Travel Industry

I’m not one to say “I told you so,” but it’s darn tempting to throw that phrase at New York City officials who implemented the tax on travel agencies selling available rooms in the Big Apple.

Lots of rooms, lots of taxes

After trying to figure out what the law says and exactly how to implement it this fall, the American Society of Travel Agents and a host of big online Internet players (i.e. Expedia, Hotels.com, Orbitz, Priceline and Travelocity) responded this week with a lawsuit against the city. The grounds: extending the hotel room occupancy tax to “third-party travel intermediaries” is “unconstitutional and illegal” as the city “has no inherent power to tax.”

Other points in the lawsuit bring up the fact that New York City failed to answer critical questions and the City’s interpretation of its new rules was unacceptable. To rub salt in the wound, the City of New York imposed the tax without notice, hearing or other opportunity for meaningful input.

ASTA’s senior vice president had previously said the law was written by ”people who don’t know about the industry who just want more money.”

Technically, I predicted that travel agencies would retaliate with a huge drop in bookings in the fourth quarter. I was correct about the retaliation part — a lawsuit could deter other cities from pulling this stunt in the next six months. The move is predictably popular among travel agents, although it is aimed only at stopping taxation on online hotel bookings at the moment, which could end up giving their biggest competitors an advantage they don’t enjoy. But that’s for another day. Fighting back is the first order of business.

Happy holidays, Mayor Bloomberg.

Elliott wrote a great summary of the Travel Innovation Summit and I wrote a summary of the rest of the PhoCusWright Conference. Here’s a lighter view of the best and worst  of the PhoCusWright 2009 Conference.

Best Sound bites – tied

• Robert Flynn from Frommers on why professional content is the best way to go, referring to why TripAdvisor is flawed said,  “We (Frommers and other professional publishers),  don’t need to put the word ‘trust’ in our tagline.”
• Tom “Mr. Walking Sound Bite” Romary, president of Yapta in response to Bob Offutt’s question “if you had a magazine title, what would it be”. Tom’s answer “Playboy: The naked truth (on prices)”

Best guerilla marketing

• The Yapta Cabana. Yes, by the pool. Yes, open to 3am (to the chagrin of the Omni security). And yes, stocked with Oban single malt scotch and ice. Bravo!

Oban Single Malt Scotch

Hardest comment to agree – or argue – with

Jeff Boyd,  “Online media in travel is slowing and it’s hard to break through against Kayak and TripAdvisor”.

• Yes, it’s hard to compete with those two 800 and the 8000 pound (Google) gorillas respectively. But they do $100M, $300M+ and $2B in annual online media revenue respectively and the online media sector in travel is north of $3B annually, so it’s likely worth trying. On the other hand, Priceline grew 47% YoY, they dominate European hotels, they have typically zigged when everyone else zagged, and their market cap is currently bigger then Expedia’s – so who’s going to argue with their strategy, execution or anything their CEO says?

Worst personal moments – tied

• Realizing there was no  coffee at 8:45am on Wednesday morning. Coming from the West Coast, that was cruelly early and unusually harsh.

No coffee was a low point

• Realizing it was 3:00 am and I was in the Yapta Cabana with a glass full of scotch

Best “I’m too cool to be flustered” routines – tied

• Jason Shulman from x+1 who had to do improv for 15 minutes while they tried to figure out why his presentation wasn’t working.
• Philip Wolfe and (most of the PhoCusWright team during the fire alarm. It was remarkable how they got the show back on schedule.

PhoCusWright execs were cool under pressure

Worst example of charismatic leadership (good leadership channeled in all the wrong ways)

• An unnamed OTA executive (almost) convincing conference attendees to go swimming at 3am (yes, this is related to the Yapta whiskey)

Best microcosm of the value of twitter and whether it’s connected to mainstream anything

• (Elliott, please don’t stone me) – Realizing there was no correlation between the twitter/blogger sentiment of who the top innovators were (e.g. excellent summary posts by Tim Hughes, Stephen Joyce, Kevin May, and Elliott Ng) and who the Conference attendees & Judges voted as the winners

Best teams no one is talking about

• Travis has done a remarkable job rebuilding the Travelport team. Scuttlebutt is they have hired bankers are going public in 2010
• Paolo has quietly built a very talented and hungry team at VFM Leonardo. Plus they have the corner on high quality photos and video.

VFM Leonardo corners the market on high quality photos and video

Worst team that people were talking about

• {Pat made me take this out}

Best stuff left for us to read between the lines & Best company to follow in 2010

• Bob Denier on why he and Dave Litman returned to launch Getaroom and how it’s similar to Hotels.com,  “We stick to our principles (that in a down market we can get hotels to give us huge discounts AND pay over 30% for us to sell rooms for them), stay disciplined to numbers and making money (we made over a billion dollars last time around, so we think we know a little bit about this), and move fast (amazing to Dave & I that 10 years later, Travelocity and Orbitz still don’t have hotels businesses.)”. Especially if you believe the Cornell and Jake Fuller data that the hotel sector is 3-4 years from recovery…

Worst post-conference moment

• Seeing poor Bruce Rosard wear a Yankees cap because he lost a bet when the Phillies lost the World Series.

