Indian online travel players hit accelerator....again!

The Indian online travel industry seems (in market designed to produce mixed metaphors) to burst in waves. Back in 2008- the four leading companies of India - Makemytrip, Cleartrip, Yatra and Travelguru seemed to have created a $2bb plus online travel market from a near standing start.

In their recent India report, PhoCusWright now puts the 2010 online travel market (leisure and un-managed business) at more than double 2008. $4.3bb is their size estimate, as much as 25% of the total travel market. They predict a rise to $7bb in 2012 (you can buy the report here). That would put the India of 2012 at the same size as the online market of Australia in 2010. An almost unrivaled acceleration in online travel. Like many markets online, the buying of low cost carrier tickets is a huge driver. But, unlike many markets, rail is a significant part of the grow story in India. Online rail in India is already more than a $1bb a year and is more than a quarter of the online travel industry's total turnover. In India (according to PhoCusWright), the percentage of rail online is twice the percentage of hotel online.

Corporate activity is accelerating alongside the market acceleration.

Number one player MakeMyTrip (MMYT) has been public for less than a year (IPO in August 2010). They went to the market at $14 and are still trading above $30 (Apr 21 at $32.23) with a valuation in excess of $1.1bb.

Cleartrip is chasing hard. They have just raised $40 mm from travel travel expense and management solution provider Concur (you remember them, they bought TripIt in Feb for up to $120mm).

Not to be left out, a day later Yatra announced they were raising $45mm from raised from Valiant Capital Management, Norwest Venture Partners, Intel Capital and others (WSJ story here). According to the WSJ this eclipes the $33.8mm they raised in the last round. The article quotes sources saying that a float in the next 12-18 months is very likely.

Expedia is also refusing to be left out. They have added India to their list of markets covered by their JV announced with Asian low cost carrier giant Air Asia.

Via is trying to argue there is room for more players. With $15mm raised so fare from NEA Indo-US Ventures, Sequoia Capital India and others, Via (also known as Flightraja) has mega bucks in their sites announcing last month they intend (emphasis on intend) to raise another $100mm.

Travelocity are trying to peek their head above the noise through a marketing relationship with Mastercard.

A very busy 30 days in a fast growing market. Did I miss anything? For the Tnooz latest list of top travel sites in India care of Hitwise click here.

Thanks to FriskoDude for the great photo via flickr

Social media is either overhyped, underhyped, or somewhere in the middle

Across two conferences two sets of travel executives have highlighted the challenges in figuring out how much to invest in social media for online travel companies. At last year's PhoCusWright Steve Hafner of Kayak called social media "overhyped". A session or two later former Expedia CEO Rich Barton called it "underhyped". At this year's No Vacancy Glenn Fogel of Priceline called social media experts "charlatans" while Toga Hospitality CEO Rachel Argaman said the future of the internet was pages inside Facebook. Meanwhile Wotif provided the perfect case study to test this debate by launching $11 rooms for 11 minutes via social media.

In my latest Tnooz post I discuss this debate and look in depth at the Wotif promotion. Check out the story here.

PhoCusWright: HomeAway boss Brian Sharples talks acquisitions and how far we are from instant conf in online vacation rental

The travel industry has conquered the sale of hotels online. The big four (Expedia, Orbitz, Travelocity and Priceline) as well as local players (Wotif, Rakuten, Ctrip, HRS) have been aggressively and successfully selling hotels online for nearly a decade.

I have often looked to the very under developed market for the booking of vacation rentals and wondered when it will be ready for the same level of online sales as hotels. When will the structural and supply roadblocks impeding online vacation rentals be removed to allow for the massive amounts of online research for vacation rental and pent up demand for vacation rentals translate into bookings. Actual online transactions rather than the listing and referral models that dominate.

With that background HomeAway CEO Brian Sharples took to the centre stage at PhoCusWright yesterday with his vision for the company and the vacation rental business. As a reminder HomeAway is the biggest of the vacation rental aggregators. They have raised more than $450mm in venture funding including a massive $250mm round in November 2008 - specifically targeted for acquisition spending.

Brian shared with us that they have been very active in spending that money having completed fourteen acquisitions 5 years. He made one of the most acquisition positive statements I have ever heard from an online travel CEO. "If you can't compete with it, buy it" was his rallying cry for growth through consolidation.

