Thursday, April 30, 2009

Travelocity goes Hotwire! New Opaque Product Launched

We are not quite sure how we missed this one, but Travelocity has launched a new opaque product (a la Hotwire or Priceline's name your own price model) within their current hotel product.

There does not seem to have been any fanfare associated with this launch - nary even a press release but then again, Travelocity may have been a little occupied with the ongoing booking fee battles to focus on this product launch.

The product is the same in name and offering as those offered on Travelocity's sister site in Europe,

Consumers click on the link above (which could use some work, by the way - what is that hanging edge of the "top secret" logo on the far right?) and are directed to the page shown below.

Not unlike Hotwire, star ratings, amenities and a fixed (rather than name-your-own as at Priceline) price is shown. Traveler reviews are masked as well as any other descriptive data that would enable a potential customer to identify the hotel.

Unlike Hotwire and Priceline, however, the location of your mystery hotel (often the most important part of buying a hotel!) is somewhat hard to identify, to the point of silliness. The hotels above were listed as being in "Chicago" rather than a specific area or neighborhood of Chicago. This makes it pretty tough for consumers to make an intelligent choice - who wants to end up at O'Hare if you have a meeting downtown? Compare Travelocity's map with Hotwire's:

And then there is the supply issue. Things are early for Travelocity - we had a choice of 3 hotels vs. Hotwire's 34. Because of Priceline's opacity, it is impossible to know how many hotels Priceline has but, based on our experience, it is usually at least as many as Hotwire.

That said, assuming the suppliers can live with it, more choice is always good for consumers and we expect, particularly in these times, that Travelocity will be able to rapidly add more inventory - again, assuming hoteliers buy into the product.

Tuesday, April 28, 2009

Delta and Northwest Bring Back 500 Bonus Miles for Booking Online - Are the OTAs Finally Stealing Share Back from Supplier Sites?

Well, its been nearly six weeks since the OTA fee-removal frenzy began. As you will no doubt recall, The pre-fight (or should we say pre-flight) warm-up match was nearly two years ago when Priceline and Hotwire dropped air booking fees. In the Main Event, Round One, Expedia dropped air booking fees, then Travelocity quickly followed suit and Orbitz finally joined the party a week or so later. Round Two was kicked off when Orbitz dropped booking fees on hotels which was quickly matched by Expedia.

But now, the question is, is it working - are the OTAs actually grabbing growth back from the supplier sites?

Maybe so - Today, Delta (and Northwest) both returned to offering 500 mile booking bonuses on their websites - something we have not seen in nearly two years. The airlines (in their usual lock-step fashion) first lowered the bonus from 1000 miles to 500 and then eliminated them all together. It is billed as a temporary promotion so we'll see what happens. If the airlines operate as they usually do, we'll have bonus miles back at all the supplier sites by the end of the week. It could be just a broad attempt to stimulate bookings but we doubt it - the airlines have gotten much smarter in recent years in how they target demand stimulation offers - this is a broad swipe.

And why not? Given the new pricing parity, airlines have little else to offer other than websites that are generally sub-par when compared to the content, functionality and service offerings that the major OTAs have built out. Millions of consumers have paid $7 for these services for years - it goes to figure that even more would opt to buy from an OTA given price parity.

Comically, Delta's PR team seems to have missed out on a few of the changes in the OTA world given the first point they trumpet regarding booking at is no booking fees. And the 2nd point is a best fare guarantee which still falls FAR short of the Orbitz offering.

OTAs offer many different airline choices, combinations of different carriers for the same trip which often results in a lower fare, money-saving air+hotel package products, often superior en-route service and, in the case of Orbitz, even assurance that if the price goes down, you'll get your money back - something no airline offers. Maybe the airlines have woken up - it looks like at least Delta and Northwest have...

Thursday, April 23, 2009

Denizen is Dead

As we blogged earlier, up until today the Denizen Hotels website still had smiling pictures of Ross and Amar along with glowing descriptions of the brand and their plans to convert the world's traveling vagabonds into "Denizens."

Alas, no more. All that great visitors now is a blank screen. No more coming attractions, no more happy Ross - just eerie white space........

