Orbitz M.I.A. in Travelzoo Top 20

Orbitz's advertisements haven't appeared in Travelzoo's Top 20 deals newsletter, which gets e-mailed to some 15 million subscribers, since late March.

At least not in the ones that pop weekly into my in-box.

Orbitz's M.I.A. status in the Travelzoo Top 20 ain't no accident.

It's part of Orbitz's new strategy, as articulated by CEO Barney Harford to analysts this week, to play hardball with e-marketers that Orbitz perceives as too expensive.

Marketing is Orbitz's single largest expense, and Harford said Orbitz henceforth will use advertising vehicles that contribute not only to top-line growth, but deliver results that show up on the bottom line, too.

As contracts come up for review, expect Orbitz to put on its game-face.

Well, Travelzoo is no pushover on these things by any means, so I guess push came to shove regarding the Top 20.

Up until late March, Orbitz would offer advertisements in the weekly Travelzoo Top 20 deals newsletter with links like this.

But, I haven't seen an Orbitz advertisement in the newsletter in the past six weeks.

However, Orbitz continues to advertise in Travelzoo's SuperSearch, which may return a better ROI with its cost-per-click model than the flat-rate-based Top 20.

Orbitz's MIA status in the Travelzoo Top 20 may not be a permanent thing. Perhaps cooler heads will prevail eventually.

But, at a minimum, Harford has set a tone about the kinds of e-marketing deals he is looking for.

Meanwhile, Orbitz continues to participate as the exclusive online travel agency in the Kayak metasearch engine, and Orbitz's advertisements continue to appear in Kayak's Top Travel Deals newsletter.

I guess, at this juncture, Kayak is a sort of a very-preferred relationship.

Barney Harford and the Orbitz Flip

There has been much speculation this year that Orbitz is in play, that online travel agency consolidation will take place this year. Various analysts have talked about the possibility of Expedia acquiring Orbitz or perhaps Orbitz and Travelocity buddying up in a merger.

One industry analyst, who playfully describes himself as "one unusually brilliant and insightful industry analyst," even recounted speculation that Orbitz CEO Barney Harford, who was hired for the top post at the beginning of the year, was brought in with the express purpose of "flipping" Orbitz to a prospective buyer.

Actually, another possibility that is not getting much air time is a scenario where Travelport would reacquire Orbitz, and there are plenty of clauses in Harford's employment agreement that relate to that possibility.

Meanwhile, as the industry speculates about Orbitz's fate in 2009, Harford, who previously helped Expedia Inc. build its hotel business in Asia-Pacific, has been busy attempting to turn around the company and is looking like a pretty smooth operator.

And, indeed he has executed a "flip" of sorts, repositioning Orbitz with a marketing message that points to its consumer advocacy.

That is a helluva transition from its less-than-humble beginnings as what the trade press often referred to as "the controversial airline-owned website."

This blog has been buzzing as of late about "legacy OTAs" and their difficulties in differentiating. For more on that see, Travel's Best and Brightest on 'Legacy OTAs' and State of Online Travel 2009.

Although we'll have to see how long it lasts, Orbitz certainly has stepped out from the OTA pack with its Orbitz Hotel Price Assurance , and its moves to trim hotel booking fees and to display the total price of hotels up-front. Last year, Orbitz also led the OTAs in offering price assurance for flights.

Travelocity had carved out a marketing niche as a "customer champion," but it appears that Orbitz is stealing some of Travelocity's thunder.

Travelocity, Expedia and Priceline are sitting tight for now, waiting to see if Orbitz's price assurances actually reassure consumers and translate into bookings.

The predominate opinion among analysts is that Orbitz has come up with a nifty marketing message, and that the Hotel Price Assurance won't hurt the Orbitz bottom line too much because of the restrictive nature of its terms.

But, for now, it appears that consumers actually have a reason to book flights and hotels on Orbitz -- Harford's assurances are in place.

And, I'm not being flip about it.

Mr. Sandman: Orbitz and Expedia Play Gotcha on Fees

In March, Expedia eliminated air-booking fees, causing a lot of pain for Orbitz. And, last week, Orbitz made some travel news of its own when it reduced booking fees for hotels and began displaying the total cost of the booking in initial search results, presumably generating considerable angst at Expedia.

Here's how one travel industry insider views the booking-fee skirmish:

"Orbitz led with hotels to kick sand in Expedia's face. Same reason they dropped hotel fees. Since Expedia sells a lot more hotels than Orbitz, the reduction in fees will hurt them more than Orbitz (the inverse of the drop in air fees). Since most suppliers only show base fees, Orbitz (and other online travel agencies if they match) will look more expensive than hotel websites, at first blush. So some volume will be lost. That will hurt Expedia more than Orbitz."

As I reported in Travel Weekly and the Hudson Crossing Travel Industry Insight blog confirmed, Expedia apparently has matched Orbitz's hotel-booking fee reductions.

Among other OTAs, Travelocity still is in assessment mode, and Priceline reduced its hotel-booking fees a year ago.