Best Lazarus act

• Barney Harford, Mike Nelson, Frank Petito, Ramesh Bulusu and the rest of the Orbitz team. From death’s door with the fee cuts to surviving, thriving and now with a fresh $100M in cash.

Best persistence in continuing to flog the same product even though we aren’t buying (yet?)

• Rob Torres and video in a blog interview with Tim Hughes. Hard to feel sorry for anything or anyone at the 8000 pound gorilla called Google, but selling video and brand in this travel economy can’t be easy.

Best after-conference events – tied

• AC/DC concert – unnamed OTA executives clever nuff to sneak off

The Little Duck at AC/DC

• Alligator night tour of the Everglades with the Travel Insights 100 and UpTake Blog Network bloggers

Travel Insights 100 and UpTake Blog Network tour of the Everglades

Best real data and substance

• Hands down – the Bill Carroll, Chris Anderson, Jake Fuller presentation on why the lodging industry will be in the tank until 2012.

Lodging Recovery Scenario

What were your favorite and worst moments? Let me know! (you are most welcome to make fun of my best/worst moments, but please submit yours too!)

Photos courtesy of:

• Oban Single Malt Whiskey
• Coffee cup by m4tik
• Fire Alarm by selva
• Alligator from AllAnimalWebGuide

You could be in your desired hotel room for less by using a few hacks.

Although hotels use “opaque sites” like Priceline and Hotwire to unload unsold inventory without diluting their brand names, with a little sleuthing customers can often figure out what hotel they’re booking. But as I recently found out, sleuths like me should beware, because if you play the game long enough, once in awhile you’re going to end up in the “wrong” property.

For my blog Frugalista, on Chicago Tribune partner site ChicagoNow, I summed up the techniques I use to figure out what no-name hotels are being offered on Priceline or Hotwire. These techniques are for using when you hope to stay at a specific property but don’t want to pay the publicly available rate:

1) Check the site you’re shopping on and other booking sites to find out how many stars your desired property is listed at. Note whether there are other properties with the same number of stars listed in the city or neighborhood.

2) Check whether the site you’re shopping on offers your desired hotel as a named property. I don’t know if this is a hard and fast rule, but I’ve noticed that if Priceline is offering a property upfront, you’re likely to find the very same place on the “name your own price” section.

3) Check a forum such as BetterBidding or BidonTravel to find out what hotels others have gotten recently by bidding in the same area you’re looking in. Usually you will notice that in a certain star category, everyone has gotten the same property. If this ISN’T the property you want, don’t bid because this is the property you’re likely to end up in!

4) If others are indeed getting your desired property, go ahead and figure out what to bid. This is something you can also learn from BetterBidding; people post the amounts of their winning and losing bids, often revealing the lowest possible price that will “win” the room. If you’re not sure what the lowest possible price is, and you have enough time, bid lower than the lowest price you see others have paid and try bidding again when allowed 24 hours later.

5) If you don’t get winning bid information from other travelers, just try bidding 50-75% less than published rates. BidonTravel’s tip sheet suggests checking rates for the same day of the week you’ll be traveling on.

In the past, I have used these techniques to get into the same hotel as other family members for a wedding and to get in the preferred spot for an urban getaway.

However, the techniques are NOT foolproof. Take this weekend, when my family is heading to a wedding near Milwaukee, Wisconsin. I did my research, and felt pretty sure that the Hilton Garden, where the family was staying, was the only 2-1/2 star hotel in Oconomowoc, a small town west of the city. I went on Priceline and bid for 2-1/2 stars, only to be informed after bidding that I had been “upgraded” to a 3-star property across the freeway.

Oh well — maybe after a weekend of wedding activities, we’ll have had enough family togetherness by the time we hit the hotel anyway. And at least I paid less than half of what I would have paid through my desired hotel’s Web site or on the phone.

There was a warning that my scheme was not going to work out: Priceline had marked the 3-star category as the “best value” before I entered my bid. If you’re bidding and see such a mark on a higher star category, I would expect to be upgraded to the category Priceline is pushing, whether you like it or not.

Photo by Oakbrookterracehotels, used via Creative Commons license.

The hotel deals are getting sweeter on Priceline and Hotwire.

According to the New York Times, travelers are getting better deals than ever on “opaque” travel sites like Hotwire and Priceline, so called because the consumer can’t see the hotel or airline’s name until she has purchased their product. Retail prices are down and more rooms and flights are going unsold, so more inventory ends up on these sites at steeper and steeper discounts.

