Saturday, April 28, 2007 speaks and I agree a lot, a little and not much (all at the same time)

Travolution has just concluded its annual conference and awards. I was reading with great interest the blow by blow posts on the Travolution blog. I was particularly drawn to the comments of CEO Ian McCaig in the final session (also carried by e-tid). In edited form he said the following:
1. that the online travel space, despite being only ten years old, was mature;

2. scale and/or niche are the only way to succeed, he insisted, and that, as in any mature market, the middle ground will get squeezed; and

3. that sites such as Friends Reunited and MySpace were now less influential among certain demographics than Facebook, WAYN or Second Life...he asked, rhetorically whether a business should be trying to tap in to a group of friends who use WAYN to meet up in Barcelona before going to the Benicassim festival, or whether they should focus on trying to win or retain the business of high spending individuals.
I agree completely with the first, mostly with the second but not with the conclusions in the third.

No question the online travel market is mature. The US has a big three that dominate (with Priceline on the side) and online travel will hit 51% of the market this year. Europe's growth is now outpacing the US, consolidation is in full swing (Lastminute bought by Sabre, Bookings and Active bought by Priceline, Laterooms bought by First Choice, eBookers and Flairview part of Orbtiz WW/Travelport etc) and the majority of airlines have online sales as the number one channel.

However I think he is being hasty in claiming that the winners will be either scale or niche. While traditional analysis would say that the middle is dangerous ground for most, there are some that can succeed in online travel. I see two types:
  1. The market specialist - the Veneres, Wotifs, HRSs, Hotel.des, Asiarooms of the world that can hold out against the "scale invaders" because they have carved a customer, SEO traffic and supplier middle ground that will be very hard to shift. Some would argue that this is a sort of scale in itself but given that most are focused in only one inbound market it is fare to call them the middle ground. The difference and reason that each will likely stay and succeed in that middle ground is because they all have kept their supplier relationships strong (well really all except Asiarooms), technology simple and costs relatively lean. While I think these middle grounders will survive it will be a challenge for new entrants to join them as the market factors that allowed them to grow initially (mainly first mover advantage in their markets) do not exist any more; and
  2. The adaptive content/SEO player - the creative, traffic generating, SEO magic weaving players like (now part of Sidestep) or Gusto that, like online traffic remoras, are able to suction traffic off Google and out of the path of the shark like TripAdvisor. They are very low cost and usually able to withstand any offline marketing blitz. Their challenge of course is to maintain relevance in a culture of constant changing tastes as I discussed here.
On the final comment I disagree with the implied conclusion that companies must make a choice between chasing transactions or connecting groups of people with content and networking. In a mature market (as we all agree) scale players have to do both. If a large player focuses only on the transaction processing elements of travel (Phases 1 & 2 of online travel as I describe in this post) and not the content and community efforts then they risk being flanked in the battle for traffic. This is not to advise shutting down the transaction product team and shifting them to building community engines . No - it means having people in the organisation devoted to building traffic, content and community. Not for its own sake but to drive customers to the site, brand interaction and loyalty and protect yourself from new models.

Thursday, April 26, 2007

Priceline here, Priceline there, Priceline everywhere....well..almost

Announcement today that accommodation powerhouse and Priceline subsidiary has opened offices in Cape Town, Munich, Warsaw and Dubai. Should be and is a great story. A company that invented a new model in the US and struggled for a long time yet made two very smart acquisitions in Europe is expanding further. All good right? This makes for offices in Cape Town, Munich, Warsaw, Dubai, UK, Holland, US (of course), Amsterdam, Barcelona, Berlin, Cambridge, Dublin, London, Loulé, Lyon, Norwalk (USA), Paris, Rome and Vienna. It should sound like a list of all of the best places in the world for an online hotel provider to be. However there is a huge part of the planet missing from this list and you do not get a special prize for guessing where.

Where are the people focused on Australia, China, Japan, India, Korea, SE Asia, Hong Kong, Singapore an more. All of these countries are booming for online travel. Should you should be nervous if you are a Priceline exec in missing these markets? Surely they were were "boom fodder" markets in 2000 (places where stupid money was spend with no return) and therefore should be ignored. However each has subsequently proven itself as a destination and source for significant online travel potential. Especially in hotel only. In each of those Asian markets the number one online intemediary is a hotel only provider.

Congrats to Priceline for its expansion. With 11 million room nights a year they are a player in every market - in Europe they are a powerhouse. However there is space, profit, opportunity etc in Asia Pacific that they (and others) are missing by focusing expansion efforts in only in an easterly direction of Europe.