The potential for Vacation Rental online is substantial given the difference in the online percentage of sales for vacation rental compared to hotels. According to the recent PhoCusWright report on the industry called "Vacation Rental Marketplace: Poised for Challenge" in 2008 the total vacation rental market was about $25bb in the US and $100bb globally. But only 12% of the vacation rental market is online. PhoCusWright predict that the online market in the US will hit just $4.6bb in 2010 compared to online hotels being a $100bb plus market.

But as the report and Sharples both say, the biggest impediment to the industry is the challenge of securing inventory from property owners. To enable consumers to be able to secure instant confirmation bookings rather just kicking of an email conversation with the property owner. To enable the aggregators like HomeAway to generate merchant level margins by shifting from being a listing business to a merchant.

Sharples indicated that he is determined to get to the merchant model. Two of the fourteen companies bought by HomeAway are property management technology companies. Sharples will use these to supply property owners with the means (and rewards for) providing real time inventory. He is backing that up by "first time in three years increasing our tech budget as a percent of revenue" That is not surprising. The biggest player in the online vacation rental market should be working day and night on finding a solution.

What is surprising is how far away the industry is from the solution. Sharples believes that "it will take 5-7 years for vacation rental to be properly online" (instant confirmation). Dara Khosrowshahi (Expedia CEO) was similarly pessimistic about how long it would take. During his executive interview the next day Khosrowshahi said that instant confirmation vacation rental transactions were 3-5 years away.

It has been five years since the launch of HomeAway (crunchbase profile), seven-eight years since Cendant first started to put together a consolidation play of European vacation rental sites and 11 years after Expedia bought Vacationspot and Rent-a-holiday. Yet according to two of the best placed execs in the market we are still half a decade (or more) away from instant confirmation bookings at scale. Clearest evidence imaginable of how hard it is and will be to crack instant confirmation on the most distributed and fragment accommodation sector.

BTW - for more on this sector but in a different region see my recent interview series with Australian vacation rental boss Justin Butterworth. Part 1 here, part 2 here.

TripAdvisor Sessions: Talking to TripAdvisor VP Adam Medros about Trip Friends and living in a Facebook world

It has taken me a while to type it up but I wanted to share with you my interview with TripAdvisor Product Vice President Adam Medros on their (now not so new) Trip Friends feature that allows review and destination surfing on TripAdvisor to be combined with Facebook social search features.

If you have not come across the Trip Friends product yet, it allows you to connect your TripAdvisor search to your Facebook network. Practical results are an ability to see who in your network may live, have visited or have knowledge about a destination. This data comes from Facebook friend's profiles and Cities I've Visited "pins". Targeted questions can be asked and answered combining the mass crowd input of Tripadvisor's UGC information and the sociograph responses of a user's Facebook friends (for more on the product see the Tnooz review).

The BOOT is full of stories from me about the evolution of online travel from a transactional activity to a recommendation and inspiration service. You will have seen my interviews with various inspiration and discovery start-up CEOs (Triporati, Joobili, Tripbase, LikeCube) as well as my general posts on the Travel Discovery & Inspiration sector. In part 1 of my discussion with Medros of Expedia's TripAdvisor we discussed discovery, inspiration, product development, lead generation and having to live in a world ruled by Facebook (part 2 here). Here are the details of the discussion

BOOT: How long did it take to build the feature?

Medros of TripAdvisor: TripAdvisor does weekly releases covering 10 or 12 different projects at any one time. We have a building and launching mentality. It helps that we are a content company, not not transactional based as transactional sites need to be much slower and more careful in their launches. This feature took 5 months of work. Some was working through the detail of how it would work – some rewriting code as Facebook changed their feed. 2 weeks before launch we had to rewrite the private messaging functionally because of changes on the Facebook side.

BOOT: What are the future plans for the feature?

Medros of TripAdvisor:There are a couple directions we want to take the product

1. Big Picture – pushing on working more closely with partners in the industry to talk to travellers and users that helps plan a better trip to add advice from experts to advice from Facebook friends;
   
2. Mobile - We re-launched our mobile site in Dec 2009. Want to add this feature to that platform. Currently getting more than 2 million users a month on mobile; and
   
3. Network effect – expanding the buckets of things consumers can share with each other.

BOOT: What is like being tied to Facebook? Must be hard and challenging to give up so much control to them?

Medros of TripAdvisor: Without a doubt (a challenge to be tied to the Facebook experience). The benefits are clear but also a number of dependencies we have to manage:

1. General dependency: What would we do if Facebook build their own travel Q&A product? We can't worry about it as we can't stop something like that happening and it would go against public claims by Facebook to be independent;
2. API dependencies: Facebook have a tendency to change features and the API often. For example app notification went away and was never replaced; and
   
3. Downtime dependency: What happens if the Facebook API has downtime? Figuring out how to message to users when there is latency coming from not you.

