Travel Industry

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?

It’s always hard saying ‘adieu’ to a co-founder but it’s especially painful in this case for me to bid Elliott goodbye. I’ve known Elliott since we started as graduate students in 1994 (note to youngsters like Dennis Schaal and Kevin May – this was pre-world wide web in Boston. We jointly organized a Silicon Valley technology tour in spring of 1996 and visited young wannabes like Yahoo, General Magic and @home; still stalwarts like Intuit, HP and Wired as well as then-leaders like Sun and Silicon Graphics. Elliott and I caught the web bug on that tour and we bucked conventional wisdom in 1996 – and ignoring fat signing bonuses and salaries – we went off to co-found our first start-ups – Netcentives for Elliott and CitySearch SF for me. Loyalty Matrix followed Netcentives for Elliott, then a stint in Corporate America, running online marketing for Intuit Quickbooks.

For those of you that know Elliott, you know that he has three deep professional interests – start-ups, social media, and U.S.-China cross-border opportunities. We are going to miss him as he heads off to pursue new, yet-to-be-defined, start-up ideas that combine all three.

Tweeting on the Great Wall

I cannot imagine a photo that better captures the essence of what Elliott would like to do next – this is the Great Wall; and yes…that is Elliott tweeting the dude beside him…

Kaango logo

Relentless, always optimistic and ever the team player, Elliott did whatever it took to help launch Kango, then re-launch as UpTake after we discovered that our trademark lawyers hadn’t done their work like they should have. He found numerous creative and pragmatic ways to drive our consumer acquisition and team-building efforts forward, and his results are clear in the speed at which we reached 1 million visitors (<12 months after public beta), the success of the UpTake blog network, the launch of Travel Insights 100 and the complementary position he has helped us establish in online travel position

We’ll miss Elliott tremendously. He’s not disappearing of course (see his post on more details), he’s transitioning into an active advisory role and will continue to drive our social media strategy and initiatives (including TI100, the Blog Network and some TBD initiatives) with Pat.

Live long and prosper

It goes without saying we wish Elliott the very best and as we say in Chinese – live long and prosper!

Related Posts

Tnooz–Elliott Ng to leave UpTake for Ventures to be Named Later

Orbitz Blogger Day

By Whit Honea, Vacations Blog Editor

Orbitz Worldwide hosted their first annual Blogger’s Day early this week at their headquarters in the beautiful city of Chicago.

Orbitz was an incredibly gracious host and really went out of their way to ensure the comfort and enjoyment of all their guests, which included some of the biggest travel blogs on the web today (yes, even us!).

There are a lot of big things on the horizon for Orbitz and they were kind enough to share them with us, unfortunately they made us pinky swear not to cover all of it.  Something about swimming and cement shoes.

What we can discuss is the excitement and passion that is Orbitz and how it runs throughout the entire company.  They are generally giddy over the news regarding their change in Orbitz fee policy.  They are obsessed with hotels and customer service.  Technology drives them.  Also, coffee.

Barney Harford, the Orbitz President and CEO gave us a good portion of his day and he was happy to do so.  He even laughed at my jokes, which was probably forced and mere politeness, but I’ll take it.

In addition to Mr. Harford we were able to chat with Sam Fulton (Group Vice President, Retail), Chris Brown (VP, Product Strategy), Carolyne Crawford (Sr. Director, Customer Relations/Training), Roger Liew (VP, Technology), Julie Szudarek (VP, Strategy and Planning), Brian Hoyt (VP, Communications and Government Affairs), Eric Brodnax (VP/General Manager, The Away Network), Jan Lofgren (VP, Account Management and Development – Orbitz for Business), Chris Hills (Air Traffic Lead Team) and many others, including Kate who does a lot of the blogging and social media for Orbitz.

A special thanks, hence her own paragraph, goes to Marita Hudson Thomas, for everything.

Stay tuned to UpTake for more on Orbitz news and hovercrafts.

Sometimes start-ups fail because they can’t raise enough capital, but it’s usually because they either don’t execute or because demand and competition materializes (or doesn’t) differently than expected. Sometimes it’s because of an investor-management disconnect that leads to failure despite good execution.

As outsiders, we don’t know why PTG will soon be closing their doors.

We don’t have any proprietary or insider information, but we do think they have (we are always a little slow and too optimistic, so we’re going use present tense :

• a compelling vision of providing professional content (but not bookings) to help consumers who want unbiased help,
• an accomplished management team,
• a beautiful and easy-to-use site,
• unique content,
• and most important of all – traction on consumer acquisition.

