New Front on the Old Hotel Chains vs. OTAs Battle: Occupancy Taxes

It appears that a new front is opening in the ever tumultuous relationships between the large hotel chains and the online travel agencies (OTAs).

The major OTAs are currently pressing for legislative relief for future occupancy tax claims by states, counties and municipalities through a proposed bill known as the "Internet Travel Tax Fairness Act" or ITTFA. For those of you interested in a reprise of the old Schoolhouse Rock Saturday morning "how does a bill become law" cartoon, the initial draft of the bill is posted here

Interestingly, the American Hotel and Lodging Association's (AHLA) take on the bill is radically different from that of other smaller, regional hotel associations.

AHLA, which represents all the large chains, has come out as a vigorous opponent of this bill to say the least. AHLA offers a detailed description of their opposition to this bill which is centered on concerns that local hoteliers will see an increase in taxes or, worse yet, be stuck with the entire tax bill. As an aside, AHLA offers that the bill is "written in such a way that it may also exempt the payment of any occupancy tax on rooms booked through online travel companies." We don't believe this is the actual intent of this bill by the OTAs (call us naive, but this simply does not square with what the OTAs are trying to accomplish) whether you agree with that goal or not.

On the other hand, the California Lodging Industry Association (CLIA,) which represents "individually owned lodging properties," has just come out in favor of ITTFA. In a recent press release, CLIA declared that they would fight "with their Online Travel Company friends" to support this legislation.

So, why the disparity in thinking within the hotel industry?

For starters, independent hotels utilize the OTAs in very different ways from the large chains. Independent hotels do not (generally) have the powerful global brand recognition of the large chains much less the global sales forces and loyalty programs such as Hilton HHonors, Marriott Rewards and SPG. As such, they depend on the OTAs for distribution reach - reaching consumers that would not have ever probably stayed with these unaffiliated properties.

Many independent hotels have become much more aggressive in developing their own consumer web business, both directly and via the OTAs. New tools that distribute inventory, develop and implement SEO and SEM strategies, etc. have made these efforts much easier for small hoteliers. The web has become a great equalizer between branded and un-branded hoteliers' ability to reach consumers.

The chains have responded by offering their distribution services for hire - witness the launch of the Autograph brand from Marriott and the resurgence of Starwood's Luxury Collection. HC colleague George Roukas highlights these efforts and the reasons behind them here in a recent article in Hospitality Upgrade magazine.

It will be interesting to see where this bill ends up - the stakes are high.

New York State Attempts Fuzzy Math in Latest Occupancy Tax Skirmish

The current budget under debate in Albany includes an interesting twist in the ongoing OTA lodging tax fight. The proposed budget contains language that attempts to compute the occupancy tax on the retail rate by simply multiplying the net rate by 120% and applying the tax rate on this amount.

Yes, you read that right. This simpleton proposal assumes that all OTA deals are created equal and that the mark-up is always 20%. If passed, this will certainly will make future hotel/OTA negotiations easy! Doubt it.

Tracey Weber Trades Gnomes for Tomes

Long-time Travelocity (and Site59) executive Tracey Weber has been appointed EVP Textbooks and Digital Education at Barnes and Noble.com (www.bn.bom)

Tracey Weber is one of the last Site59.com senior executives still with Travelocity. We expect that getting back to New York City was a key driver of Tracey's decision. No immediate successor has been named.

Southwest Offers Double Credits (miles) Until Memorial Day Weekend

We've been missing all the crazy double mileage deals that made traveling (slightly) more fun last spring. There have been a few isolated deals we've talked about (double miles from Denver for example) but nothing on a broad scale like last year when the economy was so dour.

Well, today Southwest came out with a new promo offering double credits (Southwest counts credits, not miles) from now until the start of Memorial Day Weekend.

Interestingly, this promotion was announced on the same day that Southwest announced March traffic figures. March looked pretty good for Southwest - traffic jumped slightly but RASM (Revenue per Available Seat Mile) soared 22% year over year indicating Southwest has been better able to align demand and capacity.

How long before the other carriers match? We doubt long - Airtran will probably match quickly. Other carriers may match more selectively (for example, only on routes where they compete with Southwest) but this may be the re-start of the battle for business travelers.

And isn't this a better story than Spirit airlines which just announced a plan to charge for carry-on bags?

Virgin America: Hello MCO & YYZ, So Long SNA

Virgin America has announced plans to fly from Los Angeles (LAX) and San Francisco (SFO) to both Orlando and Toronto starting later this year. Toronto will mark Virgin's first international service while Orlando will be Virgin's second foray into Florida - and a route that potentially strikes at the heart of JetBlue.

Toronto makes a lot of sense for VA - good demographics, little low-fare competition - a great extension of the brand.

Orlando, while a huge destination, isn't exactly known for high yields. It is also the heart of both JetBlue (which runs a large operation at MCO) and AirTran (which also runs a large operation and is headquartered there.)

So, how long before JetBlue announces service from SFO and LAX to Orlando? Last time, it only took a day for JetBlue to announce overlapping service from LAX and SFO to Fort Lauderdale as we discussed.

And so much for Orange County (SNA) - San Francisco (SFO) flights which we chronicled here. While Virgin did succeed in running American out of town, apparently Southwest and long-time incumbent United were too much....

Pay Now or Pay Later: A New Choice at Priceline - And the Next OTA Battleground?

Priceline.com has begun including "pay-at-checkout" inventory alongside traditional, "pay-in-advance" merchant model hotel inventory at select hotels. Priceline has developed a jazzy new logo and tagline: “Pay When You Stay” to highlight this option.

Users are then given the option of paying upfront or at time of booking when they click to select the hotel.

And this isn't a matter of simply including traditional agency inventory sourced via a Global Distribution System (GDS) such as Sabre or Travelport. This stroke of genius is actually the latest convergence of booking.com inventory with Priceline.com non-opaque (i.e. Travelweb) inventory.

Booking.com's rapidly expanding inventory base within North America now enables Priceline to offer multiple sources of inventory with multiple payment options for the same hotel. At the same time, as more hotels roll out, Priceline has removed one of the largest perceived negatives to booking with an OTA - upfront payment.

The gap between supplier.com and online travel agencies continues to close. First booking fees fall, then change and cancel penalties disappear and now this latest game-changer.

Continental: No More Free Lunch - Probably for the Best

Continental Airlines, which has made considerable marketing hay about the fact that they still served airline food for free, has decided to drop the practice.

Clever Continental advertising pieces like these will need to be re-worked a bit but free (airline) food can't be as big of a draw as other airline purchasing influencers such as price, schedule and frequent flyer program.

Back when other airlines began imposing baggage fees, Continental was among the last of the airlines (save Southwest of course) that opted to begin charging for checked baggage. We are told that Continental was looking for signs of share shift away from airlines that were adding baggage fees. Alas, no share shift was apparent so ultimately Continental decided to match the other mainline hub and spoke carriers and enjoy the revenue benefit.

Similarly, it has probably become impossible for Continental to show any share-shift (and resulting revenue gain) from continuing to serve food. In fact, they may have actually been at a disadvantage as some carriers have started to really sell some good food.

From recent first-hand experience, we can report that while free food on CO was nice, it was certainly nothing to write home about. In fact, some of the buy-on-board food has become so good (particularly on Delta) we'd actually prefer to pay a few extra bucks and actually get something that is fresh, healthy and tasty. Or not.

So, we'll see some costs come out and, hopefully, some nice ancillary revenue gains - Continental is projecting about $35M in improved revenue and cost savings - and that's a lot of sandwiches.