Monday's Travel InsideOut

It’s all in the family at Travelzoo. CEO Holger Bartel announced that the deal-publisher and metasearch company will sell the assets of its money-losing Asia-Pacific division to Ralph Bartel, who controls Travelzoo. So it may be that Ralph and the board decided to sell the division to Ralph, which buffs up Travelzoo stock and takes this money drain off the books of the public company.

e-tid.com: Travelzoo plans Asia Pacific sale:
Deals publisher Travelzoo is to sell its Asia Pacific division to focus on its European, North American and Fly.com operations.

For the twelve months ended 30 June 2009, the Asia Pacific division reported revenues of approximately $1.5m and an operating loss of about $7.8m. Read more

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I think I know why Oyster.com, the website featuring journalists’ hotel reviews, began requiring travelers to post reviews through Facebook Connect while TripAdvisor abstains from such a policy. See if you agree?

Dennis Schaal Blog: Why Facebook Connect Fits Oyster.com Strategy: TripAdvisor lives and dies by its traveler-written hotel reviews and the advertising money it takes in from the ads positioned "around the rails" of those reviews, while Oyster.com's business is based on journalist-written hotel reviews. Read more

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Social justice it ain’t. The better term might be social-networking injustice. That’s what happened apparently when a thief stole a laptop and then boasted about the heist on the victim’s Facebook account. No big travel angle here for me, but lots of travel afficianados are interested in Facebook, Twitter and the gang.

Mashable: Thief Brags About Stealing Laptop on Victim’s Facebook Account: Talk about adding insult to injury: a burglar who has stolen a laptop and other properties from a woman’s house has later logged into the victim’s Facebook account and bragged about the deed, complaining that the TV in the victim’s house wasn’t good enough to steal. Read more

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Apparently a passenger bill of rights law is not a slam dunk for the travel industry so industry groups and pundits will gather in Washington, D.C., Sept. 22 to discuss the issue. Maybe they should meet on a tarmac at Reagan National Airport instead to ensure a proper environment for the discussions? Just sayin'.

Eventbrite: Examining a Market Failure?: On Tuesday, September 22, 2009 consumer groups and travel industry organizations will conduct a Stakeholder Hearing in the Hart Senate Office Building regarding airline passenger rights. The purpose of the hearing is to examine passenger safety-related problems such as extended ground delays. Desired outcomes from the hearing include a better understanding of passenger safety problems; best practices from the EU in the area of passenger rights regulations; and the potential efficacy of proposed Congressional solutions. Experts representing all sides in this debate have been invited to participate in this hearing. Read more

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Stock picker Jack Hough steps away from the pack enamored with online travel stocks, and places Priceline.com among three popular stocks that he believes will disappoint.

SmartMoney: 3 Popular Stocks Priced to Underperform: I like Priceline.com, but no more than I like Expedia (EXPE: 22.12, -0.65, -2.85%), Orbitz 3 Popular Stocks Priced to Underperform (OWW: 4.74, +0.08, +1.71%), Hotwire and the rest.
Read more

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CruiseOne, the cruise agency franchisor, is taking steps to make it easier to attract new franchise owners. It sounds like a nice installment on future agency relationships.

Travel Weekly: Franchise now, pay later, says CruiseOne: CruiseOne, the cruise agency franchisor based in Fort Lauderdale, rolled out a financing plan for prospective franchise owners.

Under the program, new "Level One Franchise Owners" would pay $2,500 toward their initial franchising fee rather than pay the full fee of $9,800 up front, and CruiseOne finances the remaining cost of the franchise. The new franchise owner then pays in 24 monthly installments. Read more

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It looks like the woes of the hotel industry, plus the unattractiveness -- to say the least -- of mortgage-backed securities are a foundation for less development of new hotel projects.

Reuters.com:Data shows US hotel projects fell further in July: NEW YORK, Aug 14 (Reuters) - The number of U.S. hotel projects in development fell 26 percent in July, another illustration of how the financial woes of the industry have curbed growth, Smith Travel Research data showed this week. 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.

Tuesday's Travel InsideOut

PhoCusWright analyst Norm Rose takes on Forrester’s Henry Harteveldt and notions that online travel agencies are not performing well. It's great to see some dialogue among competitors.

Travel Technology: Innovation in Online Travel: The general media is a buzz with stories about the lack of innovation of the major OTAs. A recent Forrester Report which shows consumers' frustration with online travel planning and booking is cited. The report stated that many consumers are fed up with the complicated process of planning and booking travel online. Part of this frustration concerns added fees, what we like to label in the travel industry as ancillary revenue. The article points to a resurgence of bookings through traditional travel agents. Read more

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What will Air Canada’s decision to drop its ITA Software-built reservations system project mean to ITA and its customers? And, what’s up with Air Canada making new approaches to the travel agency channel?