According to Compete.com, PTG has more than twice the traffic of the much more well-known Tripit, Travelmuse or Nileguide. And the new professional review service that launched with much ado – oyster.com is just getting started.

According to Compete.com, PTG has twice the traffic of better known sites

So, with better growth than other travel start-ups of the 2007 vintage (unfair to compare oyster.com to those sites) and easily monetized hotel traffic, why is PTG shutting down? An attorney for PTG and it’s management team, Edmund Novotny, told Tomio Geron at VentureWire, “The impending shutdown of the company is a result of the economy…Everyone wants the company to succeed…Simple market forces forced it down.”

Why is Edmund Novotny involved? Because, according to Tomio Geron at VentureWire, some of the minority investors are suing the company’s management and Boston Ventures for $20 million, alleging fraud, negligent misrepresentation, breach of fiduciary duty and a number of other charges.

We clearly are not in a position to comment on the legal situation. We are surprised that given PTG’s growth, attractive market niche, and Peter Nicas’s (PTG’s CEO) accomplished past that PTG couldn’t raise more capital, but given the large number of travel start-ups fund-raising, perhaps it’s a sign of tough times ahead.

We want to congratulate Peter, Sheila and the rest of the PTG team on building a great product, and we are disappointed that PTG will not continue to address the needs of the consumer segments that want professional content.

BTW, I hope take a moment to see the site that the PTG team built, but if not, to save you a trip to what may soon be the internet archives:

Professional Travel Guide's beautiful home page

And a detail page, all sites can envy:

PTG's Miami shopping detail page for bookstores

They created an intuitive hotel page:

Professional Travel Guide's hotel well designed hotel page

Geron also confirmed with Nicas that PTG  ”is seeking a buyer and may shut down at the end of August.”  (Looks like they missed that deadline.) We hope they find that elusive buyer and the site continues to keep their doors wide open.

During the next few months, UpTake will be presenting short takes on travel with industry leaders, influencers and innovators. This post, written by Tom Romary, CEO & Founder of Yapta, first appeared on the Yapta blog.  In this article, Romary discusses the volatile nature of pricing and how the travel industry and Yapta specifically are addressing this issue for consumers.

Air & hotel prices yo-yo frequently

It’s no secret that airfare and hotel prices yo-yo up and down frequently.  A typical domestic flight will have 21 price changes over a 45 day period.  And the “high” vs. the “low” for the same seat on a flight varies by 400%.  Hotel rates change too (although less frequently, and within a tighter band).

The volatile nature of hotel and air prices leaves travelers wondering:  Did I miss out on a deal, or did I overpay?  Online travel shoppers today spend many hours visiting multiple sites scourging the web and getting their own price updates (according to Yen Lee at Uptake, over 21 website visits before buying a ticket).  And while the leading online travel search sites do an adequate job of helping you find a hotel or flight, they are delivering a static solution to shopping.  You do a search, and then you have a choice:  ”buy now” at the current spot market price, or leave.  Even after you’ve narrowed your choices to some specific flights and hotels, you are left wondering, “Will the price change?”  The odds are that your airfare will likely change, and possibly even within a few hours.

So if pricing is so dynamic, why are the big travel sites offering static solutions?

The business models for most travel search sites are finely tuned to maximize “conversion to transaction” now (not later).  They’d rather you not delay your purchasing decision in order to keep checking prices.

Value is more than a star rating

Value vs Price: One mistake many travel shopping sites make is assuming that the “cheapest alternative” is the travelers’ ultimate goal.  In most instances, their goal is really more about getting the “best value” (Value = Quality/Price).  Even the most savvy of travel shoppers are willing to pay a 3-star price to stay at the 4-star hotel.  They’ll also pay a little more for a non-stop on their preferred carrier, so those sites that are recommending a cheap ticket on a 2-stop are often not hitting the mark.  (For instance, I have 3 little kids under the age of 7, so when traveling with family, avoiding ANY layover is worth a little extra dough!).  But travelers want to make sure they aren’t overpaying on the specific flight or hotel they choose to stay in – and knowing that prices are volatile, this fear is always there.

So how can online travelers be assured of “best value” across a dynamic price environment?