Wednesday, April 25, 2007

TripIt - not sure what they do but they have a million bucks to do it with

Alarm:Clock and Venture Beat are both carrying the story that pre-launch TripIt has raised a million dollars in funding from O’Reilly AlphaTech Ventures. Front page of the site gives away nothing as to what this million bucks will do but does have a catchy phrase about how online travel needs a new model. The only executive/f0under mentioned in the articles is Greg Brockway - formally of Expedia where he was originally the Chief Product Office (and a founder) at Hotwire before moving to run the offline wholesaler Classic Vacations.

A million dollars is a good money for a pre-launch start-up, especially in the crowded travel space. You could see this as evidence that there are still amazing opportunities for idea clutching entrepreneurs in online travel to raise funds. However as a co-founder of Hotwire, Brockway is not your typical idea clutching online travel entrepreneur because with the sale of Hotwire to Expedia (well really to InterActive but same thing) for $665 million plus in 2003 he made lot of money for PE power-house firm Texas Pacific Group (as well as airlines American, America West, Continental, Northwest, United and USAirways).

Good to see former Expedia staff sticking with online travel rather than start-ups in real estate, shopping, legal affairs and social networking.

UPDATE - looks like Expedia likes finding Classic Vacations bosses from Hotwire. News from the US TravelWeekly is that the new head of Classic will be Tim Mcdonald who, like Brockway, was in his previous role the head of product at Hotwire

UPDATE 2 - Here is how Greg Brockway describes what Tripit will do (thanks to Hotelmarketing)
"Online travel is more than a decade old and travelers use multiple sites to book their trips. TripIt is the next wave in online travel, helping travelers consolidate and organize all their travel no matter where they book.
With TripIt, you simply email us your travel confirmation emails and we do the rest. First, we’ll automatically add the basic information you need to make almost every trip easier, such as maps, weather, directions, destination info and more. Second, we’ll help you share your travel plans with the people who need to know--friends, family & co-workers. Third, with a consolidated view of your plans, we can anticipate user needs and make relevant suggestions. Finally, by integrating with the applications people use most, TripIt will give you access to the right information when and where you need it - online, in print, via mobile, or in your calendar."

Still not sure how that works so will have to wait until I can see it in action.

Monday, April 23, 2007

The Kraken and Singapore airlines

Singapore airlines ancillary services online services have been (for a long time) seen as one of the great last frontiers of online travel. Here you have the top airline of Asia with natural online traffic out of the US, Europe, Asia and Australia but with nothing for sale online other than air. Everyone turned up to see them with offers for white label car, hotel, destination services and packaging technology. But Singapore held strong - "we can do it all ourselves". Now finally - more than half a dozen years after the low cost carriers bit the good time bug of hotel commissions, Singapore Airlines has signed for some white label goodness with Octopustravel (according to Internet Travel News). Jokes aside this is a big move for Singaporeair. Unless I'm mistaken this is their first foray into non-air or air services online and they are going outside of their traditional suppliers of ground product. It could show a huge shift in their approach to online direct revenue.

However I am not sure that it will prove to be a huge money maker for Travelport/GTA. As big a brand as Singapore airlines is, the traffic online to air suppliers is still based around short haul, point to point, web discounted fares - not long haul. That said - congrats team Octopus for closing the unclosable deal.

Friday, April 20, 2007

Gordon - King of the GDS

Congrats to Gordon Wilson. No surprises that he was named CEO of the combined Galileo/Worldspan GDS businesses. Plenty of talk for years about the death of the GDS but there is not a technology around that makes interline bookings and complicate combinations easier than a GDS. Sure point to point is easy without the GDS but then there are back office systems, agencies, PNR combinations and more. GDS' makes that possible. Plenty of reasons to criticise a model that that has airlines paying x dollars to a GDS for a GDS to pay more and more of those dollars to an agent. Clearly an inefficient flow of money. But I see the value in the business and know that Gordon is smart enough to reinvent the business. With the combined volumes, technology and e-commerce spread of Worldspan and Galileo, it is clear that Dallas (Sabre) and Nice (Amadeus) are going to be looking over their shoulder.

UPDATE - As an Amadeus reader quite rightly pointed out in an email to me the true HQ for Amadeus is Madrid with the main development centre being in Nice (also have a data-centre just outside Munich)

Thursday, April 19, 2007

More and more work to do at eLong

If you take the PR release at its word there was an amicable parting of the ways between struggling Chinese online travel player eLong and CEO Tom SooHoo. With the result that Expedia's Asian head Henrik Kjellberg adds the title of "Interim Chief Executive Officer, eLong" to his very long business card. Here are some extracted words from the release
"eLong, announced Tom SooHoo has resigned as CEO of the Company, effective April 16, 2007...Mr. Kjellberg commented, ''We would like to thank Tom for his contributions to eLong and wish him all the success in the future."
My prediction is that eLong will look to fill this role quickly to both calm any market jitters from this announcement and also to let Henrik get back to work running the rest of Expedia in Asia.