Despite this we need Facebook. We tried to build a version of Trip Friends on our own a few years ago – did not take off because consumers did not want to maintain another social network.

BOOT: Do you think Facebook is or will become a place for consumers to do transactions?

Medros of TripAdvisor: Facebook (the platform) is ready but users do not think that way just yet. Have yet to see any real interest in transacting on Facebook other than within games. Good innovators dilemma. Is like the early days of Google. Both Facebook and Google are going to get closer and closer to the lead generation side of marketing through delivering people to sites that can transact.

BOOT: Any thoughts on letting hotels participate - to get involved like they can in responding to reviews?

Medros of TripAdvisor: Starting to think about that. TripAdvisor serves two sides of the trip equation. The user side of recommending and the industry side as well. Hoteliers should be able to contribute to trip planning experience. As long as users know the bias of the advice. There is room for us to take this functionality and add advice from experts as well as friends.

In part 2 I talk to Medros about the differences between the sociograph and the tastegraph.

What are your early impressions?

TripAdvisor - what did they buy and when

Here at BOOT central we are trying to keep track of the acquisitions and subsidiaries of Expedia’s Tripadvisor. In earlier posts on this we tracked simply by way of a list of acquisitions in reverse date order. With what looks like two deals a year to monitor I have decided to expand the list with some more details. Here is an extensive list of all of the acquisitions made by Tripadvisor since joining the Expedia family.

Company	Sector	Date of Acquisition	Description
HolidayLettings	Holiday rentals	24-Jun-10	UK based holiday rental company (is not HolidayRentals owned by HomeAway)
Kuxun	Meta-search	30-Oct-09	China based meta-search. Kuxun means Cool Information or Smart Information
Flipkey	Holiday rentals	July 15 2009	Boston based holiday rental company
OneTime.com	Deal Search	1-Jul-08	At time of acquisition claimed 5 mm uniques and 30mm page views. One estimate puts deal at $85mm. Onetime do not like being called a metasearch company
Virtual Tourist	Social network	(same deal / company)
Airfarewatchdog.com	Deal Search	2-Apr-08	Site that monitors airline deals especially in low cost carrier sector
HolidayWatchdog	Review Site	1-Feb-08	Hotel and holiday reviews with some deal searching – UK based. Travolution rumour that price GBP9-10mm
Cruisecritic.com	Review Site	25-May-07	Cruse ship reviews and deal search
IndependentTraveller.com	Destination Content	(same deal / company)	Destinations content and information. Includes brand Family Vacation Critic
smartertravel.com	Destination Content	9-May-07	Destinations content and information
Travel-Library.com	Destination Content	(one deal buying Smarter Travel Media)	Also includes brand Frequent Flyer.com
bookingbuddy.com	Meta-search		Booking search
TravelPod.com	Blog Platform Social Network		Platform for travel reviews and blogs as well as networking
SeatGuru.com	Review Site		Reviews individual seats on aircraft to help with picking seat assignments
Everytrail.com	Trip planning	3-Feb-11	Trip planning service focused on mobile platforms

Have I missed any? Official Expedia Inc listing is here. Yes – Expedia owns Tripadvisor (you wont believe how much traffic I get for the question “who owns Tripadvisor”).

Australian Online Market for Short-Lets and Holiday Rentals: Interview with Occupancy.com joint-CEO Justin Butterworth Part 2

A deal merging two of Australia's online short let/holiday rental distribution companies to form Occupancy.com has prompted a series of posts here are the BOOT. In part 1 of this series I shared with you my discussions with Occupancy co-CEO Justin Butterworth (pictured) on the size and mechanics of the market. In this part 2 I will share my conversation with Butterworth on the merger deal itself and what’s next for the sector.

The deal

The deal to merge TakeABreak and rentahome.com.au, two of the four main players in the Australian holiday rental accommodation market, was hatched in Nov 2009 and signed in December. Butterworth is not talking how much but has admitted that the deal was all share deal (no capital raising). An assessment was made between the two companies as to relative size and grow rates to determine how much of the combined entity each would get (again not disclosed). Rentahome has maintained its office in Sydney's Moore Park and Butterworth's co-CEO Craig Davis will stay in the TakeABreak office in Canberra.

