Expedia Hotel Settlements Turn Lemons into Lemonade

In two proposed settlements with consumers on the "taxes and fees" issue in hotel sales, Expedia and its Hotwire unit got very creative.

Make no mistake about it: Expedia's $123.4 million settlement and Hotwire's $5.5 million tab are financial blows to the companies, and you hear few online travel company whispers these days that the momentum in the consumer and municipal hotel-tax battles is in the OTCs' favor.

But Expedia, Hotwire and the consumer plaintiffs added a marketing element to the proposed settlements that may substantially ease the fiscal burden.

Expedia consumers eligible for the settlement can opt for cash equal to 30 percent of what they paid in service fees or take their compensation in the form of an Expedia travel credit for 65 percent of what they initially paid.

Similarly, Hotwire consumers can get 25 percent in cash or 65 percent as a credit toward travel through Hotwire.

This formula seemingly reduces the financial blow to the companies, attracts bookers to their websites and gives them the opportunity to upsell the aggrieved consumers with higher-end hotel rooms and packages.

When you also consider that Expedia and Hotwire notify eligible consumers about the settlement using e-mail addresses that the travelers might have retired years ago, the financial scope of the settlements narrow even more.

Another interesting element of the Hotwire settlement is that Hotwire is required to change the way it explains the total cost of a hotel room.

"Website Changes: Hotwire will, for two years following the Effective Date, revise its website to include a statement that the total cost shown will include all taxes, charges, surcharges, shipping/handling and Hotwire Request resubmission or other fees. The amounts will be posted on their website but will not be separately itemized," according to the settlement.

And, another provision: "In addition, the Frequently Asked Questions section of their [Hotwire's] website will contain revisions that were negotiated as part of the Settlement. Hotwire may, at its discretion and good faith, modify the negotiated text to make it consistent with any changes to its business practices, to increase its clarity, or to comply with a legal obligation or court order."

It's all about transparency.

Expedia and Hotwire -- although they continue to deny it -- got slapped with these settlements because of consumer allegations that the websites weren't forthcoming about the real nature of their fees.

Even the language changes at Hotwire, as outlined above, don't go far enough in detailing to consumers what they actually are paying for when booking a hotel room online.

So it looks like Expedia, Hotwire and other online travel companies will continue to be able to protect their hotel merchant models and dodge the transparency bullet for now.

Nothing Opaque About Priceline's Take on getaroom.com

So what are Priceline.com's and Hotwire's opinions about getaroom.com and its model?

I was unsuccessful in reaching Hotwire Group President Clem Bason yesterday about getaroom.com, the start-up launched by the founders of hotels.com, because Bason was said to be -- of all things -- traveling. I would still love to hear from Hotwire on this issue.

But, I asked Priceline spokesman Brian Ek how he sees the hotel landscape and whether consumers would be better served to use getaroom.com over Priceline.

"Regarding your questions, it’s just about impossible to draw any comparisons since we’re hearing that our major hotel chain supplier/partners aren’t supporting it [getaroom.com]," Ek said. "They see it as non-opaque and dilutive to their ADRs (average daily rates)."

"From a hotel’s perspective, if a customer can get a discount at the exact hotel they’re looking at, why would they ever pay full price?" Ek mused. "It just hurts the hotel’s ADR at a time when hotels are doing their best to keep ADRs up."

Indeed, there apparently are a paucity of major chains using getaroom.com, which displays published and discounted rates on its website and asks consumers to phone its call center for additional unpublished bargains.

I checked getaroom.com today for Boston hotels Aug. 14-16 and found merely a dozen hotels displayed -- and just three local properties, a Radisson, a Millennium and a Wyndham, that are part of larger brands.

On Ek's point about ADR dilution, the Wyndham Boston Chelsea displayed a $200 base rate per night with a line through it and showed that room was now being offered for $160 per night.

That may be great for the consumer, but for the hotel's brand -- not so much.

Indeed, the Wyndham Boston Chelsea was transparently offering a discounted rate. Over at Orbitz.com, that same room was being offered for a base rate of $176.25.

I searched getaroom.com for Chicago hotels on the same nights and found an underwhelming 15 hotels on display there.

Interestingly, getaroom.com may have changed its mode of prompting consumers to phone its call centers for discounts.

While in the past getaroom.com displayed a message to "call for special unpublished rates" within the displays of some individual properties, now I see it is showing that message at the top of pages without pointing to specific hotels for cut-rate discounts.

That change may be a way to reduce the dilutive effect of a property's discounting -- or at least a bow to hotels' sensitivities on that front.