As I noted in the Dennis Schaal Blog a few days, ago, Orbitz's initiative is designed to build its nonair business, a strategic imperative that Orbitz Worldwide CEO Barney Harford was brought in to execute.

Yes, Orbitz's in-your-face move seemingly would hurt Expedia more than Orbitz because Orbitz's hotel business is way smaller than Expedia's.

And, by one estimate, Expedia garnered about 19 percent of its EBITDA last year from hotel-booking fees. The hotel business, in addition to advertising and media, is Expedia's growth-generator.

But, Expedia's hotel business already had been under substantial pressure before Orbitz's reduction in hotel-booking fees.

In Expedia's 2008 10-K, the company stated: "Industry sources forecast lower occupancies and year-on-year declines in ADRs [average daily rates] in 2009. These trends, combined with softer demand in a weakening economy and lower air capacity into our core leisure travel destinations, create a challenging backdrop for our hotel business, which has been a key source of revenue and profitability growth for Expedia."

So, the OTA play-for-keeps games continue. You can expect that Orbitz will mount an intense marketing campaign to tout its "total cost" hotel displays.

Harford gave us a taste of the likely talking points on the Orbitz Travel Blog. "We’re daring you to compare the Orbitz Total Price before booking your hotel anywhere else," Harford wrote.

Incidentally, the Orbitz Total Price initiative had to be in the works for several weeks. That would be the time needed to do the development work required to move total price displays for hotels from the details page to the initial search-results page.

And, the development work required may be one reason that Expedia and Travelocity haven't immediately parroted Orbitz on the hotel-display issue. It would take 30-45 days of code-writing, one industry strategy-decoder told me.

There is pressure on Expedia, Travelocity and Priceline to match Orbitz on total price in hotel displays. And, it's about time the OTAs got more consumer-friendly.

For example, Travelocity markets itself as a "customer champion" and it would be hard to see how it can remain couching the total price of hotels on its details page when the pressure is on and the Travelocity Customer Bill of Rights states that customers "have the right to unbiased information up front."

The OTAs, because of Dept. of Transportation (DOT) requirements, already display total price on flights. And, Travelocity led the way on total price for car rentals several years ago, with the other OTAs following in lock-step.

In addition to hotels, the OTAs' service fees on cruises, too, remain couched in "taxes and fees."

And, although Orbitz's decision to display total price on hotels up-front is a huge step in the right direction for consumers, all of the OTAs fall short on the transparency front because they still lump together "taxes and fees" in hotel bookings, leaving consumers in the dark regarding how much of a service fee they are paying.

With hotel-tax lawsuits against the OTAs raging across the country and the OTAs' disguising of their net rates on hotels still their unanimous mantra, don't expect any movement on the "taxes and fees" issue in the near future.

You might have to wait for a court order or a settlement for that issue to get resolved.

Meanwhile, it will be interesting to see next week, when Expedia releases its first quarter earnings results, what the business impact was of its eliminating flight-booking fees in the last couple of weeks of the quarter.

Did it pick up some share in the air business? Was there a steep revenue hit or did increased volumes fill the gap?

So, what is the next step in this OTA gotcha game?

An acquisition? A merger? Another frenzy of discounting?

Or, as Forrester analyst Henry Harteveldt cautioned to me: Will all of these fee cuts lead to a "revenue death spiral?"

Expedia's Booking Fees: The Trigger Point

There's a rumor circulating in some circles that Expedia Inc. CEO Dara Khosrowshahi decided to remove consumer-booking fees on airline tickets and "go after" Orbitz, which still charges fees, because Dara was angry that Orbitz Worldwide picked Barney Harford, an Expedia alum, as Orbitz's President and CEO in January.
I have no clue what Dara, which is what everyone calls him, thinks of Orbitz's selection of Harford, who left Expedia in 2006.
But, I doubt the validity of the whispers I'm hearing.
Instead, I do know what had to be a conversation topic in the Expedia Inc. boardroom.
Priceline, which bid adieu to consumer-booking fees on airline tickets in 2007, saw the number of airline tickets it sold worldwide climb 65.3 percent in 2008.
And, while price-conscious consumers were filling Priceline's coffers, the number of airline tickets that Expedia sold worldwide in 2008 stagnated. There was 0 percent growth.
Not all of the disparity in the respective growth rates is due to booking fees -- but much of it has to be.
So, Expedia's dropping of booking fees, followed by Travelocity's match, represented a chance to make up some of that market-share loss, and to try to crush the weakest of the Big Four online travel agencies, Orbitz.
Expedia's initiative resembles the way major airlines sometimes try to drive smaller competitors off the runway and out of business.
As I reported, Orbitz is dependent on the booking-fee model, and hamstrung in its maneuverability because of GDS agreements with its overlord, Travelport. Unless amended, Orbitz is locked into those agreements through 2014.
So far, Orbitz's only answer to Expedia's and Travelocity's still-temporary booking-fee deletions is a hotel sale, which runs through May 31, as do promotions by its three main competitors.
Undoubtedly, Harford and his chairman, Jeff Clarke, who just so happens to be president and CEO of Travelport, are trying to figure a way out of this mess.