Friday, November 30, 2007
If you can - please Digg this story here.
Deal confirmed publicly on 20 Dec 2007
Thursday, November 29, 2007
The form 604s are flying thick and fast relating to Wotif's buyout plans for Travel.com.au. A 604 form is the "change of substantial ownership form". Through these forms we can track just how close Wotif is getting to owning Travel.com.au as the Dec 17 offer deadline approaches.
Tuesday Wotif hit 36.86%, yesterday 40.23% and today a massive 58.04%. The acceptances are flying in. No word in any of the filings if one of those acceptances is from AOT who before this rapid fire round of 604s owned just shy of 20% and seemed to be the only obstacle to 100% ownership for Wotif.
Wednesday, November 28, 2007
But now we have Qantas effectively pleading guilty to a charge of price fixing and agreeing to pay a fine of US$61mm as a result of a US Department of Justice investigation (e-travelblackboard report here). They have settled an action that claimed they colluded with a number of airlines (maybe as many as thirty) to set prices (ie reduce competition) in cargo pricing.
Let's be clear as to what it means to admit to price fixing. This is akin to an admission of criminal behaviour by Qantas. It is a confirmation that Qantas as a company engaged in a criminal act to defraud its customers (cargo in this instance) of money by secretly agreeing with competitors to fix prices. To engage in secretive activity that resulted in customers paying more than they should have. Anti-competitive activity is the same as corporate theft. A class action is already under way in civil court on behalf of the customers that were ripped off by this behaviour.
Qantas CEO Geoff Dixon seemed to indicate it was a few employees not a company in this comment attributed to him
“Qantas takes its obligations to comply with the law very seriously. We have a comprehensive competition compliance program in place, and expect all of our employees to comply with these requirements at all times,”...and in indicating that two current and four past employees are not part of this plea agreement. In other words that those employees may be subject to separate prosecution.
Whether or not it was rogue employees rather than company policy - this is still a huge slur on Qantas - and whether Qantas likes it or not it places a cloud of suspicion over all of Qantas' activities.
UPDATE - Jan 08 - Qantas has been taking a dive in the stock market and this price fixing issue is part of the reason (according to the Sydney Morning Herald). SMH has also published the names of the executives that were excluded from the deal (four ex and two current employees). They are Qantas's former head of freight Peter Frampton, the airline's head of freight in the US Bruce McCaffrey, Qantas's general manager of freight sales John Cooper, Qantas's country manager for Thailand and former head of freight in Singapore Harold Pang, Qantas's head of commercial freight Stephen Cleary, and another Qantas freight employee Desmond Church.
Qantas has been given two weeks to pay up.
Number 10 was a shameless plug for FareCompare - no surprises. However the one that caught my eye was Tip Number 9 - Forget Rule 240. Rule 240 are the filings that each US carrier makes with the DOT stating the rights of a consumer if a US flight is cancelled or diverted. I did a post on Rule 240 in August quoting a travel lawyer that urged all consumers to carry a copy of an airlines Rule 240 filing on every flight just in case you need to show it to a grumpy customer service staff member.
Seaney says this is bad advice. He says that Rule 240 is no longer a government rule and hasn't been one for 30 years. Has a quote from the FAA to say that it is the airlines own conditions of carriage that is now the definitive statement of what you can expect from an airline that bumps or dumps you. That means - you are subject to the kindness of the US airline industry. God help us all. Seaney has a good list of links to carriage conditions for most airlines
Low Cost Carriers, GDS and Intermediaries are friends, enemies and squabbling children all at the same time
- easyJet announced a distribution deal in Europe with both Amadeus and Galileo. On cue - Ryanair's Peter Sharrard channelled his best O'Leary impersonation by slamming the deal and calling travel agents the "greatest deadwood of the travel industry" (travelmole);
- Orbitz, Travelocity and Priceline.com all announced that JetBlue flights would be available for sale (BusinessWeek via Hotelmarketing.com); and
- Tiger Airways held the line saying that it will not make its inventory available to online players in Australia despite many in Australia such as Webjet and Travel.com.au have aggregation engines that could access Tiger inventory without Tiger having to participate in a GDS. As Rob Dell, president of the Association of Travel Management Companies, pointed out in this Age Online article this position could well change as per Virgin Blue.