I had another thought about the apparent lack of chains' participation in getaroom.com.

In addition to concerns about discounting and lack of opacity, do getaroom.com owners Bob Diener and David Litman, who also co-founded hotels.com, have to battle still-raw resentment about hotels.com's distribution clout back in the day?

Methinks that may be a smoldering issue.

Meanwhile, Priceline, with its scale and flexibility, may have it all over getaroom.com and some other players in terms of the depths of discounts that it can offer travelers.

Comparing getaroom.com to Priceline, however, is apples to grapefruits. Priceline is established and getaroom.com is a newbie.

Also, although Priceline's opaque deals may be of better value overall for consumers, getaroom.com has value too because consumers know the identity of the hotel they are booking before they provide their credit card numbers.

And, that latter tack will appeal to plenty of consumers.

Still, Priceline President and CEO Jeffery Boyd wasn't talking about getaroom.com specifically, but he addressed the discounting issue during the company's second quarter conference call Aug. 10.

"We make business decisions as to whether to commit resources to matching those promotions and I think here domestically, our Name-Your-Own Price savings still are dramatically more favorable to the customer than one-night free if you buy four nights," Boyd said, referring to prevailing discounting trends.

Boyd added: "So we feel like we are very strongly positioned, even with that kind of promotional activity here, although there’s nothing to say that in future, we wouldn’t be able to offer that kind of a thing here in the United States and there’s nothing in the booking.com model or the Agoda model [two Priceline subsidiaries in Europe and Asia, respectively] that prevents them from offering that kind of lower pricing for multi-night stays, which is really what the principal promotional activity has been here in the United States and in Europe."

To paraphrase what Boyd seems to be saying to competitors and their discounting: "Bring it on."

RELATED POSTS

getaroom, getaroom, getaroom.com

getaroom.com's Phone Rates and Manner Fall Flat

Critics to hotels.com Founders: Take a Hike

hotels.com Founders Introduce 'Reverse Opaque Rates'

Travelocity Pays $2.7 Million Hotel Tax to San Francisco

Travelocity paid $2.7 million to the City of San Francisco on July 23 as part of its obligation to "pay first" before being able to appeal the city's hotel tax assessment.

The payment covers what the city argues was Travelocity's outstanding hotel-tax obligation on the retail rate -- as opposed to the tax recovery charges Travelocity previously remitted to hotels on its net rate under the merchant model. The payment covers the period from the beginning of 2000 to the third quarter of 2008, including taxes, penalties and interest.

As I wrote, Expedia and its Hotwire unit already paid the city $35.6 million and Priceline wired over $3.4 million. Orbitz is believed to be in the assessment process.

The payments -- some $42.7 million -- do not "prove" that the three online travel companies ultimately will owe the city the tax. Instead, a Superior Court in Los Angeles ruled that San Francisco's pay-first ordinance was proper, and thus it did not decide the merits of the tax issue.

So, the utlimate outcome of the case is undecided. It would be premature to count out the OTCs because they've recorded their share of victories around the country.

Still, this has not been a great few months for the OTCs.

As I reported , Expedia reached a proposed settlement with Washington State consumers in a class-action suit that revolved around the way the OTC presented its "taxes and fees" in merchant model hotel sales.

The judge in the case earlier found that $184.5 million in damages would be "warranted" in the case. The actual amount of the settlement has not been disclosed.

And, in another downer for the OTCs, New York City recently adopted a law that taxes the service fees of hotel "remarketers" -- a provision that not only targets the OTCs, but traditional travel agents and wholesalers, as well.









(industry associatons

Getaroom.com's Phone Rates and Manner Fall Flat

I briefly and unscientifically tested the getaroom.com call center experience and wasn't impressed with its unpublished rates over the phone and its customer-service style.

Hotwire offered much steeper discounts for properties with the same star ratings and city areas in two instances, while getaroom.com's phone rate bested Hotwire's opaque rate by a few bucks in a third test.

That being said, I can see how getaroom.com's value proposition would be attractive to some consumers.

As you may recall, getaroom.com is the brainchild of hotels.com founders Bob Diener and David Litman and, as I reported, their business model has raised eyebrows.

getaroom.com offers published rates on its website and then, for certain properties, advises consumers to "call for lower unpublished rates." Alas, it is a means for properties to off-load distressed inventory without publicizing their discounts and diluting their brands.

However, the website pitch to phone for lower rates certainly is a tip-off that the brands have a penchant for discounting.

