwise the "U.S. Court of Appeals for the federal circuit disagreed."

Media Post smartly assumes that the biggest impact of this is that hotels.com can't stop other companies from bidding on their domain name, in fact as of this morning a search for "hotels.com" shows that Priceline, Travelocity and several other players are bidding on their domain name.

This reminds us of the lawsuit against Google and Yahoo by American Airlines. We think American has a better shot at protecting their trademarked name than hotels.com did, but the whole battle over bidding on other people's domains/trademarks continues to heat up in interesting and unusual ways.

United Actually Reduces a Fee. Yes, You Read that Correctly

Today, United Airlines announced they were dropping last-minute fees for Mileage Plus frequent-flyer award ticket redemption. Yes, this is not a misprint but a case of an airline actually dropping an irksome fee. Currently, non-elite Mileage Plus members are charged $100 to redeem within six days of travel and $75 within seven to twenty days.

These fees have long pained consumers but have been revenue generators for the airlines. After all, it costs an airline the same amount to pull miles and issue a ticket for free travel two hours before a flight leaves vs. two months.

We can think of few other fee roll-backs that once they have been widely accepted by the industry. USAirways stopped charging for sodas but only after they were not matched by any of the major airlines. Similarly, Delta was forced to back down on new international baggage fees after the industry failed to match leaving Delta uncompetitive.

Indeed, prior to Northwest's acquisition by Delta, Northwest did not charge last minute ticketing fees. However, that perk (or should we say Worldperk) went away as soon as the ink was dry on the merger.

Bravo, United.

JetAmerica: We told ya so!

Late on Friday, JetAmerica announced that they were throwing in the towel. As we predicted, this airline is grounded before it ever flew. Apparently, not enough people in Newark were interested in flying to Toledo, Lansing and Melbourne. Shocker.

JetAmerica blamed the shutdown or non start-up on an inability to gain access at Newark. Right....

Priceline Launches Hotel Maps - A Very COOL Way to Search For Hotels

Priceline.com has launched a very cool new feature which integrates hotel prices (published prices, not Name your Own Price) star ratings and reviews on a map. Other websites allow users to plot results on a map after a search but Priceline's approach is innovative in that it allows users (particularly those who are geography dorks such as this writer) to start with the map.

Alas, the prices are not dynamic but Priceline Maps still provide a really unique shopping experience by allowing users to adjust sliders to narrow down results based on price, reviews and/or star rating. It is also possible to zoom in and out to really focus in on a specific area. This is particularly useful in Manhattan but the tool works equally well over larger swaths such as all of San Diego.

Priceline Maps are also great because they show in great detail how close a hotel is to various other attractions and points of interest etc. No longer will consumers need to rely on a hotel description that states "walking distance to Central Park" only to find out that only a real New Yorker would consider 20 blocks walking distance! Talk about transparency.

Priceline Maps are also exciting because they are truly a global product. This isn't something that just works in major metros in the US - it works globally. We just looked at the location of hotels in Mauritius!

Check out Priceline Maps here for yourself.

Trip.com: Resurrection of a Brand as Orbitz Enters Multi-site Search Fray

Orbitz will shortly announce the re-birth of the Trip.com brand as a multi-site travel search engine akin to BookingBuddy.com, (an Expedia property) TripAdvisor (also owned by Expedia) Igougo, (a Travelocity property) and TravelZoo's Super Search product.

According to senior Orbitz executives we spoke with, Trip.com is an effort to continue to "maximize the revenue per visit" of "each customer that walks through Orbitz' front door." "Some consumers have indicated a strong preference for these types of comparison sites" and Orbitz will now offer visitors the choice of how to shop - an area "historically under served by Orbitz."

Orbitz is betting that offering consumers more choices in how they search and buy will lead to increased total revenues and better traffic efficiencies. Orbitz will now be able to convert visitors on either a transactional basis (by selling at Orbitz.com) or on a media basis (by referring to another site.)

Trip.com supports air, hotel, car, vacation packages and cruises and compares numerous sites including both meta sites (fly.com, bing.com and kayak.com) as well as traditional Online Travel Agencies (OTAs) such as Travelocity, Hotwire, Expedia and of course, Orbitz and Cheaptickets.

Thus far, the only supplier direct link is to IHG's Holiday Inn. Three reasons are probably driving the limited supplier direct presence. First, Trip.com has just launched (interestingly without a "beta" tag) so many relationships are probably not yet in place. Secondly, particularly on the hotel side, many suppliers do not currently have an API (a structured way for two systems to talk with each other) that is easily searchable. Finally, Orbitz indicated that "unlike other sites," Trip.com will not follow the "strategy of offering complementary link-offs" to supplier sites.

Trip.com does a really nice job of allowing the user to select multiple sites at the same time on the search page and search all at once vs. some competitors which force users to click each site one at a time.

Trip will be operated as part of Orbitz Worldwide's Away Network which includes Away.com, Gorp and Outsideonline.

Diller's Offspring - No Longer All in the Family

This morning, Ticketmaster announced an exclusive partnership with, no, not Expedia but Priceline. How times have changed since the breakup of the once mighty internet jaggernaught IAC. (As most of you are probably aware, both Expedia and Ticketmaster were at one time owned by IAC).

It appears that Ticketmaster has climbed out of the nest and learned to fly - with Priceline.

Travelocity: The Walled Garden Finally Falls - Almost

Travelocity has long promoted their igoyougo property (which has morphed over time into a version of Booking Buddy or Super Search) using pop-unders and banner ads. Travelocity's goal has been to still a searching consumer to convert somewhere even if not on the Travelocity mothership. In other words, better to get a few dollars in affiliate revenue by shipping the consumer off to a competitor than end up with nothing. After all, Travelocity attracted the consumer to their site somehow which probably wasn't free - might as well make something on it.