As a personal travel assistant, Yapta.com helps travelers find hotels and flights, and then checks rates daily for you on those specific hotels and flights.  If the price goes down, you’ll know about it.  Your travel agent doesn’t do this for you.  Nor does any other travel website aside from Yapta.

(Value = Quality/Price)

To be fair, on the price “denominator” of the value equation, there are some travel sites that have made an effort to alleviate some of the fear and uncertainty around price volatility.  Nearly all major travel shopping sites offer some form of price alert functionality on a market level (e.g. SFO to JFK), but not on a flight specific or property specific level.  Additionally, they aren’t taking into account the “quality numerator” of the value equation.  So they don’t really solve the problem of “best value”. Most of these solutions actually commoditize air travel further by emphasizing only price.

Here’s a quick sample of some solutions that are worth comparing through the “static vs. dynamic” lens:

Farecast: For airfares, they make a prediction about whether they think the fare will go “up” or “down” in the next seven days (at a market level…not specific to a flight).  It’s a helpful tool, and by their internal study they are accurate at the 75% level (better than a 50% coin toss!).  In fact, it’s a good complement to Yapta.  The limitation is that it’s not flight specific so it doesn’t solve the “quality of flight” problem – and they don’t do predictions on hotels.

Orbitz: Offers a “deal detector” that tracks airfare in a given market pair.  You can name your price, and if any flight hits it, they’ll send you an alert.  Again, the limitation is that it doesn’t really filter for quality of the flight (e.g.your preferred carrier, non-stops only) – and it doesn’t track hotels.

Expedia: They have a download called “Fare Alerts”, however it’s really a trojan horse to kick off a search on Expedia, and not specific to any dates or whether I want a non-stop.

American Airlines: AA’s solution is best in breed among airline sites. Their Deal Finder gets to the date-specific/route-specific level.

Yapta tracks pricing for you.

Yapta: As your “personal travel assistant” Yapta aims to deliver value assurance.  While your sleeping, eating or going about your day, you can rest assured that your personal assistant will catch any decrease in the price of the flights or hotels you’re interested in purchasing and will alert you to the savings. Yapta will then connect you directly with the airline to buy it.   If the price drops again after you buy, Yapta will alert you if you’re eligible for a travel credit (net of any “re-booking fee” from the airline).

Given the very dynamic nature of pricing in travel, I believe that travel search as currently delivered in the industry is mostly a “static” (spot market) solution. A personal assistant brings a more dynamic approach to travel planning by constantly observing and notifying when prices change on specific flights and hotel properties — ultimately maximizing the value for the traveler, and providing an efficient method of driving bookings for the supplier. A dynamic personal assistant represents a compelling consumer opportunity within many e-commerce categories, and most certainly within the $200 Billion+ global online travel market.

Related Posts:

• Travel Metasearch is done
  
• Review of hotel review metasearch sites
• Evolution of Travel Metasearch
• What 20,000,000 Travel Opinions Tell Us
• How Kayak can beat Tripadvisor in the Hotel Review Market
• Travel metasearch isdone! Long live  travel metasearch

Orbitz cuts fees

Just a few weeks ago, Expedia announced they were cutting booking fees. Now, Orbitz just announced that it has eliminated its $7 per ticket air booking fee on single-carrier flights originating in North America (NA) and the Caribbean through 5/31 at its Orbitz.com and CheapTickets.com properties. This brings up two questions:

1. What does this mean to Kayak?

Kayak gets some of its revenue from suppliers but the majority of their revenue comes from Orbitz.  They are going to have to find other sources of revenue to make up the loss very quickly or institute some fast cost cutting measures.

2. Does this mean Orbitz’s other revenue streams are doing well?

Forbes wrote that for Orbitz  “the booking fees account for 10.0% of sales.” I assumed they were going to make up those sales through their other non-air profit centers (nyse: OWW).  But, in an AP wire feed, Stifel Nicolaus & Co. analyst George Askew estimated the loss of revenue to be approximately $12 millon.  In the same article, Chief Executive Barney Harford said, that Orbitz has implemented some stringent cost-cutting measures ($20 to $25 million) that provide enough operating flexibility to sacrifice that revenue.  Maybe a mix of non-air revenue and cost cutting can restore their bottom line?

These new cuts in booking fees save the consumer very little but are significant losse for the Expedia, Travelocity and Orbitz.  How are each of these companies planning on regaining the lost revenue and how quickly can them make it happen?