They have completely integrated the back end systems to allow for on inventory platform system to cover all 20,000 properties. The interest twist to their integration is that they have maintained the different login screens and supplier interfaces. Different inputs but one system. Butterworth told me that there was less than a 10% overlap between the two brands. The limited cross over was because Renathome had focused on the short let metro market whereas TakeABreak was focused more on regional and rural holiday accom.

SEO rankings drove the deal as much as inventory. Butterworth told me that SEO marketing is the “cornerstone of the business”. He told me that cross linking between the two brands is expected to drive a 30% uplift in SEO traffic for the combined group. Once the email lists are deduped he expects the combined group of subscribers to be greater than 400,000.

What’s next for the company and industry

This deal has not generated the press that it probably deserved. Though the bulk of the booking value and revenue remains with the properties, my calculations on the online short let/holiday rental market size show that Occupancy number 2 in terms of bookings generation in a battle that includes subsidiaries of Fairfax, News Corp and Yahoo7!. The specific challenge for Occupancy will be to achieve number one spot in the face of this competition.

For the whole of the online short let/holiday rental sector there are three general challenges:

1. Live vs non-live: Consumers are looking for instant confirmation when they book online. Occupancy is the online one of the majors that offers live inventory but only on a proportion of its properties (Butterworth is not saying what percentage). It is clear that this is a challenge for all the players;
2. Product certainty when no uniform standards: Star rating systems in the hotel sector are constantly open for criticism for bias and lack of uniformity. The position is much worse in the short-let/holiday rental sector. There is no uniform independent service that customers can go to for comparing the quality of different properties. Butterworth and Occupancy are trying to deal with this through their Rental Guarantee. This outlines the checks that they do on a property. It provides a validation on the details in the description matching the property but the industry is still missing an easy mechanism for property comparison (hence challenge 3); and
3. Building profiling and recommendation engines: you would have seen me write often on the future of online travel being around targeted and individuated recommendations (my EveryYou concept). This is particularly the case for a sector like this where there is such a variety of product is some many secondary rural and regional destinations. The challenge is to be build a combination of technology and human solutions to help guide people to the right properties and destinations.

That all said, the variety and uniqueness of the product offerings within the short-let/holiday rental sectors goes a long way to compensate for theses challenges and is the reason for the growth of a health intermediary market in Australia.

Australian Online Market for Short-Lets and Holiday Rentals: Interview with Occupancy.com joint-CEO Justin Butterworth Part 1

A war is brewing in the alternative accommodation sector in Australia. It is a war that generates a lot less press and pundit attention than the OTA and online hotel battles that consume so much of my time. But the battle for supremacy in online distribution of holiday homes, short term rentals and B&Bs is getting exciting. The latest salvo was the announcement that online corporate/short term rental specialist rentahome.com.au and holiday rental merchant TakeABreak merged to form Occupancy.com.

I had lunch recently with former rentahome.com.au boss and now Occupancy joint-CEO Justin Butterworth (pictured)to talk through the deal, the market and what's next for the online accommodation industry. In part 1 of this post I will share with you our discussions on the online market for short-let/holiday rentals in Australia. In part 2 we will look into the deal and what’s next.

The online short let/holiday rental market

It is a gross but reasonable generalisation that the online accom market is broken up into three sectors. Three sectors that overlap in sharing customers and suppliers but are distinct enough in their offering to be treated differently:

1. Mainstream Online Hotels Market: Led by Wotif but with HotelClub/Orbtizdisclosure), Expedia, Agoda/Bookings and Chain supplier direct sites making for a very competitive business. Online hotels market in Australia is between $1.5-2 billion a year and growing 15-30% (depending on the research firm);
2. The Holiday Park market (please don't call us trailer parks, you wont like us when we are angry): This market is dominated by supplier sites. Big4 is an example. Late to online we have heard claims of 25% of the business is online but no research on market size; and
3. The Holiday Rental sector: After this deal there are now four major players in Australia competing in a $500mm market (see below). The newly formed Occupancy group, the Fairfax owned Stayz . the Realestate.com.au (REA.AX) owned Realholidays.com.au and (at the listing level) the Yahoo7! owned TotalTravel.com.

The short let/holiday rental market is dramatically fragmented compared to the hotel market – goes without saying. Butterworth mentioned that a BIS Shrapnel report on the Holiday Home market in Australia which estimated 500,000 holiday home properties in Australia. Around 200,000 of those are available for regular short let. The rest being private holiday homes that are not regularly rented out.