But we recently noticed a much more prominent placement - right at the bottom of the air search results page. Travelocity is also clearly displaying their competitors logos - right on their own site - first time we have seen that on major OTA besides Hotwire.

Now if only the search box actually worked without leaving the page - it does not allow a user to actually input city pairs and dates (much less do the obvious and pre-populate these fields.) Users who try and input search criteria are redirected to a new window - at least the search parameters are passed over....

Hotwire wins for elegance and usability, Travelocity for the bold logo placement....

NYC to OTAs: We Want Our Tax on Retail, Not Net

Just before the July 4th Holiday, Mayor Bloomberg signed Resolution 1012 which will, in theory, force the online travel agencies to collect New York City's occupancy tax on the full amount paid by consumers rather than the net amount that actually is remitted to the hotels.

The full text with changes underlined tax law is here.

With this law, the City has redefined the definition of the consideration paid for occupancy to include "any service fee and/or booking fees that are a condition of occupancy" in order to include OTA's margins.

They have also added a new term known as a "room remarketer" which, according to NYC, is "Any person, excluding the operator, having any right, access, ability or authority, through an internet transaction or any other means whatsoever, to offer, reserve, book, arrange for, remarket, distribute, broker, resell, or facilitate the transfer of rooms the occupancy of which is subject to tax under this chapter." At least the Online Travel Agencies are finally getting credit for what they do - marketing rooms.

And best of all is a new term known as "additional rent" which is the "excess of rent received from an occupant by a room remarketer over the net rent" In the OTA lexicon, this would be known as margin.

What is most interesting about this law is that the OTAs will be responsible for remitting their portion of the occupancy tax directly to the city. In the past, the OTAs have sent the tax on the net rate to the hotel which has then paid the city. Under the new law, the OTAs will be forced to directly remit the tax on the "additional rent" to the city.

The OTAs, spurred on by Orbitz, have already largely given up the practice of adding additional fees in with the taxes during the check-out process. However, this change will either force the OTAs to become non-competitive with hotel brand websites and pass along the additional taxes to the consumers or further erode the industry's margins.

A very simple example:
Rate on OTA.com: $100
Net Rate to OTA from hotel: $80
Tax rate: 10%

Today, OTA sells this room for $100 and remits $88 to cover the room and tax and earns $12.
In the new world, OTA.com will probably still sell this room for $100 to remain competitive with the hotel's own websites. However, the OTA will now be forced to pay the 10% on both margin and net rate. In our simpleton example, this OTA will now remit $90 and earn $10. Good for the City, not so good for the OTAs.

This new law takes effect on September 1st, 2009.

Hotels.com Repeat? Roomvalues.com becomes Getaroom.com

Dave Litman and Bob Diener, expired non-competes in hand, have been toying around for a few months with a new site - the somewhat awkwardly named roomvalues.com. For those of you who have only known Hotels.com as a part of Expedia (or IAC), Dave and Bob were the original founders of Hotels.com.

Last week, according to DN Journal (a website which tracks the buying and selling of domains) www.getaroom.com was sold at sedo.com for $30,000.

Just as rapidly, roomvalues.com has been re-branded getaroom.com.

Given current softness in the hotel market (with no improvement in sight) and the huge upswing in consumer "deal searching" the timing could not be better for a major launch.

As an added twist, roomvalues.com is pushing consumers to call their call center for even lower prices than those listed on their website. Talk about full circle from the days when websites buried their 800 numbers in an effort to drive to web.

Comically, "Get a Room" was lodging.com's tag line. (Lodging.com was purchased by Cendant and has now been folded into Orbitz....)

Travelocity: The Walled Garden Finally Falls - Almost

Travelocity has long promoted their igoyougo property (which has morphed over time into a version of Booking Buddy or Super Search) using pop-unders and banner ads. Travelocity's goal has been to still a searching consumer to convert somewhere even if not on the Travelocity mothership. In other words, better to get a few dollars in affiliate revenue by shipping the consumer off to a competitor than end up with nothing. Afterall, Travelocity attracted the consumer to their site somehow which probably wasn't free - might as well make something on it.

But we recently noticed a much more prominent placement - right at the bottom of the air search results page. Travelocity is also clearly displaying their competitors logos - right on their own site - first time we have seen that on major OTA besides Hotwire.

Now if only the search box actually worked without leaving the page - it does not allow a user to actually input city pairs and dates (much less do the obvious and pre-populate these fields.) Users who try and input search criteria are redirected to a new window - at least the search parameters are passed over....

Hotwire wins for elegance and usability, Travelocity for the bold logo placement....

JetAmerica: Ooops - We Are Not Really Going to Start Flying Next Week

JetAmerica, a charter operation we discussed earlier and noted as more folly than shrewd has announced a one month delay in starting operations. JetAmerica is billing it as "self-imposed" and leading with this great quote:

“The delay is not as unusual as it sounds,” according to JetAmerica’s Vice President of Operations Brian Burling. “Historically many of the world’s most successful airlines and charter services have had to delay their launches.”

More telling is that they claimed to have ~6400 passengers booked over the initial one month period. Based on their expected 34 segments per week, this nets out to only about 48 passengers per flight. Based on Miami Air's (who is actually operating the flights for JetAmerica since they are not a real airline) 737-800 capacity of 172 seats, this equates to less than a 28% load factor....

Sure, right this will work. We still bet this operation never gets off the ground. Sorry Toledo et al.