Friday, November 23, 2007
The Offer period for Webjet's run at acquiring Travel.com.au has come to a close and according to the filings this week Webjet has not received any significant acceptances. Webjet ended up with a "relevant interest" in just 20.53% of the stock. Under the pre-acceptance agreement following Webjet's original bid Webjet acquired "relevant interest" in 19.8% of Travel.com.au's shares - being a right to get 19.8% of the stock from lead shareholder Co-Investor if some conditions were met. Those conditions were not met so the pre-acceptance agreement is terminated and the stock stays with Co-Investor. Presumably the gap between the 19.8% and 20.53% in the filing is explained by a small number of acceptances of Webjet's offer.
The Wotif.com offer period closes on December 17 (here is the TVL board recommendation of the Wotif bid - also called the Target's statement).
So unless Webjet (or someone else) makes another bid then they are out of the running for Travel.com.au and we can presume that it will be all quiet on the TVL front until Dec 17. Or can we...?
Thursday, November 22, 2007
Who would have thought there was an artistic angle to the US aviation industry.
Wednesday, November 21, 2007
- Number 2 player eLong posted its Q3 results. Good news started and ended with an reported increase in revenue. Bad news was that revenue was only up 12% and losses have widened from RMB2.7mm (USD365k) in Q3 06 to RMB 7.4mm (USD1mm) in Q3 07. Stock is almost half it was a year ago. New CEO Cui Guangfu has a big job ahead of them to catch up with...
- Ctrip posted a great result this quarter - beating expectations - announcing an almost doubling of profits to USD15mm for the quarter on revenues of $46mm. In a clear dig at eLong, Ctrip attributed a lot of the credit for the results to rising travel demand. Shares are similarly moving the opposite direction to eLong. But any possible conflict in signals about the market from the different results between number one and number two in China did not dissuade...
- Lehman Brothers Private Equity Partners dropped $10mm into local meta search player Qunar.com. It was Qunar's second round of funding. First round was in the $2-3mm range with Mayfield leading that round. UPDATE - here is the alarm:clock story including information that Qunar founders Douglas Khoo, CC Zhuang, and Fritz Demopoulos had previously founded and sold the CSEEK search engine to News Corporation and founded and sold the Shawei.com portal to The Tom Group.
Sunday, November 18, 2007
Fifth and final in my series of posts coming out of my interview with Michael O’Connell of Pegasus at WTM (Senior Director – Global Partnership Development).
Michael told us (not surprisingly) that Pegs has no plans to enter the air distribution market. However we should expect to see them launch products focused on land activities in the near future.
Michael told us (not surprisingly) that Pegs has no plans to enter the air distribution market. However we should expect to see them launch products focused on land activities in the near future.
Fourth in my series of posts coming out of my interview with Michael O’Connell of Pegasus at WTM (Senior Director – Global Partnership Development).
The last area we talked about was chain hotels and Best Available Rate (BAR). The background to this is easy and quick – ever since the rise of the merchant model, hotels (especially chains) have been trying to use best available rate guarantees as a tools for driving consumers to hotel direct sites as opposed to online intermediaries. This has been to the benefit of Pegasus as chains with central rate control have been insisting that intermediaries access inventory through a Pegasus or similar direct connect link rather than via direct to property discussions. But it has also been a challenge for both chains and intermediaries as not all of the properties adhere to the chain rate rules – especially in the case of consortia and brand groups (such as the Pegasus owned Utell).
My question to Michael was a short but direct one – “What role should Pegasus play in helping to secure true BAR from chains – especially those consortia that do not have full brand control?”. His reply “Pegasus is about bringing the two [chain and intermediary] together. We are not structured to get the rates from hotel (ie “a Pegasus rate”). This is always a discussion with the hotel. We don’t control the commercials between the hotel/chain and distribution.”