Butterworth and I tried to figure out the size of online short let/holiday rental market. From our lunch time back of the envelope work we put the size of the Australia online holiday rental/short let market at between $450-500mm. This makes it a quarter to a third the size of the online hotel market. I have arrived at this number through combining two calculation methods – top down and bottom up.

Top down – start with the size of the total market and work downwards

We started with the 200,000 in available stock and assumed an average weekly rent of $1,000 and occupancy at 50%. This sets the full market size based on inventory story is $5.2 billion. Butterworth thought that around 10% of the market is online making a market for short let/holiday rentals of around $500 million.

Bottom up – start with the bookings generated/referred by the major players and work up

Here is what we know about the top players. I had to make a series of assumptions but I think the range is reasonable.

Player	Bookings Generated For Listed Properties	Source/Calculation
Stayz.com.au (Fairfax)	$160mm	At NoVacancy told us they were generating 160k bookings per year (assuming $1,000 per booking). In 2008 told us $100mm
Occupancy	$150mm	Occupancy joint-CEO told me they are generating $300mm in enquiries to properties per year but is not disclosing the percentage that are confirmed. Will assume 50%.
Realholidays.com.au (REA/News)	$45mm	Real holidays is 1% of REA’s AU revenue (pdf). AU revenue ~$150mm per year (pdf). Therefore Realholidays revenue $1.5m per year. If this was a hotel business, $1.5mm in revenue would mean $15mm in bookings generated. Sounds low so times 3. In 2009 claimed 359 paid subscribers and 22,304 listings (pdf)
Others including TotalTravel (Yahoo7!)	$90mm	Assume top 3 have 80% of the market
Total bottom up estimate	$455mm

Combining the top down and bottom up approaches gives us an online short let/holiday rental market size in Australia of $450-500. With the merger putting Occupancy.com’ estimated $150mm year putting them at #2 in the market to Stayz’s $160mm but not by much. Butterworth told me that Hitwise traffic data would put Stayz further ahead of Occupancy than my booking estimates would argue. He believes that Stayz has a lower conversion rates from enquiries. This would make sense as Stayz is likely to get much more unqualified traffic than Occupancy due to the referral of traffic from Fairfax Digital properties.

Much like online hotels, there are different models in the short let/holiday rental sector. The Stayz model is the listing model. Properties pay to be listed on the site. Occupancy.com operating on a booking fee model. Occupancy.com collects net rates and grosses up by the booking fee. Guests can process payment with Occupancy or pay the property direct (who remit booking fees to Occupancy.com). It is clear that the vast majority of the bookings are being paid offline with the property.

The market sizing proves that the online short let/holiday market in Australia is a substantive and growing market. The Occupancy merger puts a lot of pressure on Stayz as the combined volume has closed the gap to Stayz. But Fairfax, News Corp and Yahoo7! are tough competitors. I am looking forward to seeing how they respond. If the war wasn’t intense already, foreign players also have their eye on the market. US giant HomeAway (more on them here) have put up an Australian holding page at HomeAway.com.au – a clear indication of a push into the market. Expedia’s TripAdvisor have bought another holiday rental firm (Holiday Lettings) to add to Flipkey (already in their stable). No surprises. With a $500mm market to fight for, it is to be expected that many more companies will join Occupancy in this battle for short-let/holiday rental customers.

New Expedia.com Logo: its a 21st century thing - I think

It is a day for Expedia webite posts. Thanks to Ciprian Morar for alerting me to the new Expedia.com logo. Gone is the softly swooshing yellow aeroplane on a bright blue background evoking happy thoughts of travel and living in the noughties. Hello to the sharp pointed rocket ship that blasts forward into the second decade of the 21st century- a world of darker hues and serious companies. No more Mr Nice Guy and next stop the moon. What would Freud say about this change? What do you think? Here is the old one.

More Expedia display trials - defaulting to hotel search in Australia

Late last year I shared with you a screenshot showing that Expedia.com.au were trialling a Wotif list like display for hotel results. With the new year I can see that they are trialling a new home page with larger widget and hotels as the default for search. First sale of the year is a 50% off hotels. Is Expedia giving up on Air in Australia? Screenshot below.

Expedia trialling Wotif display format in Australia

Care of a tweet from Kristi Barrow I came across a hotel sort order and search display experiment by Expedia in Australia (expedia.com.au). Below is a screenshot of the new display trial.

As you can see it is a grid approach rather than the typical list and details approach. I am convinced this is only a test as I was only able to get these results in one of four searches I tried. Likely they are doing multi-variant (or A/B) testing here.