OTA Slug Fest Continues: Expedia Removes Back-end Mark-ups Previously in "Taxes/Fees" to Match Orbitz

The OTA slug fest over booking fees continues today - Expedia has apparently (and quietly) stopped adding additional fees into the "taxes and fees" section as a result of Orbitz removing them yesterday. Expedia claimed to the press they would remain competitive and, indeed, they have.

Until now, while the "base" price of a hotel room on Orbitz, Travelocity and Expedia (and supplier sites) was usually the same, the OTAs often added additional fees into a murky line during the booking process labeled "taxes and fees." Consumers didnt pay much attention to these fees, assuming that they were not optional or a subject of competition. All that changed yesterday when Orbitz began breaking out the total all-in price on the first search results page - something even the hotel supplier sites don't currently do.

Yesterday, we shared the following price comparison which clearly showed the differences between the OTAs (and supplier sites) when the "all-in" price was compared: $253.71 $253.10 $253.76 $262.46 $287.83 $287.83

Today, pricing seems to have equalized across the channels with Expedia coming in line with the competition. Consider the Paramount in New York for this Sunday night:

Paramount website $151.40 $150.80 $150.07

(Note: Priceline was $299 and Travelocity was $160.33 showing the importance of shopping around - but that isn't the point here)

Or consider the same Hilton New York on Sunday, May 10th: $162.31 $161.94 $162.23

What is critical is that Expedia has effectively taken a hatchet to their margins. The difference could be as much as a 12 point drop in the Hilton example above. Clearly, Expedia is not about to cede share and is determined to remain competitive - the open question is what the effect will be on Expedia's hotel margins.

Wednesday, April 22, 2009

Next Round in the Online Travel Agency Fee Wars:: Orbitz Cuts Hotel Booking Fees

Orbitz fired off the latest salvo in the continuing war between the Online Travel Agents (OTAs) by removing the somewhat hidden booking fees that have pervaded the industry's merchant model. These booking fees have typically been included in the "second step" of the booking process after the consumer clicks on the rate at the hotel they wish to purchase. The fees have been bundled together with taxes in a single "taxes and fees" line without delineation to the consumer on which portion was/is taxes going to the government and which portion is fees going to the OTA.

This is a page right out of Priceline's play book but with a twist. PCLN eliminated the fees on non-opaque (meaning NOT name-your-own price reservations) several month ago under their "Fee Chop" moniker but only shows the "all-in" price when the consumer clicks to book. Orbitz, to their credit, is showing the full price, including taxes on the first page - something even does not do.

We sampled a room for tonight, Wednesday at the Hilton New York to see how the big OTAs and compared. As expected, every site we tested came back with the same initial price: $219. However, from there, prices diverged widely when the "all-in" price was compared: $253.71 $253.10 $253.76 $262.46 $287.83 $287.83

Remember, these are the fully-loaded prices off the same $219 base room rate. Wow! Quite a difference indeed.

Obviously, Travelocity, Expedia and are adding some significant revenues under the guise of "taxes and fees" - often more fees than taxes!

Orbitz is clearly looking to strike Expedia and Travelocity where it hurts in their most profitable segment - hotels. The question is, will consumers notice? After all, all of the OTAs have had these "hidden" fees for years - with few complaints from consumers. All of the competition has been on the first page - ensuring that the first rate consumers see for a hotel is competitive.

And this is yet another "temporary" promotion - only for bookings made between now and July 15th. Will it last longer? Priceline's Fee Chop certainly has.

And there is still that little cancellation fee that Orbitz dings consumers for. Priceline and even have long removed the $25 cancellation fee they imposed above any fees the hotel itself might have charged. The $25 cancel fee lives on at Orbitz, Travelocity and Expedia. Will this be the next frontier in the race to be the most "consumer friendly OTA?"

Tuesday, April 21, 2009

Delta joins AA in Suggesting that OTAs and Travel Agents Should Pay for Content

If you listened to Delta's Q1 earnings call this morning, you heard some interesting commentary on the future of distribution according to Delta.

DL management echoed American's CEO's suggestion on their call last week that the time would come when OTAs and agents would pay the airlines for their content. Interesting how the airlines can have these "open" discussions in their earnings calls, isn't it? We've been following the commentary over on Dennis Schaal's blog but this was too rich to pass up without a few thoughts of our own!