This answer is to be expected. Pegasus is a connectivity mechanism not an operator. However the success of BAR push of the hotel chains is dependent on the chains ability to enforce it at the property level - something that is not being achieved at at level that co-operative intermediaries need. This is not Pegasus' problem to fix it is one of the chains, consortia and intermediaries to work on. Pegs for now can sit back and enjoy the boost in bookings from the chains BAR push.
One of the challenges facing Pegasus mirrors by theory around the next phase of online travel being about consumers confronted with too much information and needing help and guidance in finding answers questions like “where do I go next?”
Pegasus is being confronted with this in dramatic increases in search volumes, especially from meta-search and optimisation tools. Some involved look to books ratios of 300,000:1 that is a conversion rate so off the chart that if you were at an online retail company you’d either fire you head of marketing or product or both. This is happening because Pegasus gets pounded in a meta-search request not once but potentially dozens of time per search. If you imagine that a meta-search provider is connected to 40 or so retailers and half of them are access the same rate for a chain property through Pegasus you can see than duplicative searches are inevitable and place a burden on Pegasus’ systems.
Pegasus is trying to deal with this in two ways. Firstly by doing deals directly with meta-search providers to lessen the load or at least manage it more efficiently. Part of this is to help the meta-search companies decide which hotels to search through which distribution connections including Pegasus. This should hopefully reduce some of the bursting that comes from meta-search companies. Secondly by using this as a very cheeky opportunity to encourage the meta-search companies to drive this traffic and the Pegasus owned hotelbook booking site rather than the string of competitors that will then pound Pegasus multiple times. The hope being to sell meta-search on using hotelbook as a proxy for all chain property searches. Has a nice ring to it if efficiency of search is your main criteria but am not sure that the CPC hungry meta-search providers are going to buy it.
I don’t need an introductory paragraph to tell you about the rise of the retail model in online hotel sales. In the online travel world immediately after 9/11 and Expedia’s acquisition of Travelscape the push for all online hotel retailers was merchant, merchant, merchant. However the retail model is back and in a significant way. Not only with the rise of European and Asia based retail model companies such as the amalgamated Booking.com, Venere, HRS and Hotel.de in Germany and Rakuten and others in Japan, but also with the efforts of the GDS companies to extract Best Available Rate promises from hotel chains.
I talked this over with O’Connell and expressed two interesting points of view
Firstly he believes that consumers do not really care which model so long as they can book the room they want at the price they want. Arguing that the choice of model is a decision made by the retailer and the hotel based on considerations other than what is more desirable to the consumer. I thought about this a lot and am torn right down the middle. This premise is supported by the continued success in
The other area we looked at was which model the hotel’s preferred and why. O’Connell’s view was that hotels clearly prefer the retail model because there is no payment collection issue and the hotel has a greater chance of establishing a relationship with the customer – effectively “stealing” the customer from the retailer. Therefore the rise of the retail model is more due to the economic good times and shift in power from the retailers to the hotels than specific model decisions made by retailers. On the former point I have always seen the merchant model as being just as beneficial to the hotels as the retail model. While the retail model removes collection issues the merchant model drastically reduces cancellation rates and shifts the fraud and credit card process fee burden to the retailer. But I agree that the hotels are dictating the growth of retail driven by the strong global hotel demand. Merchant will survive and grow in a prosperous times but should/when the market softens then merchant could become dominant again.