So, I tested the getaroom.com value proposition on three hotels: the 3-star Hotel Rex in the Union Square West section of San Francisco; Swisshotel in the Magnificent Mile area of Chicago; and the Regal Sun in the Lake Buena Vista-downtown area of Orlando.

I compared:

-- getaroom.com's published website rates;

-- getaroom.com's unpublished phone rates;

-- hotels.com's published rates;

-- and Hotwire's unpublished rates.

For the Hotel Rex in San Francisco, getaroom.com's website published rate for an Aug. 4-6 stay was $160.50 per night, the same as the hotels.com published rate. getaroom.com's unpublished rate over the phone was $146.40, but Hotwire offered an unpublished rate of $113.00 from one of its unidentified hotel partners in the same section of the city.

Incidentally, while getaroom.com listed the Hotel Rex as a 3-star property, hotels.com, Expedia.com and Priceline.com showed it as a 3.5-star property, so I went with the 3.5-star rating for Hotel Rex to come up with the $113.00 Hotwire rate. Hotwire's 3-star rate was even lower, $79 per night.

But, perhaps this getaroom.com-Hotwire face-off is a tad unfair because it is a bit of an apples to grapefruits comparison.

Here's the difference: I phoned the getaroom.com call center and the agent, Todd, went into a spiel about how getaroom has it all over Hotwire because with Hotwire you don’t know the identity of the hotel before you book.

So, with Hotwire the consumer must place some trust in the company that its hotel ratings are accurate and that you won’t end up in a fleabag property.

Regarding the face-off, I was measuring the getaroom.com unpublished rate for one property versus Hotwire's entire roster of properties with the same star rating in the same section of the city. Obviously, Hotwire would have an advantage of scale.

Hotwire gives you the price up-front, and the system is a bit different with competitor Priceline.com, where you enter a bid and wait to see if your offer is accepted. And, with both Hotwire and Priceline you select the star rating and city area, but learn the hotel's identity only after booking.

I’ve often taken advantage of great unpublished rates on Priceline and Hotwire and feel comfortable with booking on both websites.

But, I believe there is a large subset of consumers who would feel much more comfortable getting a sometimes-smaller discount with getaroom.com over the phone than gambling that Priceline or Hotwire will put them in a suitable room.

Although Priceline and Hotwire usually offer hotels from household-name brands, at least with getaroom.com there is no mystery about which hotel consumers will end up in.

And, I also think that some consumers may be unaware that the unpublished rate they can get over the phone from getaroom.com may be substantially higher than if they booked at Priceline or Hotwire.

I continued my rate-testing for the 4-star Swisshotel in the Magnificent Mile section of Chicago. getaroom.com's published website rate for an Aug. 4-6 stay was $206.10 per night, and the hotels.com published rate was $229. getaroom.com's unpublished rate over the phone was $150.81, but Hotwire offered an unpublished rate for a 4-star property in the Magnificent Mile area of Chicago for $92.00, or about 38.7 percent cheaper than getaroom.com's unpublished rate.

In contrast, getaroom.com's unpublished phone rate of $57.72 per night at the 3.5 star Regal Sun in the Lake Buena Vista-downtown section of Orlando was cheaper than Hotwire's $62 rate for a 3.5-star property in that area on the same dates, Aug. 4-6. hotels.com and getaroom.com's website both displayed the same published rate, $66.60 per night.

So, score two big wins for Hotwire, and one narrow victory for getaroom.com.

I'd also like to make a couple of points about my experience in phoning the getaroom.com call center, which I did twice today. I didn't identify myself as a journalist, and passed myself off as an ordinary consumer looking to book a room.

Hey, I'm sleuthing for you, but I digress.

The first agent I spoke with, Todd, was congenial, but a bit pushy.

And, I understand why.

After all, call center distribution costs are higher for getaroom.com than the online channel, especially if the consumer attempts to engage the call center agent in conversation or wants to do some comparison shopping.

I had informed Todd that I wasn’t sure if I wanted to stay in San Franscisco or take a quick getaway to Orlando instead. So, after quoting me the unpublished rate for Hotel Rex in San Francisco, I said I wanted to find out the unpublished rate for a hotel in Orlando.

"OK, which hotel quickly?" he replied.

So, I felt a bit pressured and certain that the agent, anxious to make a booking and move on to the next customer, wasn’t about to go out of his way to satisfy my deal-hunting desires.

getaroom.com's call center is not a place for comparison-shopping, but a venue for wham-bam-thank-you-mam bookings.

Todd warned me, as did a second agent, Tammy, who likewise had a pleasant manner when I called again later to inquire about Swisshotel in Chicago, that I'd better book now because the rates might not be available if I phoned back in a couple of hours.