Created by Elliott Ng

David Sifry, CEO/Founder of Offbeat Guides  is upbeat about the travel industry. He said, “because he just started, his business has nowhere to go but up.”  He calls this period of time the “new normal.”  This an interesting take from a successful entrepreneur.

About David L. Sifry – Founder and CEO
“Dave Sifry is a entrepreneur with over 20 years experience in the I.T industry.  Most recently, he founded Technorati, the largest blog search engine in the world, and was CEO from 2002-2007. He is Chairman of Technorati’s Board of Directors. Dave was a co-founder and the CTO of Sputnik. Prior to Sputnik, he was co-founder, CTO, and Vice President of Engineering at Linuxcare, Inc, having built Linuxcare’s services infrastructure. Dave is a recognized expert on leadership development, blogs and the massive changes in the digital media environment, Open Source development, and the Linux operating system. He is also the creator of Projectdocs, an online document management and collaboration service, and Hoosgot, a lazyweb service. He served on the founding Board of Directors of Linux International, the Advisory Board of the National White Collar Crime Center, and the Technical Advisory Board of the National Cybercrime Training Partnership for law enforcement. He has a B.S. in Computer Science from Johns Hopkins University. Dave lived and worked in Kobe, Japan for Mitsubishi Electric, and speaks Japanese in a rusty kansai-ben. While he now lives in foggy San Francisco, one of his top travel destinations is Yosemite, in his hometown state of California, although the lure of London and Paris frequently beckons.”

Travelcom Related Posts:

• Kevin Fliess, TravelMuse, Video Interview
• Gregg Brockway, TripIt, Video Interview
  
• Travelcom 2009: TripAdvisor, “Going Here, There & Everywhere“
• Travelcom 2009 Keynote-”There’s No Room for Maybe”

Gregg Brockway, CEO of TripIt, discusses what keeps him awake at night in today’s economy with Elliott Ng, VP of Marketing at UpTake.com. He believes now is the time for a service like TripIt.com to emerge. His vision of interconnectivity between systems, easy integration, and tying information together across travel providers  is a vision that will clearly come to pass. The question is when.

About Gregg Brockway–Gregg is an online travel industry veteran, former co-founder of discount online travel company Hotwire and former president of Expedia’s luxury travel company Classic Vacations, Inc.  Prior to his work in the online travel industry, Gregg was a director at the private equity firm Hellman & Friedman and worked in the merchant banking group at Morgan Stanley & Company. Gregg received his MBA from Harvard Business School.

Travelcom Related Posts:

• Kevin Fliess, TravelMuse, Video Interview
• Sam Shank, Dealbase, Video Interview
  
• Travelcom, TripAdvisor, “Going Here, There & Everywhere“
• Travelcom Keynote-There’s No Room for Maybe

UpTake invited a group of industry leaders to participate in a series about the current and future state of metasearch in online travel.  This post was was contributed by Scott Hyden, President of STA Travel.

STA Travel serves a niche market that metasearch sites often underserve.

It goes without saying that the topic generating the most excitement in our business over the past few weeks relates to metasearch. It is certainly interesting, educational, and at times fun to watch the personalities we all know go back and forth with provocative commentary from their perspective. We all owe a collective ‘thank you’ to Kayak, Tripadvisor and UpTake for seeding a conversation that has added some spice to our normally boring and tranquil business. If nothing else, the topic drove more and more industry leaders to open a Twitter account (or to use their previously dormant one) to follow the action. To me, the commentary has accurately captured the slippery slope faced when a brand pays for user review content. However, the other parts of the discussions are internally focused trade-based arguments – I haven’t seen an end-customer comment included in any of the banter that shows they ‘want to see content aggregated from the most 3rd party websites’, or ‘need content from the semantic web to make their purchase decisions’. Of course consumers want comprehensive, unbiased content, but the mechanism used behind the scenes to pull the content is not what drives them to determine that the content is meaningful. They need it to be extremely relevant. If one site’s mechanism is better at doing that, then they have the advantage and that is how the conversation should be framed.

Opportunities exist to capitalize on student travelers' flexibilty

This brings me to my specific point – there are many niche markets out there that are not getting the most relevant content delivered to them. Selfishly, one of those niches is the student market. STA Travel has been in business for 30 years, developing products and services to serve the millions of students generally between the ages of 18-26 years old. Over this history we have shown airlines that we have the ability to move share and fill demand troughs, and as a result we receive unique products to offer to our customers. Speaking specifically to airfares, we can offer students deeply discounted prices, as well as additional flexibility for their tickets (longer maximum stays, cheaper changes, relaxed advance purchase requirements, etc.). While we have these great products, we have had limited success in working with most of the metasearch players for one critical reason – they can’t or won’t work with us to qualify the clicks we would receive.