Of note, DL stated that "TMCs have an important role to play" and seemed to imply that their main target was the OTAs particularly when DL described the "value we provide vs. others" online. Maybe so, Orbitz's Price Assurance which offers consumers a refund when fares decline seems like a pretty good value. The same can be said for the multitude of air+hotel packaging options that the OTAs provide to consumers. And many consumers would also vote Orbitz's TLC in-route support to be far superior to many airline's offerings. And multiple airlines? Try booking a multi-carrier trip on or OTAs are all about offering consumers choices and comparison opportunities - things they do quite well.

More interesting, however, was the suggestion that "OTAs should pay for [airline] content the way they do for hotels" Hmmmm. Obviously, someone at Delta has not taken a quick look at hotel distribution costs - nor drivers of OTA profitability. Newsflash: OTAs don't make any money selling airline tickets! They make it selling hotels. And they don't pay hotels - quite the opposite. Can you imagine the horror if someone at Delta knew that many chains are paying Expedia/Travelocity/Orbitz in the mid-teens for distribution? And what of independent hotels? Considerably more.

And finally, DL mentioned that was driving ~ 37-38% of Delta's revenues - great news indeed. But they also estimated that the OTAs were providing in the area of 30% of Delta's revenues - wow is all we can say on that one.

"Rossgate" Continues - Federal Grand Jury Subpeonas Documents From Hilton

Today, a federal grand jury in New York requested documents from Hilton relating to the allegations that two former Starwood executives (Ross Klein and Amar Lalvani) improperly removed thousands of sensitive and confidential documents relating to Starwood's luxury brands. According to Starwood, these documents were used to enable Hilton to dramatically shorten the time required to bring Denizen to market. In addition, they contained valuable proprietary data about Starwood's development pipeline, developers etc

Hilton has "temporarily" suspended development of the Denizen brand and suspended both Ross and Amar on paid leave.

Oddly enough, however, Hilton has not suspended Ross and Amar from the Denizen website. They are still prominently featured as the brand leaders.

As an aside, we can't help but laugh at how similar Ross looks in this picture to former Starwood Hotels CEO Barry Sternlicht. Funnier still because Barry was the original brains behind the W brand long before Ross arrived on the scene.

This investigation will prove a huge distraction for both Hilton and Starwood over the coming months - how much time will both chains focus on these efforts vs. generating revenue in these trying times?

And how will this change Hilton's development pipeline? We can't imagine that many developers (what few that are in fact looking right now) will be looking to sign a deal with Denizen anytime soon - today's developments should open new opportunities for other, non-Hilton brands in the "lifestyle brand" category.

How far beyond Ross and Amar did the knowledge of these documents go within Hilton? That could be the difference between this affair bringing down just the two Denizens vs. something much broader.

Thursday, April 16, 2009

Starwood sues Hilton over Denizen - "Zengate"

The Wall Street Journal is reporting that Starwood Hotels and Resorts Worldwide (HOT) has sued Hilton Hotels over trade secrets relating to Hilton's new brand, Denizen. We previously discussed Denizen when it was launched a few weeks ago in Berlin and noted its remarkable similarities to Starwood's W Brand. However, at the time, we chalked it up to Ross Klein's memory and panache. (Hey, Panache isn't a bad name for a boutique brand, is it?)

If Starwood's claims are true, it may be more than simply enduring style and charm that helped define Denizen. Starwood claims "This is the clearest imaginable case of corporate espionage, theft of trade secrets, unfair competition and computer fraud." Strong words indeed.

So, what, if anything, might have Ross taken with him? Revenue projections and past performance? Bliss soap samples? Music play list for the elevators? This isn't like stealing the recipe for Coke or the nuclear launch codes but it clearly sounds as if Ross left with more than a towel or two.

Indeed, according to Starwood, Ross and Amar departed with literally boxes (8 of them!) of documents detailing extensive market research, sensitive management contracts and blueprints for developing a new brand - something Starwood clearly knows a few things about given the launches of W, Element, and aloft.