Thus, a little more pressure, and not a leisurely shopping experience.

So, I think getaroom.com, with its website and call center propositions, might be an effective way for some properties, particularly smaller ones, to put some heads in beds during slack periods.

But, I think many consumers looking for real "deals" will probably stay online rather than phone and find greener pastures and more substantial discounts elsewhere.

Expedia Reaches Proposed Settlement in Washington State Consumer Class-Action

Expedia Inc. reached a proposed settlement with a certified class of consumers in Washington State related to hotel taxes and service fees.

The amount of the proposed settlement was not disclosed, but in late May, Superior Court Judge Monica Benton found that $184.5 million in damages, allegedly covering "services fees" collected from Feb. 18, 2003, to Dec. 11, 2006, "based on Expedia's breach of contract is warranted."

In that earlier proceeding, Benton, hearing the case in Washington's King County, found that Expedia had breached its contract in a previous version of its Terms of Use regarding the way the online travel company collects taxes and service fees in merchant model hotel sales.

The breach finding apparently led to settlement talks.

On July 8, attorneys for the plaintiffs and Expedia signed a proposed settlement, which would satisfy remaining claims in the case.

The court is scheduled to hear a motion for preliminary approval of the settlement on Aug. 10.

The development follows procedural setbacks for Expedia, Hotwire, Priceline and Travelocity in San Francisco, where they were required to "pay first" before challenging assessments, and in Columbus, Ga. The latter two litigations, however, were brought by municipalities, and not by consumers, as was the case in the Washington State.

Friday's Travel InsideOut

Continental CEO Lawrence Kellner, didn’t pull off a merger with United, but won antitrust immunity, and the two carriers will be collaborating -- to the chagrin of many in the travel industry -- within the Star Alliance. Now, Kellner is giving up his post.

Associated Press/Yahoo Finance: Continental CEO Kellner stepping down: DALLAS (AP) -- Chairman and CEO Lawrence W. Kellner will leave Continental Airlines Inc. at the end of the year to return to the private-equity business and will be replaced by company president Jeffery Smisek. Read more

-----


With occupancy stabilizing at Marriott, pricing still is in the tank. Revenue per available room fell 24 percent globally, and 21 percent in North America in the second quarter.

Travel Weekly: With rates in freefall, Marriott reports 76% drop in net profit: Marriott International reported a 76% drop in second-quarter net profit on weak business travel and falling hotel rates. Read more

-----


There's been a double whammy for online travel companies and wholesalers in San Francisco. In a surprise move, the city’s tax assessors hit Expedia, Priceline and Travelocity for their vacation-package businesses and not just their standalone merchant-hotel bookings. Also, there are signs that tour operators and wholesalers could be the next targets for San Francisco’s auditors.

Dennis Schaal Blog: Shocker: San Francisco Assessed Expedia's Vacation-Package Business, Too: When Expedia.com and its sibling Hotwire wired in $35.6 million to the City of San Francisco, and when Priceline transmitted its $3.4 million in taxes, penalties and interest today, these assessments included the online travel companies' large vacation-package businesses -- and not just their standalone merchant-model hotel businesses. Read more

Dennis Schaal Blog:Tour Operators, Wholesalers Could Be Next in San Francisco Tax Dispute: The online travel companies label San Francisco's pursuit of them on the merchant-model hotel tax issue as "discriminatory," in part because only OTCs, as far as is publicly known, have been targeted. Read more

-----

Two analysts, quoted in the article below, have different takes on Carnival Corp.’s prospects. One cites “solid liquidity” and another sees oversupply and pricing as “long-term hindrances.”

TravelAgentCentral: Carnival "Can" Says Analyst: A recession is not enough to put Carnival Corp. down for the count. In fact, the cruise company is doing surprisingly well despite a tough operating environment distinguished by lower pricing power and lack of demand. Read more

-----

If you missed earlier editions of Travel InsideOut this week, you can read them below.

Thursday's TravelInsideOut

Wednesday's TravelInsideOut

Tuesday's TravelInsideOut

Monday's TravelInsideOut

Travel InsideOut is a Dennis Schaal Blog daily feature. Get a thorough-going look at the day's travel industry top and tangentially interesting stories. Feel free to comment on them below.

Travel InsideOut is Copyright (c) 2009 by Dennis Schaal. All rights reserved.

Shocker: San Francisco Assessed Expedia's Vacation-Package Business, Too

When Expedia.com and its sibling Hotwire wired in $35.6 million to the City of San Francisco, and when Priceline transmitted its $3.4 million in taxes, penalties and interest today, these assessments included the online travel companies' large vacation-package businesses -- and not just their standalone merchant-model hotel businesses.

