Wednesday, November 18, 2009 An Interesting Twist on Search Aggregation

Does the world really need another search aggregation website? Well, we are about to find out. has gone live (in beta) with an interesting approach to searching multiple travel sites.

Unlike some other players such as TripAdvisor's, TravelZoo's SuperSearch, FlightSearch searches multiple sites without opening window after window after window as each separate site is searched. Users are able to simply tab between results from Priceline, Orbitz, CheapTickets, Vayama, Kayak and others. (Does Kayak's inclusion make FlightSearch a meta of metas?) FlightSearch is a really nice take on an oft-copied model. And not a bad URL either.

FlightSearch is led by travel industry vet Ted Perlstein (full disclosure: Ted worked for me at Starwood as a summer intern once upon a time - he probably considers it a dark period in his career) who has also has been at Orbitz and once upon a time, carried a business card with the title of "Head Sherpa" when he was at an earlier incarnation of

As we mentioned, FlightSearch is still in beta so there are a few things we'd still like to see improved, but we'll be watching to see when other OTAs (and metas?) join up. And how about a few suppliers? Where are you American and United et al? Obviously, driving traffic in this hyper-competitive space will be a challenge but we like the approach Ted and team are taking...

Tuesday, November 17, 2009

Buy your hotel room or car with SkyMiles at

While trolling around this afternoon looking to burn some of our hard-earned SkyMiles we came across a new (or re-launched) feature called the SkyMiles Marketplace. SkyMiles members can search for hotels and cars and then use SkyMiles to pay for some or all of the cost of the room or rental. The redemption rates can be a little dear but hey with air redemptions getting harder and harder, it is nice to have another option - particularly one without capacity controls and the like.

A little sleuthing shows that this is another website powered by ezRez. ezRez has been on a terror of late, launching similar pay with miles/points programs with the likes of Starwood, IHG, and United.

One of the coolest features is the slider bar that allows members to choose the mix of miles to cash they want to pay for the hotel or car.

At the rate we've been earning miles lately, it is great to have another way to burn them that doesn't rely on the whims of revenue management!

Monday, November 16, 2009

Planet Hollywood Hotel Mirrors JetBlue's All You Can Jet Pass

Over the weekend, we noticed an interesting promotion from the Planet Hollywood Hotel in Las Vegas that reminds us of JetBlue's wildly successful (at least on the PR side) All You Can Jet Pass.

The Planet Hollywood "Phanatic Pass" offers consumers any ten nights between now and March 15th for $599 - in other words, just 59 bucks a night. Whats more, it is even valid during some of the biggest weekends in Vegas such as New Years Eve and Super Bowl Weekend. A quick check of the non-promotional rates shows the Planet Hollywood selling regular rooms for $310 on New Years Eve so the savings are huge if you are (or want to become) a regular in Vegas. What is more, the PH is waiving the resort fee that normally applies (don't get us started on resort fees - they are worthy of another diatribe.)

Obviously, Planet Hollywood is hoping for some breakage on this one, but we like the creativity they are using to generate buzz and interest. And if the goal is to keep customers coming back to the hotel and get them gambling, eating, drinking and hitting the shows etc, this is a pretty cool way of generating repeat business. We bet (as we've seen with hotel loyalty program redemption) that people staying on this deal will have a higher incremental spend than average. The logic goes that people who think they scored a great deal (or used points) on the room will be more inclined to spend on F&B etc.

More details on the PH deal here

Wednesday, November 11, 2009

Expedia and Choice Hotels Kiss and Make Up

Expedia (EXPE) and Choice Hotels (CHH) tonight announced they have signed a new, long-term deal that will return Choice's inventory to Expedia's global family of websites including Expedia and The three year term is even included in the press release but maybe that is standard for a deal negotiated in the press.

More of note, the jointly issued press release begins with a quote from Dara Khosrowshahi, CEO of Expedia Inc, that makes it very clear to anyone wondering about the deeper issues of the dispute (LRA and rate parity as we discussed here) as where the two sides ended up: "We’re pleased to be working with Choice in an agreement that respects the guiding principles which we operate under." In other words, Choice agreed to similar terms that everyone else has: coup averted.