Dennis Schaal Blog: ITA Software's Lollipop: ITA Software, the king of online air search and pricing, undoubtedly took a big hit when Air Canada cancelled the bulk of the reservations system that ITA had been working on for four years. Read more

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Perhaps Continental Connection Flight 2816 and its stranding of 48 passengers for hour upon hour at Minneapolis-St. Paul airport last Friday will get a Passenger Bill of Rights bill moving without delay.

PeterGreenberg.com: Express Jet Tarmac Nightmare Prompts Renewed Calls for Passenger Bill of Rights: Passenger rights advocates are renewing their push for legislation to protect fliers from excessive airport delays, after an incident last Friday in which 48 people were stranded on a plane for more than five hours. Read more

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Travel Weekly packages a sector-by-sector analysis of what the Winter might yield.

Travel Weekly: Disappointing summer could make for a very long winter: This is the time of year when many travel companies, particularly airlines, generate their peak revenue. They make hay.

But not this year. Read more

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More bullishness here about Priceline as the online travel company, with its Name Your Own Price business in the U.S. and Booking.com in Europe, beat analysts’ expectations for the 13th consecutive quarter.

Motley Fool: Fly, Priceline. Fly!: You can't keep a good portal down. After priceline.com (Nasdaq: PCLN) delivered another better-than-expected quarterly report yesterday, its stock soared 14% higher on an otherwise down day. Read more

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Some breaking news here about how Orbitz Worldwide is poised to modify its modified retail business model for hotels in certain Asia-Pacific markets.

Dennis Schaal: Where in the World is the Orbitz Hotel Business Model?: Orbitz Worldwide is about to change its hotel business model and go-to branding in Asia-Pacific. Read more

Traffic Jam

The following posts of recent -- and not so recent -- vintage still are ratcheting up this blog’s traffic numbers:

Twitter Travel Search: the Start of Something Big

Google: We Won't Be a Copycat in Travel

Kayak's Hafner Awaits Google Hotels

Travel's Best and Brightest on 'Legacy OTAs' and State of Online Travel 2009

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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.

Friday's Travel InsideOut

Southwest and JetBlue now are flying into some major airports instead of off-the-beaten-track landing strips. Will they be able to maintain their value proposition as they get right in the middle of all of the hub-bub?

Wall Street Journal: Southwest Lands at Logan, Bringing Low Fares Mainstream: Next week Southwest Airlines Co. will do something that Herbert Kelleher, its legendary former chief executive, said would never happen: The airline will offer flights at Boston’s Logan International Airport. Read more

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Following are two articles, one from the Los Angeles Times and the second from the Havana Times, detailing efforts by U.S. citizens to defy the Cuba travel ban. Hey, it's Travel InsideOut, you know.

Los Angeles Times: Violator of Cuba travel ban seeks to force court action: Erika Crenshaw returned to Los Angeles this week from a 10-day trip to Cuba with a message for authorities charged with enforcing a ban on travel to the communist-ruled island: Come and get me. Read more

Havana Times: US Travel Ban on Cuba Losing Teeth: While visiting Cuba is still illegal and subject to fines for US citizens, Washington’s travel ban appears to be losing some of its teeth. Read more

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A new tool for revenue managers helps hoteliers determine how to set their opaque rates on Priceline. How high is too high? How low is too low? Let’s limbo some more:)

The Center for Hospitality Research: Setting Room Rates on Priceline: How to Optimize Expected Hotel Revenue: Executive Summary: This report and tool combination develops a novel approach to set prices on Priceline.com to maximize revenues received from releasing rooms to Priceline. When setting rates on Priceline, hotel properties face a straightforward auction-like pricing decision. Read more

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A new hotel application on Twitter shows more experimentation with travel search and planning on the social media site.

InventorSpot:Twihotels, The Twitter Hotel-Finder Launches: Hotel booking sites like Hotels.com can locate a number of hotels anywhere in the world and if you are diligent enough to cross-reference with TripAdvisor you can most likely obtain a review on that hotel's performance. But until now, there was no one site that could surface hotel recommendations for you firsthand, without a lot of searching and cross-referencing. Twihotels is filling that void nicely with a new app they just rolled out in August. Read more

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It’s too soon to tell whether there will be fewer cruise-ship repositionings or vacation cancellations, but hurricane watchers have downgraded their hurricane forecast after a pacific start to the hurricane season.

Travel Weekly: Hurricane forecast altered after a quiet two months The lack of hurricane activity prompted the U.S. National Oceanic and Atmospheric Administration (NOAA) to alter its 2009 forecast on Thursday. Read more

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I’m betting that Orbitz will take Ratestogo.com’s modified retail model out of Asia and Europe and into North America in a meaningful way.