You may be wondering why Expedia would trial a new (and arguably less user friendly) display on their Australian site. The reason is because of the market power of Wotif - the largest seller of online hotels in Australia.

In case you have not looked at the Wotif site, they have a very different look and feel to a typical online hotel retailer. Instead of a list of hotels with a lead in room rate, they have a grid that shows all the hotels on the left side, dates at the top and then availability and price in the middle. In other words a dramatic increase in the amount of information shown to a consumer. The sacrifice being depth of hotel information, sort order management and date accuracy (ie a specific date range for a search). It is now standard in Australia but very different to other markets.

By standard I mean it has influenced other players. Local competitors such as needitnow (AOT group) checkin and quickbeds (Fight Centre) have followed suit with this layout. Clearly Expedia has also caught the Wotif bug and is interested in trialling this layout in Australia.

Thanks to Kristi for sending the story around.

Kuxun acquisition takes TripAdvisor further into China

Expedia's TripAdvisor is to buy Chinese meta-search company Kuxun (at least I think it is a meta-search company) (according to Dow Jones via Hotelmarketing.com). TripAdvior CEO Steve Kaufer would not give away how much was paid but is quoted in the article as saying he has US$50mm to invest in China in 2010 and 2011 but this includes setting up the local version of TripAdvisor Daodao.com. Also said he plans to double the number of staff in China from 80 to 160. My guess (no basis just a hunch) is Kuxun will be used as the tech behind Daodao with Kuxun's brand to disappear soon after the deal.

In case you are wondering about meanings. I am reliably informed that Kuxun means Cool Information or Smart Information and Daodao means To Reach, To Arrive.

Her is my updated list of TripAdvisor Acquisitions in the last few years:

• Kuxun;
  
• Flipkey
  
• Airfarewatchdog.com
• OneTime.com
• Virtual Tourist
• HolidayWatchdog
  
• smartertravel.com
• bookingbuddy.com;
• TravelPod.com;
• Travel-Library.com;
• SeatGuru.com; and
• Cruisecritic.com.

I always close these stories with the reminder that Expedia owns TripAdvisor as you'd be surprised how much search traffic I get asking the question "who owns TripAdvisor"

801 not out

Another 100 posts are live on the InterTubes. Time again for my regular "not out series" recap where I go through the last 100 posts and remind you of the themes that have been dominating the blog. I started almost three years ago with 101 not out and continued with 201, 301, 401, 501. 601, and 701 not out. This comes at a time that the BOOT passed the 100k visitor mark.

Two new segments for the Blog

• Seat Reviews including Qantas Economy, Qantas Premium Economy, JAL Business, BA Business, Singapore Raffles and United Business ; and
  
• Business traveller tips - what to pack, what to wear and getting through security.

Meta search action a-plenty which I tried to summarise in my post "Meta-search vs Online Travel Agents: the three main differences and why they matter"

• TripAdvisor launching air meta-search and received criticism (including from me) for allowing too many reviews from non-travellers
  
• Travelzoo launching Fly.com
• Kayak branching into content and review meta-search through expanded Travelpost
• Yahoo! went the other way and euthenased FareChase
• Cheapflights launched in Australia with a sub-par product
• Car meta-search company Oodles topped the car traffic numbers in Australia
• Sidestep founders came back with the oddly named Voyij
  

While also having time for Travel Discovery and Inspiration sites such as:

• event based search site Joobili
• the high profile Triporati
• data loving Tripbase

...and we found out how much Expedia paid for VirtualTourist and OneTime

BOOT interview mania with start ups and industry shakers

• Alfonso Castellano of TripSay (part 1 and 2)
• AsiaRoom came out of the closet, launched direct contracting and the BOOT found out more about them and their TUI ODS stable-mates including revenue numbers
  
• Jim Hornthal of Triporati
• Yen Lee of Uptake
• Reuven Levitt of Tripbase (part 1 and 2)
• Steve Hafner of Kayak
  

oh...and...a plane actually landed on water

Webjet to relaunch hotels with a GDS backed retail model. Three reasons why I don' think this is the best plan available

Webjet are having a great time selling domestic air in Australia. As we have discussed before their tech leadership in developing the Travel Services Aggregator back in 2004 enabled them to sell multi-carrier domestic air including low cost carriers before anyone else. Even though other sites now have similar functionality, Webjet continues to enjoy customer loyalty and growth (despite charging dramatically higher fees per booking).