Starwood has also sought a full injunction against Hilton from using any of the documents in launching the Denizen brand which, if successful, could effectively shutter the brand for some time.

It will be interesting to watch this play out in court. And it will be a huge distraction for both chains at a time when revenue generation is critical.

Tuesday, April 14, 2009

Is ALGT (Allegiant Air) losing altitude? Not at all...

Allegiant Air pre-announced Q1 earnings of $1.34 to $1.38 per share this evening - beating analysts' estimates of $1.18 per share. Good news in the airline industry? Yes, really. But ALGT is no American, Delta or even AirTran or JetBlue. Why?

First, this is an airline built for leisure. Flying two or three days a week from Podunk cities with limited other service (no offense, Sioux Falls, Duluth and Bozeman) to key leisure destinations such as Las Vegas, Orlando and the like attracts few, if any business travelers. Business travelers demand frequency - two flights a week just won't cut it - especially when they are to cities with little business demand in the first place (now, no offense to Vegas, St Pete and Orlando.) And where are the larger airlines hurting? Business travelers and international travelers - this is common knowledge. Guess how many of those kinds of travelers show up on ALGT? About zero.

Second, those leisure travelers buy a lot more than just air - they also buy hotel rooms. Lots of them. And guess who makes a margin on those hotel rooms. Yes, Allegiant Air operates as a traditional travel wholesaler - a business the rest of the airline industry got out of years ago. But, if you haven't noticed, the hotel industry is hurting these days - and guess who they are offering great package rates to? Yes, ALGT.

Third, ALGT is really, really cheap. They don't operate complicated hubs. They only fly relatively old (and cheap to acquire) MD-80s. They do the majority of their bookings by far on their own website. And they market in tiny cities - what do you think the cost of marketing is to customers in Springfield, Missouri vs. Chicago? Most of their flights are simple "out and backs" from their key focus cities - they leave in the morning, fly somewhere and return back. No need for crew hotel rooms. Best of all, many of these small cities are so desperate for air service (even if it is to Orlando) they are even willing to contribute marketing funds to ALGT to market their services. Not a bad place to be.

Finally, ALGT is relatively insulated from competition. The major airlines want nothing to do with Vegas right now, much less from Fargo. Several years ago, Northwest got cranky when ALGT began cranking up operations in Fargo, Bismark and other small towns that Northwest has traditionally protected as their turf (code for kept service levels reasonably high but fares off the charts.) Northwest added flights from Sioux Falls, Fargo etc into Vegas but they rapidly proved to be failures. Northwest's costs were too high and they didn't have the packages (read: hotel rooms) that ALGT continues to drive significant margin from.

Of late, some carriers seem to have taken note of Allegiant's success and added competitive service. Alaska Airlines woke up and realized that ALGT was moving significant passengers from tiny Bellingham (~88 miles from hometown Seattle) to Vegas and added three flights per week in direct competition with ALGT. Airtran also seems to be concerned (or has decided imitation is easier than innovation) and has added a bunch of 3 and 4 times weekly service from Orlando to such as Charleston WV, Allentown, Knoxville and Ashville. But these routes have little chance of success. First, neither Airtran nor Alasaka Air have the hotel inventory required to make these routes work in the same way that ALGT does. They also have fundamentally higher costs than ALGT. Finally, who cares? If Allentown gets more service than it can handle (pushing down yields as a result) between Airtran and Allegiant, Allegiant can simply pull up stakes and move the aircraft elsewhere. And, history has shown that, with competition negated, Airtran (or Delta or Northwest) will rapidly depart the market as well. Pity Allentown.

Southwest announces Boston schedule

Today, Southwest announced destinations and schedules their new Boston flights set to begin in Mid-August. Not surprisingly, they announced service to Chicago Midway (MDW) and Baltimore (BWI) with five flights to each destination. Both MDW and BWI are Southwest powerhouse cities with plenty of onward connecting flights as well as a loyal Southwest base.

And Boston has a loyal base of Southwest travelers as well - they have just been forced to drive to Providence (PVD) or Manchester (MHT) for Southwest's low fares and service. Many have speculated that Southwest might pull down service in these two cities now that they will operate service directly into Beantown's main airport. Fear not PVD and MHT fans. Southwest mentions more than once that the new Logan service is part of Southwest's "expanded New England service." So, at least for now, it appears Southwest will be growing in New England overall.