Dennis Schaal Blog: Does Orbitz Ratestogo.com Mean Merchant Model To Go.com?: Orbitz Worldwide CEO Barney Harford is bullish on subsidiary ratestogo.com, the Sydney, Australia, hotel business primarily selling last-minute rooms in Europe and Asia. Read more

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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.

Thursday's Travel InsideOut

Here’s a Google crystal-ball double bill, featuring my interview with Google’s Rob Torres, and separately Alex Bainbridge’s post about how keyword bidding on hotel names may evolve in the next few years.

Dennis Schaal Blog: Google: We Won't Be a Copycat in Travel: After writing "Kayak's Hafner Awaits Google Hotels" and the "Brave New World of Google Travel 3.0," I spoke with Google's managing director of travel, Rob Torres, and learned a lot more about what Google won't do in travel. Read more

Musings on travel ecommerce blog: Google travel is coming… could it be a hotel PPC system?: I have been reading this great blog post over on Dennis Schaal’s blog. Kayak Hafner awaits Google hotels Well worth a read (and interesting comments too). Kayak CEO Steve Hafner thinks “it’s only a question of time” before Google begins displaying hotel pricing, a move that could change the online-travel ecosystem. Read more

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Family strife reportedly is driving an IPO for Hyatt Hotels in the midst of the sort of down economic times that would make any family squabble. After the IPO, ownership wouldn't be all in the family, but they still would control the company.

Business Week: Though Hotels Are Slumping, Hyatt Preps for IPO: It has been a stock offering investment bankers have been drooling over for decades. Hyatt Hotels has a prominent brand name and a multibillion-dollar market value. On Aug. 5 the privately held company filed with federal regulators to begin the process of selling shares to the public. Read more

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Pundits are speculating that the Travel Promotion Act may take a back seat to the Cash for Clunkers goldrush as legislators seek to do wheelies to get out of town.

Dow Jones Newswires: Clunkers Vote Could Derail Tourism Bill Favored By Reid: WASHINGTON -(Dow Jones)- The push in the Senate to approve a $2 billion extension of the popular "Cash for Clunkers" program could prevent Senate Majority Leader Harry Reid, D-Nev., from bringing up a bill aimed at boosting the flow of foreign tourist dollars into the U.S.

The perceived urgency in extending the popular and economically stimulative clunkers scheme may leave no time in the crowded Senate schedule this week to turn to the Travel Promotion Act, according to several Senate aides. Read more

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It's going to be a long hard road to get the Yahoo-Bing agreement implemented and Yahoo has several out clauses if things don't go according to plan. Also, according to the agreement, Yahoo gets certain payments from Microsoft that weren't initially publicly disclosed.

Financial Times: Yahoo-Microsoft search deal has escape clauses: Yahoo’s recently announced search alliance with Microsoft has escape clauses that allow the top internet destination to pull the plug if the partnership stumbles, according to a regulatory filing late Tuesday. Read more

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From zero to hero -- suddenly online travel stocks have some legs.

Investopedia: Online Travel Stocks Taking Off: At the onset of the economic recession, online travel stocks were among the hardest hit last year. As recently as this spring, many of the companies in this space were trading at or near 52-week lows. Fast-forward a few months and these stocks look to be taking off on a trip to the top. Read more

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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.

Tuesday's Travel InsideOut

Months after pitched allegations surfaced that it manipulated reviews on TripAdvisor's Cruise Critic by wooing frequent cruisers, Royal Caribbean has chucked its Royal Champions program in favor of blogs, Facebook and Twitter.

Travel Weekly: Royal Caribbean disbands Royal Champions: Royal Caribbean International ended its Royal Champions program, saying that it has supplanted the program with new social networking outlets. Read more

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When Google bobs, the travel industry weaves. The betting here is that Google is not about to launch another Expedia any time soon, but Steve Hafner of Kayak believes that Google is poised to build out its content to cache-in on hotel pricing.

Dennis Schaal Blog: Kayak's Hafner Awaits Google Hotels: Kayak CEO Steve Hafner thinks "it's only a question of time" before Google begins displaying hotel pricing, a move that could change the online-travel ecosystem. Read more

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Online travel companies, from Travelzoo and Expedia to Priceline and Orbitz Worldwide, are the darlings of the stock market...this week. In down economic times, goes the thinking, these babies can find travelers deals and get some revenue and profits going.

Seeking Alpha: Online Travel Companies: Good Places to Book Some Profits: Online travel booking companies have been taking off lately especially in the wake of Travelzoo (TZOO) and Expedia (EXPE) both posting solid revenues last week. Wall Street analysts yesterday decided to hop aboard the online travel express by upgrading both Orbitz Worldwide (OWW) and Priceline.com (PCLN) probably so they don’t look like idiots when those companies beat their upcoming earnings estimates. Read more

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Expedia’s affiliate network replaced metasearch company travelsupermarket.com in powering travel offerings for The Guardian. The travel pages on the newspaper’s website attract a few eyeballs….around 2 million or, conventionally speaking, some 1 million unique visitors. Score one for the OTCs over the metas.