The company has made a number of attempts at diversifying their
revenue with land product. In mid 2003 they launched Bookabed as a standalone hotel brand. In 2006 they revamped the product under the new name Lotsofhotels. Then in June 2008 they announced plans to take Lotsofhotels onto the eBay platform. Unfortunately none of these efforts have developed traction in a very competitive market.

In their recent results they announced the launch of new hotel product called "Stay and Pay" (Travel Weekly story here). This new product moves them away from merchant sales to the retail model (consumer pay at the hotel, Webjet collects commission from hotel). They are launching two twists on the retail models you see from big players like Booking.com and Venere. Firstly there is no negotiated inventory. The inventory is drawn from the publicly available rates distributed through a GDS feed from Travelport. Secondly there is a service fee of $10 per booking charged up front by Webjet.

I like the fact that Webjet are trying hotels again. Fees on air make up 97% of their operating revenue (just down from 98% last year). They need to have other revenue streams to compete with packaging experts Expedia and Zuji (Travelocity) and the Wotif group owned air intermediaries Travel.com.au and Lastminute.com.au (not to forget the Orbitz owned hotel only players HotelClub and RatesToGo) [disclosure]. That said there are three reasons why I don' think this is the best way to go about hotels for Webjet:

1. Webjet will struggle for Rate Parity: The GDS companies (Travelport included) have done an admirable job working with the Chains and some independent properties to secure rate parity through GDS distribution. By that I mean working with hotels to have the rates that are loaded in the GDS be on par with the negotiated rates provided to the OTAs. However the rates in the GDS are never cheaper and by charging a $10 booking fee, Webjet will end up with pricing that is almost always more expensive than any other channel. There will be a convenience factor for consumers but this will be at the margins compared to the consumers who will be turned away by the higher price on Webjet;
   
2. Webjet will not have access to important Inventory Types: Again the GDS companies have worked hard to expand the range of hotels and properties available. However there is still a bias towards chains and a bias towards geographies with a history of GDS distribution. This means Webjet will be missing important independent properties and have less coverage in the Asia Pacific, Latin American and Middle East regions than the negotiated hotel agencies and OTA competitors; and
   
3. Webjet will miss out of the the best Specials and Promos: In this "year of the deal", hoteliers are providing deals and promos the likes of which have not been seen since 9/11. Most of these come with conditions, specifically a range of cancellation options ranging up to non-refundable. The GDS is not able to support this functionality as well as the negotiated inventory providers. Means that many of the great deals (especially last minute ones) will not be in the feed accessed by Webjet.

I can understand why Webjet went down this route. It would be very expensive for them to build a hotel contracting team from scratch. Impossible in fact if they wanted to gain coverage outside of Australia. Therefore they need to work with partners to access inventory. However my recommendation would be to work with an inventory provider with negotiated rates rather than the GDS. [disclosure - I work for a company that provides negotiated hotel rates]. It will provide them with a fix to each of the issues above.

The new Stay and Pay product is due for beta-launch today (18 Aug 2009). Will put in a functionality review post later.

Update - make sure you check out the comments where Richard Noon (Webjet CEO) puts his side of the story

Update 2 - I thought of one more reason why this product won't give consumers as good an experience as a negotiated provider will. The room type description and hotel content on the GDS is not as clear or attractive as those from a negotiated provider. Here is an example of a room type for a Sydney hotel in a GDS " PREMIER ROOM CITY VIEW 1 QUEEN OR 2 SGLSNON SMOKING LCD TV HI SPEED INTERNET FOR A FEE".

PS - last year at TRAVELtech Webjet CEO Richard Noon gave his estimates of the turnover of the various Austrlaia online air intemediaries.

Still trying to convince offline travel media that Expedia own's TripAdvisor

Below is an extract of the TravelToday daily PDF published by the Australian version of TravelWeekly (owned by Reed Business).

Expedia coup
Expedia has partnered with SeatGuru to integrate user reviews of airplane seats [sic] into the seat maps for flights sold on Expedia.com.

In case you (like TravelWeekly) have missed the last 5 years of the online travel industry, Expedia owns TripAdvisor and in May 2007 TripAdvisor bought SeatGuru.

What next TravelWeekly? Amazing news that Qantas has extended its preferred supplier relationship with Qantas Holidays. Industry shaking news that W and Sheraton hotels have agreed to exchange loyalty club points. Hold the front page news that Avis and Budget are using the same fuel supplier.