When San Francisco compiled its assessments of the OTCs, including Travelocity, it assigned values to the hotel components within air/hotel or air/car/hotel vacation packages, in addition to assessing tax liabilities for solitary hotel sales.

Including the OTCs' vacation-package businesses in these tax disputes makes their potential liabilities, if the city prevails, much larger than I realized.

I have been writing about the hotel-tax issue for five years, and this was the first time I've heard that packages were part of the equation.

For Expedia.com, its standalone hotel business is much larger than its lodging bookings within vacation packages, but including its package business in tax assessments considerably ups the ante.

That is especially true if other tax jurisdictions are calculating assessments in a similar manner.

And, it also providers greater weight to my theory that the City of San Francisco would consider going after tour operators and wholesalers next.

Priceline Paid San Francisco, Industry Associations Irate about NYC Law

Priceline is set to pay $3.3 million in disputed hotel tax to San Francisco because of the city's pay-first requirement even as Priceline disputes the notion that online travel companies are responsible for hotel tax on the retail rate.

UPDATE: An attorney for San Francisco just told me that Priceline's attorney informed him that the online travel company wired tax money to the city today. Priceline paid, and the city received $3,409,844, including tax, penalties and interest through today.

Expedia and Hotwire this week wired $35.5 million to the city's tax office, and Travelocity is expected to ante up some $2.5 million, as well. For details, read here.

These developments occur as an industry source tells me that various industry associations, including ASTA, ITSA, NBTA and USTOA, may be researching legal options in order to challenge a new New York City law that may require agencies, tour operators and meetings planners to pay the city tax on their service fees and possibly commissions.

Update: In fact, Paul Ruden, ASTA's senior vice president of legal and industry affairs, just told me: "We will be working with other groups such as ITSA to try to get this [the New York City law] undone or overturned."

And, the NBTA stated: "NBTA is always concerned about new taxes that may affect business travelers. We are currently researching this law for further analysis."

But first, the following is a statement from Priceline on the San Francisco situation:

"In Priceline.com’s most recent 10-Q, the company noted that it expected to be assessed approximately $3.3 million by the City of San Francisco. The Company has recently received an assessment and expects to pay the assessment shortly. Payment of the assessment was explicitly required in order for the Company to be able to appeal the City Tax Administrator’s decision. The Company expects to promptly appeal the Tax Administrator’s decision to the courts.

"The Administrator’s decision is wrong and contrary to San Francisco’s own interpretation of its ordinance. In 2003, San Francisco proposed a new regulation to extend hotel occupancy taxes to cover amounts retained by the OTCs. The regulation failed. The Administrator’s decision is also contrary to decisions by the U.S. Court of Appeals for the Fourth Circuit and four federal district courts that have entered judgments in the OTCs favor that they are not liable for hotel occupancy taxes."

Regarding San Francisco, it is important to note that no court has ruled on whether the OTCs are responsible for the tax. Instead, a court has ruled that San Francisco's pay-first ordinance is legal and proper. Thus, the OTCs have to pay the tax in order to begin an appeals process.

Incidentally, only two other California municipalities -- Fresno and Long Beach -- have local pay-first ordinances. Some other cities outside of California, require tax-payers to secure bonds for their tax liabilities as a precursor to an appeal.

So what happened in San Francisco "is not the start of an avalanche," said one industry source, who's sympathetic to the OTCs.

This same industry source said several industry associations are very concerned and are looking into legal options related to a new New York City law that would appear to tax the service fees of OTCs, tour operators, traditional travel agents and meetings planners.

Until now, in the cross-country litigation about hotel taxes, tour operators, who use a merchant model to sell vacation packages, have not been targeted. In fact, the OTCs' vacation-package business likewise has not been zeroed-in on.

Update: Woops, the vacation-package business indeed has been targeted.

But, the New York City law has the potential to change this.

The NYC law says "room remarketers" are responsible for the full rent, meaning they would remit tax on the net rate to the hotels, and pay tax on the remaining rent, including service fees, directly to the tax commissioner.

Ruden of ASTA said the NYC law "plainly" targets agents' service fees "despite claims that the traditional agency model is not the target. Tax laws are usually interpreted 'as written' when the language is not ambiguous. The drafters went out of their way to avoid ambiguity with phrases such as '... through an internet transaction or any other means whatsoever, to offer, reserve, book, arrange for, remarket, distribute, broker, resell, or facilitate the transfer of rooms ....'"