Choice Hotels CEO has a line as well but not nearly so telling: "Choice Hotels and Expedia worked together to establish a new agreement that is mutually beneficial and enables hotels in the Choice system to effectively manage their businesses."

Glad this thing is over - relationships negotiated in the press are never positive for either side. A public spat like this does little for the industry (hoteliers or OTAs) and takes the focus away from what everyone should be concentrating on in times like these - generating revenue.

Thursday, November 5, 2009

Expedia drops phone booking fees

Expedia announced today that they are removing booking/service fees on all travel products sold through Expedia's call centers.

From an airline perspective, the move is interesting in that it will now be cheaper for consumers to book with an OTA then calling the carrier directly. (Except, of course, for Southwest which does not charge extra for a call center booking but they don't participate in the OTAs anyway.) The move is another example of how the OTAs have continued to differentiate themselves from the suppliers in terms of service, functionality and price. The list of enhancements the OTAs have made this year is long and compelling and great for consumers. Just to tick off a few: Orbitz TLC, Orbitz Price Assurance, Expedia's SeatGuru reviews, Priceline's iPhone app all come to mind.

And what of the timing, by the way? Interesting that Expedia announced this change the same morning as Orbitz announced earnings - particularly when Orbitz had this say in their statement: "This net revenue decline was due primarily to the removal of most air booking fees and the significant reduction of hotel booking fees on the company's domestic websites, as well as a decline in average hotel room rates globally."

Today's move by Expedia along with the OTAs' other enhancements this year should be a wake-up call for suppliers - Airlines and hoteliers cannot continue to sit still while they are out-innovated by the distributors. Piling on more fees or other dis-incentives for booking through specific channels only further harms the supplier's brand and the overall customer experience. Suppliers, wake up!

Wednesday, November 4, 2009

Expedia Billboard Effect: Cornell agrees that it is real

Expedia and other OTAs have long touted what has become known in the industry as "the billboard effect" whereby they have claimed that positioning on their sites generates not only bookings through the OTA but also a halo effect on the hotels' own sites by generating brand awareness. Non-loyal consumers start many of their searches at an OTA to gain a perspective on the options available, relative costs and positioning of the hotels in a given market against one another. Then, they often check other sites to compare pricing - usually including the website of the hotel they are interested in.

Personally, I saw strong evidence of the billboard effect while I was at Starwood and Expedia has long claimed that for every booking generated on Expedia, another booking is generated on the hotel's own website.

In a new whitepaper, Cornell assistant professor Chris Anderson has measured the billboard effect with a several branded and unbranded hotels. The results are striking, particularly for the independent hotel in the test.

For the study, Prof. Anderson worked with Expedia and JHM Hotels, an ownership group with hotels under the Starwood, Marriott, Hyatt and Hilton flags to cycle specific hotels on and off of Expedia over a three month period. That is, the hotel was listed at the top of the search results when the hotel was participating on Expedia and and removed altogether from search results listings when the hotel was dark on Expedia. By the conclusion of the study, each hotel was listed on Expedia for 40 days and dark for 40 days.

The results are below:

According to the study, the hotels saw a boost in reservations ranging from 7.5% to as much as 26% for the inde hotel when they were listed on Expedia vs. when they were dark.

Prof. Anderson suggests that the branded hotels may not have seen as large of a boost because when consumers go the brand websites they are presented with other "in-chain" hotels, e.g they are searching for a Marriott but upon arriving at they are presented not only with the Marriott they saw on Expedia but also a Courtyard where they may actually end up booking.

We'd like to see an expanded test at some point with some slightly different parameters. For example, what happens if the hotel isn't listed at the top of the search results on Expedia? Could the brand numbers be further refined if the test was conducted in markets without sister hotels nearby? What would the results look like for resort hotels? How did the booking curves differ? And the cancellation rates? Could leveraging the billboard effect actually be cheaper than buying google key words? And of, course, what do the bottom line ROIs look like after all distribution costs are taken into account. Those questions may be ripe for another study - any of you OTAs or chains reading ready to sign up? Lets talk....