Rather than using the headline "Expedia coup", it would be more appropriate to usethe phrase "People at Expedia are returning each other's calls". But that would hardly make for an interesting headline.

PS - can only find the article in PDF form, let me know if you see it online.

TripAdvisor needs to move to a "no stay, no say" approach to reviews to protect brand and online reviews generally

Expedia's TripAdvisor is claiming more than 20 million reviews on their site. In addition they have been on a steady and apparently unstoppable campaign to buy niche review sites in areas such as Cruise, holidays, airline seats and vacation rental. You'll find the latest list of everything they have bought here. As a result (and as predicted here) they have morphed from a destination site to an online advertising network and meta-search company called (unsurprisingly) the TripAdvisor Media Network.

While that has been going on in the background, the front end of TripAdvisor looks like an Onlnie Travel Agency site with tabbed header, a search widget middle left, deals and promos in the the C column and content and search help below the fold. Clearly a move to compete directly with the OTAs in drawing in consumer loyalty and repeat business.

Despite all the changes, the heart of TripAdvisor is the reviews. The dedication of the user base to write detailed, descriptive, useful and Google friendly content to attract lookers and bookers. This all ties to the baseline of the TripAdvisor band and their tag line - "get advice from real travellers". Unfortunately stories are coming out about possible flaws in TripAdvisor's mechanism for ensuring that reviews are only written by "real travellers".

Just recently the Times in the UK ran a piece called "Who's really writing the reviews on TripAdvisor". The story quoted one hotelier as saying "the system is laughably easy to manipulate....I was even approached by PR first offering to write my reviews for me." Newsweek also covered the story in their article "TripAdvsor tries to respond to fake hotel reviews". In that story journalist Sean O'Neil noted that he did not understand why "TripAdvsor didn't duplicate Amazons "Real Name" feature, which offers third-party verification that a reviewer is the person he or she claims to be".

The question is not whether or not their are fake reviews on TripAdvisor - clearly there are. The question is how many are there and what influence do they have in hotel rankings, especially in smaller destinations. Consumer Travel uber Blogger Chris Elliott put the question best in his story "Does TripAdvisor hotel manipulation scandal render the site completely useless".

The official word from TripAdvisor (care of Elliott's post) is that they have a zero tolerance for fake reviews (they call it fraud) and a three methods for policing this policy. Quote -

"1. Every review is screened prior to posting and a team of quality assurance specialists investigate suspicious reviews

2. Proprietary automated tools help identify attempts to subvert the system

3. Our large and passionate community of more than 25 million monthly visitors help screen our content and report suspicious activity"

An example of this approach can be seen on the entertaining TripAdvisor We're Not Making This Up Blog (in the post called "Exactly") where an irate hotel DOS is complaining that all of the reviews he is writing for his own hotel are being pulled down.

What is missing is independent confirmation that the customer actually stayed in the hotel. My view is that these three steps are not enough. Technology and human review will simply not be enough to screen out the "gamers". The only way to be truly clear of fraud is for TripAdvisor to move to a "no stay, no say" rule. A means of verifying that the person writing the review has stayed at the hotel. This could be achieved though a combination of approaches such as a feature like the Amazon Real Name service, using the enormous amounts of transaction and searching data that the Expedia Inc empire collects, drawing on information from advertising partners and other verification mechanisms.

The counter view is that this would be too hard for TripAdvisor as they do not do any of the bookings, that is left to the advertiser. While there is some truth to that argument, between the data collected by TripAdvisor on click behaviour, information provided by advertisers and information from what must be a massive Expedia Inc privacy killing data warehouse, there is (I am sure) more than enough data available to TripAdvisor to verify. I would not be cheap or easy to do, but in my opinion necessary

What do you think - should TripAdvisor move to a "no stay, no say" rule or is the fraud so small that it doesn't need to?

If you are looking for more commentary on this story also check out

• Yeoh Siew Hoon's post "the ugly face of social media"
• Darren Cronian's post "Ten summer travel tips from bloggers" which includes the tips "You’ll find good reviews and bad reviews for nearly every destination" and "Treat all online travel reviews like mildly entertaining fiction."
• Dennis Schaal "The truth About TripAdvisor and Professional Hotel Reviews"
• Martin Kelly at TravelTrends with a personal experience called "TripAdvisor Cleans out Reviews for Fiji Resort"
  

As always I close with confirmation that Expedia owns TripAdvisor. Other than searches for my name, Google searches for "who owns TripAdvisor" is my number one source of search traffic.