Ruden said ASTA opposed the law before its enactment and "tried to get Mayor Bloomberg not to sign it. It results in double taxation of travel agent/distributor/'remarketer' income."

And the law defines rent thusly: "The consideration received for occupancy valued in money, whether received in money or otherwise, including all receipts, cash, credits, and property or services of any kind or nature, including any service and/or booking fees that are a condition of occupancy, and also any amount for which credit is allowed by the operator or room remarketer to the occupant, without any deduction therefrom whatsoever."

The industry source said some travel industry associations [and now ASTA has confirmed this] are in contact with Mayor Mike Bloomberg's office, are expressing their concerns and mulling legal recourse.

The OTCs ceased selling hotel rooms in Columbus, Ga., on a merchant-model basis after an adverse tax ruling in the Georgia Supreme Court. And Travelocity, dropped out of the Baltimore market, as well.

New York City's new tax ordinance is much broader than Columbus, Ga.'s and, well, the Big Apple attracts a few more tourists than does Columbus, Ga.

The stakes in NYC thus are a tad greater than in Columbus, Ga.

The industry source labeled the New York City law, adopted by the City Council and signed by the mayor, "a significant move and one that could be extraordinarily damaging to tourism in the city."

The New York City law certainly is a big deal -- one that could suddenly find the OTCs not wanting for industry friends.

Updated: Wednesday's Travel InsideOut

Travel Weekly posted a new story , correcting a story posted in Wednesday's Travel InsideOut. Travel Weekly now states that United did not mail a letter to a second set of travel agencies about its new credit card policy.

Travel Weekly: United: Only one batch of agencies informed of new card policy: United Airlines informed Travel Weekly on Wednesday that it has sent just one batch of letters to selected agencies, informing them that they won't have acces to the airline's merchant account. Read more


San Francisco reportedly won an important round in the hotel-tax battle against Expedia and Hotwire.

Dennis Schaal Blog: Expedia.com, Hotwire Reportedly Pay $35M in Hotel Taxes to San Francisco: Andrew S. Ross broke the story today that Expedia and Hotwire wired some $35 million in hotel taxes to the City of San Francisco.

If true -- and I'm trying to confirm it -- the development is a shocker. Read more

-----

Orbitz continues to apply pressure on Expedia's hotel business by extending Orbitz's policy to reduce its own hotel-booking fees.

Orbitz.com Press Release: Orbitz.com Extends Hotel Booking Fee Cut: Orbitz.com (www.orbitz.com) today announced the extension of its dramatic booking fee cut on all of its hotels around the world. This move follows a successful promotional trial that began in April. Read more

-----

My colleague Nadine Godwin at Travel Weekly produced a trifecta in her unparalleled reporting on United's new credit card policy, slated to begin implementation July 20. Her three stories follow.

Travel Weekly: United informs more agents about credit card cutoff: United Airlines has sent out a second round of letters to agents, informing them that the carrier will cut off access to United's merchant accounts, effective Aug. 3. Read more

Travel Weekly: Alaska, JetBlue not matching United's new card policy: Alaska Airlines said it has no plans to cut off agencies from access to its merchant accounts when agencies book its air services. Read more

Travel Weekly: For United, credit card policy might have unintended effects: United is cutting off credit access for several travel agencies starting July 20, but if three affected agencies reached by Travel Weekly are any indication, the carrier won’t save much on merchant fees. Nor will it enjoy the consolation of eliminating GDS fees on targeted agencies' business. Read more

-----

A hole in the fuselage of a Southwest Airlines 737 jet triggers inspections and safety concerns.

Wall Street Journal: Southwest Incident Renews Maintenance Worries: Federal aviation investigators are examining a Southwest Airlines Co. airplane that developed a one-foot-wide hole in its main body midflight, a setback for the discount airline just four months after it agreed to pay a $7.5 million civil fine for maintenance lapses. Read more

YouTube: Video: Southwest, Boeing Inspecting 737 Planes: View it

-----

Expedia Inc. takes a step to integrate TripAdvisor's content with Expedia.com.

EyeforTravel News: TripAdvisor destination content now available on Expedia: Expedia.com has launched a new interactive Drive Getaway ideas tool. The tool, developed in partnership with TripAdvisor, provides users with ideas for driving-distance trips accessible from their starting city on a single tank of gas or less. Read more

-----

Travel InsideOut is a Dennis Schaal Blog daily feature. Get a thorough-going look at the day's travel industry top and tangentially interesting stories. Feel free to comment on them below.