On a sidenote, we applaud any company (travel industry or not) that can actually use "wicked awesome" in a press release!

Tuesday, April 7, 2009

Orbitz finally falls in line with no booking fees: OWW

This morning, Orbitz matched competitors Expedia, Travelocity and long-time forerunner Priceline in removing booking fees on airline tickets. The duel continues. Orbitz, like Expedia and Travelocity, is billing it as a "promotion" through May 31st but as we've stated before, we don't think that putting this genie back in the bottle will be easy come late May.

Wisely, Orbitz excluded tickets that utilize a combination of airlines from the fee waiver. This is laudable because these kinds of tickets are difficult, if not impossible, for the supplier sites to sell. (when was the last time you bought a Delta ticket at Also, because of Orbitz's strong ITA Software search engine backbone, Orbitz often provides lower combinations of multiple carriers than Expedia, Travelocity or Priceline. This may enable Orbitz to preserve at least some of their fee revenue - time will tell how much.

We also like that Orbitz is weaving their innovative Price Assurance plan (which protects consumers from airfare decreases after buying a ticket) tightly into the no-fee marketing. This provides a one-two punch vs. Expedia and the supplier (airline) websites which do not have a similar program.
But, we do worry about the costs associated with both of these efforts. Consumers apparently appreciate Price Assurance, but these payments come directly from Orbitz - not the airlines. Absent much or most of the $7 per ticket fee revenue that Orbitz has enjoyed, this program may get expensive quickly.

Similarly, as previously discussed, a much larger portion of Orbitz's earnings come from booking fees. (Citi estimates nearly 60% for OWW vs ~10% for EXPE.)

Orbitz's long-time focus on air (at the expense of higher margin hotels) is finally coming home to roost - OUCH or OWW may be perfect now more than ever.

Thursday, April 2, 2009

Innovation rages on in Meta-Search

The smack-down in travel meta-search between, and market leader with consumers so far emerging as the big winners. The emerging players (Fly and TA) are continuing to push out new functionality that is offering consumers new and interesting ways to search for airfares.

Today, released a great new feature that allows users (once they have searched) to easily explore how changing adjusting their travel dates can save them money. Talk about a feature that is right for the times! allows users to easily compare air fares on multiple days. Better still, it enables users to compare airfares across months at a time based on a variable trip duration. Finally, a consumer can simply say that they want to go to Los Angeles for 4 days sometime over the next 4 months and will show the user a multitude of travel dates with associated fares - it enables consumers to easily make trade-offs between flying on say, a Saturday in mid-May vs. the end of spring break. And, a user can even declare a fixed outbound or return day - perfect for those trips when you know exactly when you have to leave or return but are somewhat flexible on one end of the trip or the other. Finally, has made it easy to see if staying over a Saturday night really makes a difference or not! Or it may yield the perfect excuse to stay an extra day on that business trip to South Florida in January...


$14 Transcon Flights? Really? Yes.

JetBlue launched a sale of sales today on the JFK-SFO and SFO-Long Beach (LGB) routes with a fare of $14. Not misprint, not a fare error but an actual $14 transcon flight!

Don't get too excited as it is valid only on very very limited dates in early April but it is certainly a amazing deal.

But, is JetBlue taking a page out of the RyanAir playbook? We don't think so.

RyanAir is obviously famous for very low (like 1 Euro or even 1 cent) fares but RyanAir is also equally famous for loading up fees after the booking for everything from using a credit card to buy your ticket, checking in with an agent, checking a bag etc. JetBlue is quite the opposite - there are still free drinks and snacks, free Live TV and, as appears to be the point of this promotion, the first bag is still free. In fact, the major airlines are all charging more for the first bag than the airfare in this case - therein lies the point of this promotion.

JetBlue will undoubtedly generate huge buzz - a veritable public relations bonanza - while calling attention to their lack of checked baggage fees. All for a few plane loads of $14 fares.

We'll go ahead and call it a brilliant marketing move - finally a US airline is using actual fares as an integral part of the marketing message. Bravo JetBlue!