WTM Pegasus Sessions: RezView Next Gen to kill the need for a rates cache – but Pegasus needed to buy to make it happen
The rewirte of RezView came from the acquisition by Pegasus in May 2007 of GuestClick. The aim with the relaunch was to update the platform, consolidate the two older version of RezView into one product and allow for improved functionality in areas of pricing, distribution and real time connectivity. One integrated platform based on more modern web technology (ie the magic ajax). All good aims. It seemed strange to me at first that Pegasus needed to buy a company to relaunch its core product – as opposed to build in house. Kistner made two points in response – first that the technology was not completed when they bought GuestClick. It was “about 70% ready”. This gave Pegasus enough of a product to get a jump in development without being too far advanced that Pegasus could not make the changes it needed to have the product meet their aims. Secondly, they were aware that they needed a big jump in the product. They needed a product that was unencumbered by any legacy issues in the current product. As Kistner put it the GuestClick product was “not perverted by commercial realities. It [GuestClick product] was a technically pure implementation of a CRS not changed to meet the needs of any one customer”. In other words – a fresh start.
Migration will start in Q1 in 2008 and take about a year. The main upside for distributors (ie online hotel retailers using Pegasus) is that the NG product will have an pushed based version for pricing distribution trough UltraDirect. This means less of a need for a cache and I am assured will meet the aim of dramatically increases the accuracy of rates in the first search for all players. I am sure you will join me in a round of “finallys”.
Friday, November 09, 2007
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UPDATE - have just seen the 8k filing which puts the purchase price at US$15,074,693 up front (with some in escrow) and potential earn out for three years (or more if "disruptions in the Asian travel market") for up to $141.6mm based on gross bookings and earnings targets (not disclosed)
UPDATE 2 - 7 Jan 08 e-tid are reporting the transaction as closed (reg'd required) and giving the first hints at the integration plans. The article says that the Agoda business will continue to be run independently which we can assume means no brand or business model change (ie merchant to retail). Is inevitable that we such a large earn out component that integration activities will be limited.
Wednesday, November 07, 2007
The Wotif Bidders statement is out for Travel.com.au (TVL). This is the official statement passed on to all shareholders of TVL from Wotif indicating why shareholders should accept the Wotif offer. There are ten reasons listed but as predicted the main one is words to the affect of "we are offering a lot of money, you'd be crazy not to accept". It came out a few days after the TVL board had categorically rejected, unrecommended, threw out and junked the Webjet offer with a target 's statement headed "Do Not Accept The Webjet Offer" (in big capitalised red lettering).
What AOT will do in response to the Wotif Bidders Statement is still the great unknown in this deal.
I had wondered in my earlier post how the TripIt technology would go about "reading" all of the different forms of confirmation emails (especially pdfs) that travel companies send.
I conducted a test by sending through to the TripIt mail all the details from a recent trip to Melbourne made up of a Virginblue flight voucher, RatesToGo.com hotel voucher and Melbourne Skybus airport transfer ticket.
Unfortunately, the common response to each of these three emails to TripIt was
We received your email (Subject Line: [whatever the booking was]) but had a problem processing it. This typically happens when your email is not from one of our currently supported booking sites or when your TripIt To Me text isn't in the right format (for help with TripIt To Me, send an email with a blank subject line and the word "help" in the body to email@example.com and we'll respond with a list of available commands).Not a great first time user experience. It is clear that the confirmation information has to be in a very set format or from the list of supported vendors. There is a good number of companies on the supported list (here) including biggies Expedia, Orbitz, Travelocity and Priceline as well as major airlines and leading LCCs such as easyJet and Ryanair. However there also a lot of well known brands missing such as lastminute.com, Accor.com, Qantas, Booking.com, HotelClub.com and Venere.com.
We placed your email into the Unfiled Items section of your account as an unformatted Note for your review. Please follow this link to login to view your Note.
The TripIt Team
The site is still in beta so there is reason to be forgiving. However customers give very few second changes to content/mashup based websites - even those in beta. My conclusion therefore remains the same - great idea but the execution needs to be flawless for the business to work. That is a big ask for any travel start up, even a well funded one. Anyone else have a TripIt experience to share?
Fastbooking operate B2C businesses through Fastbooking.com and a network of destination/SEO targeted sites under the collection of brands known as Only-Recommended-Hotels.