Wednesday, April 18, 2007

eBookers new site delayed/on hold

Report in Travolution that rumours are flying that the planned April relaunch of eBookers based on an international version of the Orbtiz engine - also called Project Austin - is on hold due to the impending IPO plans of Orbitz World Wide. Read more at Travolution.

Googles continued threat to the Online Travel Agencies

Guest Editor Post from Michael Potts of e-interactive

A few weeks ago Google announced that it was to launch a "pay-per-action" advertising medium through its adsense network. Reaction to the news by the search community has been surprisingly muted, perhaps because this strategy reaches into an online marketing realm that search engines have never been before - affiliate marketing.

For many years pay-per-action marketing (a form of online advertising where the advertiser pay only when an advert actually provides a sale, or other action), has been the nearly exclusive domain of affiliate marketing networks. Some private affiliate marketing networks do exist but the scale of these pales into insignificance against the large affiliate networks of players like Commission Junction and Tradedoubler. These networks have hundreds of thousands of publishers willing to take adverts and be paid on a cost per action basis. About 81% of advertisers use a sale as the “action” that they pay for.

Google’s move is significant for online travel space, not least because affiliate marketing is one of darlings of the major online travel brands. Additionally:
  1. Google has MANY more publishers than any of the affiliate marketing networks. This means that now ANY online travel supplier has pay-per-action access (ZERO RISK ACCESS) to a vast array of publishers that simply weren't available before. In the past affiliate networks and affiliate marketing generally have tended to be solely the concern of larger travel suppliers like OTA's and hotel chains;
  2. If this move affects the ability of affiliate marketing networks to continue to own this space, then it also means that the OTA’s are not going to have it all their own;
  3. Smaller travel suppliers, like independent hotels, can now easily access an advertising medium that is charged in a more similar way as their traditional distribution - as a cost against each booking. There is no need to understand the advertising ROI based on a click through rate or cost per click; and
  4. Google's (previously demonstrated) ability to optimize ad campaigns to maximize ad revenue means that this new product will most likely work well.
THE RESULT: For the independent travel supplier Google is looking like a simple to understand, zero risk advertising medium to rival the OTA's. For the OTA’s it likely means a more uphill playing field in the drive to attract targeted buyers to their websites

So does this signal a bigger move into online travel for Google? Probably not, no. There have been various rumours about Google product releases related to the online travel market, for instance in this blog in ZDnet, but the threat that this possesses has never really been taken seriously. For a start if Google did seriously go after this vertical with their own engine, content and supply they would risk seriously denting ad revenues from the OTA's.

However a move into the affiliate marketing space does pose a greater threat to OTA's as Google provides an even better distribution opportunity for travel suppliers desperate to avoid the high levels of commission payment to online distributors like Expedia (Expedia "normally" charges hoteliers 25% commission on the sale price for the right to place product there.) And once travel suppliers are all hooked on Google it really is time that the OTA's sat up and took some serious notice.

Building and keeping scale in Travel 2.0

No need for me to write an introductory sentence justifying a post on the explosion in the number of sites trying to muscle into the TripAdvisor market by developing content, information and destination sites. You will have seen my interview posts with Travelgator and Global Travel Market/AsiaTravelMarket concluding with my thoughts that this is part of a phenomenon where online travel customers are asking "where can I go now" as compared to the earlier questions of "do you have the cheapest fare" and "I want somewhere to stay". These series of posts have resulted in a number of start-ups contacting me for advice on how to succeed in this phase.

Here is the general advice I gave to one recently that I wanted to share with you.

The advantage of this content/destination site model is the lower cost base compared to the online intermediaries/agents (be they full service or product specific) combined with the new sites being able to jump straight into this new wave. The challenge is that not only do these new entrants have to build scale but they have to keep a hold of that scale. There are few (if any) online intermediaries that I can think of that achieved scale (large number of bookings) and then lost it. took a back step but then recovered, stalled (but then don't think it every really hit scale) and Travelocity struggles/ed in Europe (until it bought Lastminute) but I think it is fare to say that no agent that has achieved scale has lost it. This is not the case for social networking/content based sites. For example Friendster crashed in the US (though is recovering through attacking Asia) and blog search innovator Technorati seems to have hit a traffic ceiling. The story here is that advice, networking and search do not produce the same loyalty as a retail (Google being the one exception).

So to succeed these content/community based sites need to innovate and brand build ahead of the customer. Building one hook to bring them in (ie like an OTA would with a good deal) and hoping more of the same will keep them wont work. They will need to keep adding more and more hooks to catch the same customer again and again. That can be challenging and expensive but needs to be in the launch planning.

Tuesday, April 17, 2007

Mommy, the co-pilot was mean to me!!!