Travel InsideOut is Copyright (c) 2009 by Dennis Schaal. All rights reserved.

Update: Expedia.com, Hotwire Pay $35M in Hotel Taxes to San Francisco

I confirmed that Expedia and Hotwire indeed paid some $35 million in hotel taxes to the City of San Francisco on Monday, a necessary step if they want to further challenge the assessment administratively and eventually in court.

I wrote about this yesterday, but now have more details.

Jim Emery, San Francisco's chief of complex litigation, told me that Expedia and Hotwire had filed a notice of appeal July 1, a step in challenging an earlier ruling that the city's pay-first rule is valid. But a judge in Los Angeles Superior Court, which is handling the San Francisco case, dismissed Expedia and Hotwire's petition July 9, Emery said.

So, no court has determined whether Expedia and Hotwire actually owe the tax. But, to challenge that assessment and to seek an $8 million refund (which no one is talking about publicly but I believe is related to an admininistrative assessment against hotels.com), Expedia and Hotwire had to pay first.

Only after taking these administrative steps can they challenge the assessment in court.

Emery said the city is having discussions with Priceline ($3.5 million) and Travelocity ($2.5 million) about their tax tabs and "I expect they will be paying within a week, although we haven't closed the loop."

He said that Priceline and Travelocity previously agreed that they would go along with the Los Angeles Superior Court findings regarding San Francisco's pay-first rules.

Meanwhile, Orbitz spokesman Brian Hoyt confirmed that his company is engaged in administrative proceedings with the city over any potential tax liability.

Hoyt said Orbitz continues to be "concerned" about what he characterized as anti-tourism, anti-consumer and "discriminatory attacks through the court system."

He said cities would be "far better off" working with the online travel agencies instead of against them.

Although the OTAs dropped out of selling merchant-model hotel inventory in Columbus, Ga., and Travelocity exited the Baltimore market, Emery said he has "every expectation" that the online travel companies will continue to conduct their merchant-model hotel business in San Francisco.

Wednesday's Travel InsideOut

San Francisco reportedly won an important round in the hotel-tax battle against Expedia and Hotwire.

Dennis Schaal Blog: Expedia.com, Hotwire Reportedly Pay $35M in Hotel Taxes to San Francisco: Andrew S. Ross broke the story today that Expedia and Hotwire wired some $35 million in hotel taxes to the City of San Francisco.

If true -- and I'm trying to confirm it -- the development is a shocker. Read more

-----

Orbitz continues to apply pressure on Expedia's hotel business by extending Orbitz's policy to reduce its own hotel-booking fees.

Orbitz.com Press Release: Orbitz.com Extends Hotel Booking Fee Cut: Orbitz.com (www.orbitz.com) today announced the extension of its dramatic booking fee cut on all of its hotels around the world. This move follows a successful promotional trial that began in April. Read more

-----

My colleague Nadine Godwin at Travel Weekly produced a trifecta in her unparalleled reporting on United's new credit card policy, slated to begin implementation July 20. Her three stories follow.

Travel Weekly: United informs more agents about credit card cutoff: United Airlines has sent out a second round of letters to agents, informing them that the carrier will cut off access to United's merchant accounts, effective Aug. 3. Read more

Travel Weekly: Alaska, JetBlue not matching United's new card policy: Alaska Airlines said it has no plans to cut off agencies from access to its merchant accounts when agencies book its air services. Read more

Travel Weekly: For United, credit card policy might have unintended effects: United is cutting off credit access for several travel agencies starting July 20, but if three affected agencies reached by Travel Weekly are any indication, the carrier won’t save much on merchant fees. Nor will it enjoy the consolation of eliminating GDS fees on targeted agencies' business. Read more

-----

A hole in the fuselage of a Southwest Airlines 737 jet triggers inspections and safety concerns.

Wall Street Journal: Southwest Incident Renews Maintenance Worries: Federal aviation investigators are examining a Southwest Airlines Co. airplane that developed a one-foot-wide hole in its main body midflight, a setback for the discount airline just four months after it agreed to pay a $7.5 million civil fine for maintenance lapses. Read more

YouTube: Video: Southwest, Boeing Inspecting 737 Planes: View it

-----

Expedia Inc. takes a step to integrate TripAdvisor's content with Expedia.com.

EyeforTravel News: TripAdvisor destination content now available on Expedia: Expedia.com has launched a new interactive Drive Getaway ideas tool. The tool, developed in partnership with TripAdvisor, provides users with ideas for driving-distance trips accessible from their starting city on a single tank of gas or less. Read more

-----

Travel InsideOut is a Dennis Schaal Blog daily feature. Get a thorough-going look at the day's travel industry top and tangentially interesting stories. Feel free to comment on them below.

