Elliott Ng, co-founder of UpTake, wrote a great summary of PhoCusWright’s Travel Innovation Summit. Here’s my uptake on Wednesday and Thursday’s Center Stage presentations, hallway conversations, and miscellaneous (usually unsubstantiated 
scuttlebutt.
Conflict and Opportunities Abound in Lodging Sector
If you believe Bill Carroll, Chris Anderson and Jake Fuller – and they have the data to support their hypothesis – the lodging industry’s recovery is 4 years away. There are number of reasons for this:
Lodging industry supply is increasing
Supply is still increasing. There are structural limitations (ownership and political) on why lodging rooms aren’t going to be taken out, discount expectations are hard to reverse, fragmented ownership inhibits price leadership and chain brand value and controls have been diluted. An excellent analysis that has implications for online travel ecosystem – the OTAs’ resurgence will continue, conflict between chains and franchisees will grow, and there will be interesting opportunities for businesses that can deliver enough opacity to disable best guaranteed pricing. The dynamics were similar in 2001-2003 when Expedia and Hotels.com dominated online hotel sales to propel into number one position.
OTA's reach a tipping point
What do you think of the Cornell (and Jake Fuller) analysis and conclusion that the lodging sector will be below the magical 60% occupancy line for another 4 years? And what new businesses will emerge and what other implications do you think there will be?
The Next 6-12 Months will Signal a LOT about the Health of Online Travel
The big event we were looking forward to at the start of 2009 happened – booking fees got cut. And the OTAs survived – and thrived (primarily by taking share from suppliers). Jeff Boyd, Priceline’s President and CEO has Priceline and Booking.com dominating European hotels and growing almost 50% Y/Y. Dara Khosrowshahi, Expedia’s CEO has the company growing almost 30% and well positioned given the ongoing hotel occupancy struggles. Barney Harford, CEO of Orbitz took the firm off death watch, cleaned up the balance sheet, raised $100M in cash and is driving Orbitz to finally build a hotel business. Fair to say the publicly-traded OTAs are doing well!
So why do the next 6-12 months matter? Because a number of later stage, private travel companies are primed to go public – Amadeus, Travelport have filed their S-1 and hired bankers respectively. Potentially four more have the size – but perhaps not the size AND growth – to go public: HomeAway, ITA Software, Kayak and Sabre. Will they try? Can they get public?
If they do, it certainly will help the earlier stage private travel companies. Most need to raise additional capital in the next 6-12 months, but if there aren’t some exits and some liquidity to enable acquisitions, it is inevitable that there will be a slew of travel start-ups going under. And even if there is more investment capital available or there are acquisitions as a result of some IPOs, as Brad Gerstner, founder & CEO of Altimeter Capital said, there will be a need to reset valuation expectations. E.g. Priceline and Expedia are growing at 47 and 28% and trading at 8-9X multiples. {Disclosure: UpTake is one of those earlier stage travel companies, and although we don’t need to raise additional capital until 2012, we are very aware that we will benefit from more travel companies going public and an improvement in valuation multiples}
Obviously HomeAway, ITA and Kayak don’t have control over the public markets, but they all have major initiatives underway that will materially impact their growth trajectory and perception from investors. HomeAway will start building awareness of the vacation rental category with an ad campaign – including super bowl ads! ITA is moving ahead with its new GDS and has additional search innovations (e.g. Needle) teed up. Kayak is building brand with their offline campaigns, building their hotel business to offset the cuts in booking fees, and investing to go deeper into the transaction process. Interesting times, big bets, big potential upside!
Who do you think will try and succeed in going public? What do you think will happen to the several dozen private travel start-ups that need capital in the next year?
Either Search & Discovery still needs improvement – or a lot of us don’t get it
There is plenty of ongoing investment in new search and discovery:
- Amadeus’ Affinity Shopper, the winner of the Innovation Award with their dynamic packaging search-;
- Goby with long tail search, , my personal favorite – ;
- Voyij, my favorite runner-up is filtering the Twitter stream, compiling them into emails to slow down the real time feed and enabling me to find what I need when I have time to look;
- TripAdvisor, the investment closest to my heart, Steve Kaufer discussed how TripAdvisor is investing in semantic search to deliver the gestalt of a product and save consumers the need to read 3,300 reviews on the Bellagio;
- Car Trawler on car rental comparison shopping;
- 10Best (VinePulse) on enabling hotels to search reviews from across the web about their hotel etc.
Disclosure – no surprise on this (gasp!) UpTake is a search engine! We have aggregated content from over 5,000 local, travel and professional sites and done the ontology-driven attribute – e.g. ‘6 year old’ indicates a family related fact – and sentiment analysis – e.g. ‘loved the pool’ indicates a positive feeling so we can recommend products that best fit consumers trip preferences. For example, we return different hotels if you are looking for family hotels versus romantic hotels}
Are Goby, Voyij, Car Trawler, TripAdvisor, UpTake all search ‘hammers’ looking for search ‘nails’, or is there a real problem for the search & discovery companies to solve? What do you think they need to do to succeed?
TripAdvisor and Google are the 800 and 8,000 pound Gorillas (respectively)
Expedia has to battle Priceline, Orbitz and Travelocity and vice versa.
But up the travel funnel, there is less competition.
Google has crushed Yahoo Search. Bing is battling valiantly, but Bing’s pick- up 200 basis points of search (from Yahoo) to get to 9% market share hardly shifts the market dynamics (when Google has north of 60% market share). The three most successful online travel CEOs – Dara, Jeff and Steve (Kaufer – sorry Steve Hafner 
all mentioned their concern about Google (or Troogle – Google + Travel) and their dependency on Google (given 73% of travelers search and search an average of 10-12 times before they book). Even though Google has publicly said they aren’t entering ‘vertical search’ like travel, Google continues to extend their lead in related categories – e.g. maps, photos, video, the ‘local modules’ – and therefore increasingly influences online travel. A benign 8,000 pound gorilla (generating over $2B a year in lead generation revenue from travel), but growing larger as each PhoCusWright comes and goes.
TripAdvisor is as dominant as the ‘second click’ for travel research as Google is as the starting point for travel research. Already dominant domestically, they have quietly launched localized versions globally over the last two years and are estimated to generate over $300M in 2009 revenue and $200M in operating income. And they too, are extending their lead. In the last year, the TripAdvisor Media Group has expanded into China further with the Kuxun acquisition (already owning DaoDao), launching flight metasearch, getting into deals (via SmarterTravel), and driving into the vacation rentals sector. Fortunately, TripAdvisor continues to be collaborative with the rest of online travel, but like Google, they continue to extend their lead.
In an industry where size (of market share) matters, Google and TripAdvisor are dominant. What does that mean for the long term health and balance of the online travel ecosystem?