The more I look at airline crew stories in the comedy sections of newspapers, the more you feel like you are talking to teenagers at a high school transition camp. Lesson one - don't drink and drive. Lesson two - don't sleep with movie stars in the toilettes. And now, lesson three - get plenty of rest - brought to you by a BA pilot that caused a thirteen hour delay because he was too sleepy to drive, blaming a noisy hotel room. What next, an airline that is grounded because co-pilot called you names and hurt your feelings.

Thursday, April 05, 2007

On Holidays - Back on April 17

Happy Easter, Hag Sameach and enjoy the break. I am away for 10 days with the family in beautiful and (hopefully) dry New Caledonia. Will be back on the blog around April 17

BA enters the customer service understatement of the year competition

BA maybe be helping you to reduce the bags under your eyes with "a" podcasts but it appears that are also trying to reduce the number of bags you get to take home. E-tid is reporting that BA "mishandled" (ie lost) a million pieces of baggage last year. That is 23 bags per 1,000 passengers. To its credit, Geoff Want the BA director of operations said

"we accept that overall the levels of service we offered to our customers has
not been up to an acceptable standard."

However this gives us another phrase to add to our customer service understatements of the year competition. Currently neck and neck between this and AA saying
"There is some dispute over exactly how dire the circumstance were on that
in response to locking customers in a plane with no food and limited water for more than eight hours.

Wednesday, April 04, 2007

Doom and gloom in the online US travel market they say

Travelmole has picked up a story from eMarketer saying that there is trouble ahead for online travel because US growth rates from here until 2010 will only be 17% a year down from the 28% per year enjoyed from 2002 to 2006. The end of the world is nigh! Baloney!. Just a press release from a research org to generate buzz around their research. The key to the story is not that the US online travel market is either slowing in its growth or that there is a risk of commoditization of travel - the true story is that this year online travel will be more than 50% of the market. The story is not about the pain in online travel but the pain in offline. At 50% plus of the market the online industry goes beyond being a mature sector of the overall market to being THE market [full stop]. Research firms need to shift their thinking from hyper growth being necessary to talk about online travel's success to the complete redefinition of the market that is now a reality.

Tuesday, April 03, 2007

It's OK so long as everyone is doing it

I had an American Airline'ophile friend asking me to stop being so tough on them for shoddy seats, trapping passengers and drinking on the job pointing out with glee that the Brits can drink and fly just as well as the Yanks following the arrest of a drunk Virgin Atlantic pilot at only 4 times limit. Let's be thankful that the US and EU have finally agreed to an open skies policy. With more airlines flying across the Atlantic we can hopefully increase our chances for finding a sober pilot.

More from Lonely Planet - maybe I should stop being so tough on them

I gave Lonely Planet a hard time when they announced a new travel classifieds section, arguing that it might be too late for them to try to join the online revolution and the content was eclectic and (frankly) a little over weight pachyderm content. I ranted a little more when they finally announced a booking engine (Haystack) because again it was a little late and as one of the comments pointed out the information was not as up to date as competitors.

The latest effort is a video sharing site - Lonely Planet TV. Follows a similar model to Travelistic (here are my comments on them) and like them enables you to search by map as well as channel, tag, views etc.

So that is review content (their old media content), classifieds, a booking engine and a UGC/Video site.

If I was consistent I would criticise them for being late, having a challenge to reach scale and other quibbles. However there reaches a point where you have to give snaps to a company that was late to a market pulling out all of the stops to catch up and dedicating the time and money to launch new products with planning and co-ordination. This is clearly that time for me and my comments on Lonely Planet. There is much work to do and there are areas of each product that need fixing but snaps to them for launching three in a row.

UPDATE - m-travel is reporting that Reality Digital Opus is the technology partner behind this product.

UPDATE - have just read the interesting post on the Compete blog analysing the (limited) traffic flows from the Lonely Planet main site to the Haystack booking engine. Makes for interesting reading

Monday, April 02, 2007

Sabre - no rumours to monger over

Sabre is now private...a public company no more. I am a little disappointed. With the little hiccup last week over the announcement of a delay in the approval meeting I had hoped for a list minute twist to give me something juicy to blog about - but atlas. The deal is done and the TSG ticker is no more (for now).

Sunday, April 01, 2007

Flighties back in flight

With a new structure and plan the Flight Centre privatisation in back. You will recall that shareholder Lazard said "No" to the initial PEP bid for Flight Centre. Well the deal is now back but in a joint venture structure. According to (in what is now becoming the Australia structure benchmark - see the PBL Media and 7 Media deals) the Flighties operational assets would be put into a JV part owned by PEP (33%) and part owned by the listed Flight Centre vehicle (67%). This deal may not necessarily need shareholder approval, thereby dodging any input from Lazard. Will watch closely how this unfolds in the coming week.