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.

Delta: Ooops, we forgot the fuel surcharge: Crazy deals to Europe!

Last night, Delta uploaded a host of new fares for Central and Southern European destinations including Madrid, Zurich, Athens, Barcelona and the like. In so doing, however, they managed to leave off the $200 fuel surcharge making for some outrageously low airfare deals.

For example, JFK-Zurich in August for $233 including all taxes and fees. Similar deals were to be had to Madrid and Barcelona - the taxes alone to Europe these days are often over $100. Athens was a bit more but who is going be bothered paying $400 for a ticket to Greece in the peak of summer?

How did this happen you may ask?

Airlines file or load international airfares from their internal systems to a distribution partner known at ATPCO or the Airline Tariff Publishing Company. ATPCO is owned by most of the major airlines and serves as a central "hub" for fare (but not inventory) distribution to the major Global Distribution Systems (GDSs) such as Sabre, Travelport and Amadeus. ATPCO sends international fare changes to the GDSs five times per day where it is processed and made available for sale. Travel agents (everyone from Amex to Expedia) can access the airlines fares, schedules and availability directly from the GDSs.

Airlines send two pieces of data to ATPCO with each load: Fares and rules. The fares are fairly self explanatory - a basic dollar amount for each specific fare product. The rules get more tricky. This is where each fare product is defined - things like Saturday night stay requirements, advance purchases, etc. Also part of the rules section is, you guessed it, fuel surcharges. In last night's load, Delta inadvertently left of the $200 fuel surcharge for these fares. ATPCO dutifully uploaded the fares to the GDSs and voila: Cheap tickets to Europe!

And, yes, the deals are still out there as of this posting - but dont expect them to last too long - you can be sure Delta is taking steps to correct their mistake....

New EXPE Board Member - Chairman of Amadeus - really!

In a small 8K filing late last month, Expedia added Jose Antonio Tazon to the Board of Directors. Tazon replaced Expedia long-time insider and fellow European Simon Breakwell who left the board.

Breakwell leaving isn't particularly interesting aside from the fact that he was one of the "old guard" from earlier times - he joined the company in 1997.

But the Chairman of one of the big three GDS systems joining the board is interesting indeed. Clearly, Tazon brings a wealth of European knowledge and insight to Expedia - which could be crucial as Expedia continues to slug it out with the likes of booking.com in particular. Amadeus also brings deep experience in serving both airlines and travel agents alike.

But Amadeus' market strength comes from the European Markets - not North America where Expedia's strengths lie.

Amadeus, on the other hand, unlike Travelport and Sabre, has limited experience in the direct-to-consumer online travel agency space. From a consumer marketing standpoint, clearly Expedia sets the bar.

We doubt this is a prognostication of further consolidation within the travel distribution space (yet) but Expedia and Amadeus certainly have plenty to learn from each other.

January US Airline Agency Sales off 25% - demand plumets faster than airlines can remove capacity

The Airlines Reporting Corporation (ARC) has posted January US travel agency sales and the numbers are, in a word, shocking.

A bit of background first. ARC is a company owned by the major US airlines that facilitates payments between the airlines and all travel agencies (including OTAs such as Expedia et al). If a ticket was bought at a travel agency in the US, the revenues flow through ARC. Airlines' sales outside the US, as well as their own airline.com (e.g. delta.com, aa.com etc) revenues do not flow through ARC. Roughly 50% of US airline revenue is handled by ARC and it skews heavily towards business travelers.

The raw data is here but year over year, actual ticket sales numbers plunged by nearly 25% while revenues plunged by an even greater amount - nearly 27%. This is one of the first indicators we have of what is to come for the airlines now that the holidays are over and the true recession has set in. Most analysts have pegged capacity reductions at around 10% year over year - revealing a great chasm is opening between demand and capacity.

Indeed, the carriers' worst fears are being realized - demand is falling faster than they can reduce capacity. Things were not supposed to work out this way.

These declines are also telling for the Global Distribution Systems (GDSs) . Galileo, Worldspan (both owned by Travelport), Sabre and Amadeus are no doubt seeing similar declines in airline segments as nearly all of ARC's revenue is delivered by the GDSs. With their heavy debt loads from their privatizations, things may get interesting quickly for Sabre and Travelport.