Travel InsideOut is Copyright (c) 2009 by Dennis Schaal. All rights reserved.

Expedia.com, Hotwire Reportedly Pay $35M in Hotel Taxes to San Francisco

Andrew S. Ross broke the story today that Expedia and Hotwire wired some $35 million in hotel taxes to the City of San Francisco.

If true -- and I'm trying to confirm it -- the development is a shocker.

The two Expedia Inc. companies had filed a notice of appeal, meaning they intended to appeal a Los Angeles Superior Court ruling that held that they must first pay the tax to San Francisco in order to appeal the whopping assessment.

This could be just a tactical defeat for Expedia and Hotwire. Perhaps they are indeed merely paying the tax in order to vigorously appeal it.

But, it would represent an abandonment of the OTA strategy to drag out the litigation for as long as possible.

What most people don't realize is that Expedia Inc., among the online travel agencies, is the company with the most to lose. Its hotel business is so massive, that the other OTAs face a much smaller liability and threat.

For background on the case, read this story I wrote July 7.

Today's San Francisco Chronicle story said that Priceline and Travelocity, which were not part of the Expedia.com-Hotwire litigation but were involved in separate actions, were expected to pay more than $6 million, as well.

I'm reaching out to San Francisco's chief tax attorney to confirm the story. And, I have e-mailed the online travel agencies tonight to get their take on the development and to find out what actions they have taken or plan to execute.

This is a major development in the five-year old hotel tax fight, as thousands of municipalities, counties and states target the OTAs with assessments or litigation related to hotel taxes on the full retail rate.

If true, I wouldn't be surprised to see the OTAs pull out of the San Francisco market in terms of offering hotels on a merchant basis.

If they intend to appeal the assessment, as I suspect they will, then perhaps they will continue to market the city's rooms on a merchant basis while an appeal is under way.

Other municipalities could get the same treatment regarding OTA boycotts if the cities prevail in the courts.

For now, I see that Expedia.com and Hotwire still are offering San Francisco rooms using the merchant model.

The OTAs have more litigation and adverse development hitting them on the hotel tax issue than they can handle.

New York City recently adopted an ordinance that holds hotel "remarketers" as responsible for tax on the retail rate. With such explicit language, it may become moot whether the OTAs can convince New York courts of the OTAs' contention that because they are not hotel operators, they thus are not responsible for the tax on the retail rate.

And, Expedia Canada just got handed a consumer class-action complaint against it, charging that it misleads consumers by bundling its "taxes and fees" instead of breaking them out in a transparent manner.

We'll have to see what the San Francisco development means in terms of the countrywide (and now Canada, too) legal battle.

Is it merely a significant defeat for the OTAs in one city -- or the dawn of a new era in terms of the ways they market hotels online?

Will the OTAs abandon the merchant model for hotels in favor of an agency model only?

Any abandonment of the merchant model would have a whopping impact on the OTAs, with Expedia feeling the most heat.

On the other hand, we saw when they abandoned booking fees on flights, that the OTAs can come up with flexible ways to try to recover.

Stay tuned here on what the San Francisco development really means.

I'm awaiting further details on this breaking news story.

Continental, TripAdvisor Team on Metasearch Promotion

I guess Continental is very pleased to participate in the metasearch channel and in TripAdvisor's new flights search tool, in particular.

Continental and TripAdvisor partnered in a TripAdvisor Million Miles Sweepstakes so TripAdvisor could "celebrate our new flight-search service," according to an email announcing the promotion.

Talk about some marketing clout for metasearch.

The sweepstakes winner, according to the rules, will receive 1 million Continental OnePass miles plus $5,000, with the total value pegged at around $25,000.

To receive the prize, you have to enroll in Continental's OnePass loyalty program. I guess there will be a ton of new sign-ups.

So besides the eventual sweepstakes winner, the other winners here are TripAdvisor, Continental and the metasearch sector.

Meanwhile, searching for a Newark-Orlando flight using the TripAdvisor tool, I found a Continental flight bookable at Continental.com, Expedia.com, Hotwire.com and Travelocity.com -- all for $199.

They each had their own marketing messages within the grid, including Continental's "Low fare guarantee," but not much other differentiation.

Incidentally, I wonder how Expedia Inc. plans to differentiate Expedia.com ("Go with confidence") and sister company Hotwire ("Book here!) in metasearch now that neither charges consumer-booking fees.

Maybe some kind of sweepstakes would work:)