Student travelers can help fill empty seats

While a couple of sites have worked with us to integrate our fares with content that clarifies our product as ‘for-students-only’, most of the bigger players have been unable or unwilling to do so. Sometimes this relates to the limitations of their user interface, but more often it seems to relate to their focus on other priorities. Whether our participation is in the core search results, in the path that allows the customer to click on a brand or brands and then opens browsers for each, or in a student-specific ‘channel’ tab, we feel the student customer of the metasearch site would benefit. At a time when price spreads across travel sites are shrinking, niche-specific unpublished fares such as ours do in fact provide substantial pricing differentiation. We just can’t justify participating when our clicks come from the likes of 38 year old lawyers who aren’t eligible for our products.

Perhaps the conversation will broaden.

Scott Hyden
President
STA Travel

Related Posts (guest contributor posts are in bold):

• A Brief-ish Thing About Metasearch in the UK. by Kevin May, Travolution
• Tripadvisor vs. Kayak Paid Reviews, by Dennis Schall, Travel Industry Media Expert
  
• How Kayak can beat Tripadvisor in the Hotel Review Market, by Sam Shank, Dealbase
  
• Travel Metasearch is done! Long Live TravelMetasearch! by Yen Lee, UpTake
  
• Travel Metasearch is done, by Yen Lee, UpTake
• Review of hotel review metasearch sites by Patricia Jenkins, UpTake
  
• Evolution of Travel Metasearch, by Yen Lee and Patricia Jenkins, UpTake
  
• What 20,000,000 Travel Opinions Tell Us by Gene McKenna, UpTake
  

Mark S. Mahaney, Citi’s Director of Internet Research, wrote an excellent summary of Expedia’s rebound and brighter prospects since eliminating the booking fee. A couple of his key points:

1. Cutting the booking fee will cost Expedia about 10% of their profits, but will stop market share losses against Priceline and suppliers, while likely taking share away from Orbitz (where booking fees make up ~60% of profits) and Travelocity if those two agencies don’t match or continue to match Expedia’s move.
2. Unlike other agencies, Expedia has a HUGE advertising/lead generation business in the TripAdvisor media group that generated $280M in revenue in 2008 with margins of ~60%. That constitutes 10% of Expedia’s revenue and 20% of their profit. In a recession, this media business is likely to do very well because suppliers will be looking to buy qualified leads to fill rooms and seats. Also the TripAdvisor team is expanding their offering to give suppliers more options.
3. Interestingly, Mark also points out that online agency share of online travel is stabilizing due to demographic and economic factors. In addition, travelers will continue to migrate their research and buying online (per PhoCusWright), and as a global agency, Expedia should benefit from both trends.

I think there is another important implication of the cut in booking fees and the global economic meltdown. Despite big investments and good progress by the other agencies, Expedia arguably still has the best hotel and packaging platforms. That enables Expedia to treat flights as a loss leader because they can cross-sell hotels or use their market share and packing technology to create great deals for travelers while protecting supplier brands. Expedia’s CEO, Dara Khosrowshahi, said as much at the Goldman Sach’s Internet conference (yes, I know I’m mixing banks now – I think that’s a faux pas of some kind) when he said that leisure travel was the only short term option to drive growth, consumers were responding to price reductions, and that Expedia expected ADRs (average daily room rates) to go down – but that Expedia expects to gain hotel share.

Travel ‘happy meals’-- would you like milk or fries with that flight, hotel or car rental?

Hard to argue with the short term results from the financial markets – Expedia stock is up ~$3 to ~$9.5.

The market likes Expedia's elimination of booking fees

It will be interesting to see the longer term implications. Will Expedia force Orbitz into a merger with Travelocity – does Expedia benefit from that? Sure the combined entity will have significant cost savings but it will likely be burdened with debt and integrating two global platforms will likely keep both sides internally focused. Time will tell, but congratulations to Dara & the Expedia team – the booking fee cut was a bold move to take the initiative back.

Related posts:
Expedia’s Booking Fees: The Trigger Point

Travel Metasearch is done! Long live Travel Metasearch!