Travel companies feel they can unload inventory on these sites without tipping off competitors to their discounts or undercutting their regular prices. But I wonder. For the first point, I think travel providers must have a pretty good idea what discounts their competitors are giving on Hotwire. After all, savvy consumers know what hotels sell for what on these sites – they can find out from other travelers on forums such as Biddingfortravel.com or Betterbidding.com.

The second point may be an even bigger worry. As companies in all fields look to cut costs, you can bet some are using Hotwire and Priceline to book corporate travel. And once they find out that it’s easy and generally satisfies, who says they’ll go back to paying premium prices after the economy picks up again? Even if the traveling employee sometimes looks up reviews of the hotel and objects, if she’s not the CEO, the company will probably care more about the money they’re saving.

It seems like in every recession, companies learn how to operate more leanly and don’t necessarily forget that learning in good times. I remember when the in-house travel agent at the company I worked for didn’t even bother looking at Southwest fares. He had his regular agent at United, and he just went ahead and booked a refundable, top-tier fare. How many companies ignore discount carriers today?

Fees are heading up even as fares are coming down.

Everywhere you look lately, there’s a new airfare sale being announced. And if you’re a savvy customer, you know that a drop in fares can benefit you even if you’ve already bought tickets.

That’s because airlines will refund you the price difference if you call and ask. But, always looking for fees to recoup the costs of fare sales, the airlines have started tacking on ”administrative fees” of up to $250 for price adjustments, often eclipsing any savings you might have gotten from watching the fares.

An New York Times travel article offers several ways to stay ahead of this game: 1) Use Yapta.com, which will track the fare and email you when the price drop exceeds your airline’s change fee; or 2) Book through Travelocity or Priceline, which are providing price-drop refunds for packages under certain circumstances.

Wouldn’t it be nice if Yapta’s service worked for other areas besides travel? Like, I’d like an alert letting me it’s time to refinance my home because the falling rates have surpassed closing costs. And I’d really like a service to tell me just the right time to jump into the crazy stock market.

Come to think of it, I bet the airlines would like a service like Yapta themselves. They could find out when customer outrage is threatening to surpass the benefit of one more raised fee, when to file bankruptcy after fare competition and lagging demand have become too much to bear, or the optimal time to approach the federal government for bailout money.

But if airline CEOs do head to Washington to ask for bailouts, how will they get there? The auto CEOs symbolized their newfound humbleness by driving their own cars; would United’s CEO have to come in on a simple prop plane to signify the same? Or perhaps he’d just have to do what the rest of us do to save money and buy a ticket on Southwest or another discount carrier that has not indulged in all the fees.

After all, the airline industry comes with plenty of baggage — heavy retirement and other workforce obligations, unused equipment, the traditional hub-and-spoke systems, and a history with the bankruptcy courts. Those CEOs are going to have to check more than one piece, and with the per-bag fees at the major airlines these days, that adds up.

Photo by tylerdurden1, used via Creative Commons license.

A decision against Pitt County, NC by the Fourth Circuit Court of Appeals in Raleigh in a lawsuit won by a bunch of online travel websites, is making waves in the travel industry and in the justice system, because of the enormous significance to other similar cases pending in dozens of courts, not to mention the millions of dollars involved, and the larger question of whether states have a right to tax internet companies which do not have a physical address in-state.                                                                                                   

And this untaxed difference pocketed by online travel sites has suddenly become as important as the abortion wars, with dozens of counties having filed lawsuits (some of them class-action) against online travel websites including Expedia, Travelocity, Priceline and Orbitz, among others. None of the lawsuits, until the Raleigh appeal case, had been able to win a definitive federal decision inspite of years of litigation and hearings.

And this is not just about paying more taxes in future. Lyndhurst County, NJ collects about $337,117 a year in hotel taxes, and they’re suing travel websites (including Expedia, Travelocity and Priceline) for 5 million dollars. This is just for one County.  They’re actively trying to rope in all 147 towns in New Jersey and make it a class-action. If that happens, and then the travel websites lose the suit, can you imagine the amount that they’d end up paying in back-taxes, damages and costs? And even this would be just for one state.

Hotel Occupancy tax Lawsuit

Throw in the dozens of other lawsuits in San Antonio, Houston, Los Angeles, Miami, Atlanta, Philadelphia, and Chicago, along with class-actions by smaller counties put together, and what you have is a disaster waiting to happen – If the travel sites start losing.

Which is why immediately after the federal Raleigh appeal went in favor of the travel websites,  both sides  are now rushing to lobby the new 111th Congress.

The travel websites want to add an amendment to the $850 billion economic-recovery stimulus bill which would ban local authorities from taxing the travel websites. The Counties and Cities, for their part, are putting pressure on their Congressmen to not support any such move, so they can continue their fight through the courts.

Photo by Phillip via flickr (creative commons).