Tuesday, November 3, 2009

Florida AG sues Expedia and Orbitz - If cities can, we can too

Bill McCollum, the Florida Attorney General filed suit against Expedia and Orbitz this afternoon, opening the next chapter in the ongoing fight over occupancy taxes. Florida is the first state to take such a step - all of the previous actions have been filed by cities or groups of cities in a specific state.

It is not clear why the suit was only filed against Expedia and Orbitz - in the past these actions have usually been taken against all of the major OTAs including Priceline and Travelocity, among others.

In reading the actual complaint, there does seem to be some confusion in how the merchant model actually works.

For example, in Section 9: "each Defendant purchases and receives inventories of hotel rooms at negotiated rates from the hotels." and "re-sells the rooms to consumers at rates determined by that particular Defendant." Lets take a look at these two statements. Does Expedia, in most cases anyway, actually purchase a block of rooms and hold the inventory? No, not since the early days of - most, if not all, rooms are not purchased and held in advance. As far as determining the rates paid by consumers, again, certainly in the case of the chain hotels, the OTAs are not setting the prices - the chains are through their contractual agreements.

The AG claims that the OTAs are using a "purchase and resale" model which just isn't the case.

The big issue is that the model roughly described by the AG has been in place long before the Internet came around - how do they think all those rooms at Disney World are filled? Thousands of rooms are sold every night in Florida under the wholesale model - I bet more than in any other state in the country except for maybe Nevada. These wholesalers also remit the taxes back to the state based on the wholesale or net portion of the room rate, not on what the consumer actually paid for their package which may include Disney tickets and plenty of other things also bought on a wholesale basis.

Texas Cities vs. PCLN, EXPE, OWW et al: A Draw at Best

Late last week, a jury in San Antonio delivered a verdict on a class-action suit against the major OTAs that was brought by around 170 cities in Texas. The verdict against Expedia, Orbitz, Travelocity and Priceline is for $20M plus court imposed penalties and interest.

While this sounds dire, (and if you read the lawyers press release you would think this was a slam-dunk) a detailed analysis beyond the headlines should give the edge to the OTAs. Why?

First of all, the jury rejected the municipalities' claims that the OTAs willfully pocketed tax dollars that were collected (as taxes) from consumers. This precedent setting verdict finally makes it clear, once and for all, that the OTAs are not collecting taxes and pocketing it - a position that many of the other lawsuits have taken and one that was sure to ring true with juries, particularly in this day and age. The "tax and pocket" position was a highly emotional stance that anyone who truly understand the true economics of the merchant model would obviously reject. Yes, taxes and fees have long been bundled together but the spirit and goal was clearly not to defraud consumers or rob cities and towns of tax dollars - the intent was to protect the underlying contractual agreements around margins.

Secondly, the jury rejected punitive damages against the OTAs because they agreed that the OTAs were not, in fact, pocketing tax revenues. Obviously, this is a no-brainer.

Interestingly, the jury did find that the OTAs "control hotels" and therefore are required to remit the occupancy taxes required by hotel operators. Knowing more than a few hotel General Managers, I can't imagine a statement that would boil their blood faster (except, maybe to say that "corporate" controlled their house!) than to say an OTA controlled the hotel. By now, everyone knows that hotels set pricing, inventory, discounts and room allocations either on the fly or during negotiations with the OTAs. The OTAs then re-market those rooms that have been offered to them to sell. This is hardly control. Furthermore, the hotel is clearly in control of the guest experience - after all, it is the hotel that decides which rooms to allocate to specific guests and who to "walk" when things go wrong.

Lastly, we believe the jury's definition of "control" may expand well beyond the OTAs. Put in the context of the ruling, traditional tour operators control rooms as well. Traditional tour operators (which pump a lot of rooms into Texas resort cities) have always paid the occupancy taxes based on the net rate of the room, not the gross selling rate. This has been going on long before the Internet and the OTAs came along.

Bottom line: if Expedia and the like are hiring, firing, allocating capital, negotiating with unions, customers, franchisers and managing to get the beds made and the bacon crisp, we'd agree that they control the hotel. Last I checked, these functions were not part of the OTA business model.