According to the Fastbooking corporate site, the group processed a volume of more than Euro206mm in 2006 in hotel bookings, representing 1.5mm room nights from 3,500 hotels. What is unclear bout their results is what the split in this volume is between B2C/direct to consumer activity generating commission levels that a retailer would enjoy and B2B reservation services which are presumably of lower margin compared to the volume processed. My sense is that the vast majority of the volume is B2B processing given the valuation of the deal.
Tuesday, November 06, 2007
In this he reports that the number of online travellers both researching and buying travel online has fallen from 68% in 2005 to 62% in 2006. In addition that 63% of leisure travellers that looked online booked online in 2005, rising to 67% in 2006 but dropping to 55% in 2007. Meanwhile the online travel industry in the US is set to be US$104 billion this year up from $73.6 billion in 2005.
Harvteveldt says that all this points to a fall off in travellers, a decline in bookers and the "travel industry [being] increasingly reliant on a smaller group of people who are travelling more" (quote and stats in US Travel Weekly article by Dan Luzadder - registration required). eMarketer was full of similar doom and gloom about the US market earlier this year when they claimed that online growth rates in the US were dropping dramatically. My response at that time was "Baloney!" and I tempted to repeat that analytical summary in this instance.
Instead of being a symbol of the resurgence of the offline world or the end of online, the trends highlighted by Harteveldt are merely the signs of a mature market. Online travel in the US is more than 50% of the leisure market. Therefore we should expect now and into the future that market stats and figures will show ups and downs, as you would with any mature market. Rather than be a example of online travel failing it is a natural consequence of the victory of the keyboard over bricks and mortar. I am not saying that there is no place for a travel consultant or that the big three/four online players in the US can laugh all the way to the bank. Similarly I have argued before that consumers are entering a period in online travel where there is "too much information". But no-one in the US online travel industry should see statistical blips in demand or sky is falling talk from analysts as an indication that the industry is in trouble. If you have scale online in the US and continue to focus on good product, customer experience and driving efficiency then there is no need to worry about the strength of the online travel industry.
Thanks to reader Brian Russo of Bank of America who covers Priceline and Expedia for the Bank. He sent through an NY Times article on this subject prompting me to look further.
Monday, November 05, 2007
Worktopia management include CEO John Arenas previously of Stratis Business Centers and EVP Brian McCabe who used to be with Regus.
Friday, November 02, 2007
The new service will allow users to search millions of travel photos and videos while simultaneously shopping for travel services.It is easy to see the media search part in action. Just a matter of typing a destination and videos are presented. However, while I am a fan of efforts to bring more media into the online travel retail experience, I do not think this implementation or product is that valuable to consumers or meets the hype.
Firstly I found the quality of media available to be mixed at best and poor at worst. A search of Sydney had some interesting media like a series of photos from one contributor from the local zoo but also contained photos of random people at random events. Relevance is always hard in a UGC environment so this can be forgiven.
What is very dangerous from Lastminute's perspective is that if you click on an image/video/media item the browser opens a new window at the location of the media contributor. This means that Lastminute is referring customers to media sites that it has not reviewed and has no control over. So in the case of a photo of a Kangaroo submitted by contributor Richard Ward I ended up at a media hosting site called Smug Mug another photo sent me to a site called ViewImages. Even though these two sites appear to only have kosher content (ie no porn, no violence) I would always advise against a system that sends customers to a UGC images site that I did not have complete control over. There seems to be a limit to the media providers but they include YouTube and DailyMotion so this is not much of a control.
Secondly the link between the images/media served at the Lastminute booking process is tenuous. I have put two screen shots below to highlight this.
Shot 1 - Other that the Lastmintue frames around the Pixsy search results the only integration is a link next to the search box. There is no integration with an individual image.
Shot 2 - should a customer actually click on this link they are sent to a Lastminute generic search results page. In this example of Sydney the list appears to be a random collection of hotels and generic links to top level pages like flights or holidays. It is not an integrated experience.
This is not compelling an unlikely to drive any booking activity.
The Techcrunch general Pixsy profile is here.