Travolution: Expedia to expand white label scheme as meta sites pull out: Expedia Affiliate Network president Henrik Kjellberg says there is “no technical limit” to how many websites the business can work with, and that cannibalization of customers from the core Expedia Inc. brands is not an issue. Read more

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HRG is downsizing with a twist. Through its Options for Change program, the travel management company is giving employees a measure of customization in the concessions and cutbacks they accept. No reports yet about whether the staff is, well, hog-wild about the idea.

e-tid.com: HRG seeks concessions from staff: Hogg Robinson Group chief executive David Radcliffe has agreed a 5% pay cut as part of a move to protect the business in the current economic climate. The rest of the HRG board will take the same pay cut, which is effective from 1 September. Read more

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Hawaiian Airlines arrived with the top on-time performance in June while American Airlines, JetBlue and regional carrier Comair were unfashionably late, according to the Dept. of Transportation. Overall,on-time performance improved from a year ago, but slid compared with May.

Dow Jones Newswires: US Airlines' On-Time Performance Improves In June From Year Ago: U.S. airlines' on-time and baggage-handling performance improved from a year earlier in June but worsened from May, the U.S. Department of Transportation said Tuesday.

Air traffic has been easing in recent months as carriers continue to cut back capacity amid slack demand. Read more

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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.

Kayak's Hafner Awaits Google Hotels

Kayak CEO Steve Hafner thinks "it's only a question of time" before Google begins displaying hotel pricing, a move that could change the online-travel ecosystem.

Waiting for the other shoe to drop, so to speak, Hafner says he is much more concerned about how Kayak, the leading travel-metasearch player in the U.S., would navigate Google's souped-up role in facilitating hotel transactions than about the maneuverings of rivals like TripAdvisor, Fly.com, Bing Travel or Mobissimo.

"Google is by far the biggest source of travel information for consumers," Hafner says.

That point was confirmed for me last night when I drilled down a bit into what Google has been doing on the hotel front.

When I performed a Google search for Chicago hotels and then selected Hotel Allegro reviews, I accessed a link that produced:

• The property location in Google Maps;

• Overviews of the hotel and property details;

• Some 619 user reviews and ratings of Hotel Allegro from the likes of TripAdvisor, Priceline, HotelGuide and others;

• 50 photos and videos from the hotel itself and other content providers;

• 683 Web pages about the property, and

• Advertisements from Expedia, DealBase, Travelzoo and Hotelsmax.net.

The "look and feel" of this compilation is not very attractive, but that can be improved. And, with so many consumers launching their trip-planning through Google searches, you could argue that Google already is the most comprehensive "hotel website."

With speculation rampant about Google's next move in travel, Hafner believes he knows where Google is headed.

"Google doesn't care about flights," Hafner contends. "Hotels is where they'll enter."

He continues: "Hotels are a comparatively easy entry point and yield the highest margin for Google."

I blogged a couple of weeks ago about the Brave New World of Google Travel 3.0, arguing that Google may continue to build out its apps, from flight links to Google Maps, to put a heavier stamp on its travel offering, now that Bing Travel has raised its profile with its prominent integration into Microsoft's Bing search engine.

Hafner's theory on Google's evolution in travel is consistent with that line of thinking.

As it already does for products ranging from books to digital cameras, Google might display hotel price points in default displays and then advertisers could use Google Checkout to drive hotel transactions, Hafner says.

"So imagine a list of OTAs [online travel agencies] and suppliers, with Google Checkout to help facilitate conversion," Hafner says. "Pretty powerful."

And, Google already has another app, Google Base, featuring a data API, which perhaps could accommmodate hourly hotel pricing updates, Hafner says.

Some have argued that Google, with its market cap of $143 billion, doesn't worry about relatively little things such as Bing Travel.

But, I think with travel being such a large part of Google's advertising business, Bing's deft integration of Bing Travel in Google's own backyard has been an embarrassment to Google.

So, how would implementing hotel pricing -- and this could merely be Google's opening shot in travel-inventory pricing -- impact Google commercially?

"My guess is that it would be cannibalistic since many advertisers run their SEM [search engine marketing] campaigns on a same-session loss," Hafner says. "And, Google's opportunity to increase search share is relatively small (since it already owns 70 percent of queries in the U.S.) But, they'll probably need to move to this approach anyway to counter Bing etc."

In travel, as in other sectors, when Google bobs, the entire industry weaves.

There are lots of issues to sort out.

How would this impact the hotel-direct channel?

Who would be the winners and losers?

"It's an open question what role players like Kayak would have in a new ecosystem like this," Hafner says.

Google, by implementing hotel pricing (and who knows which travel segment after that), could certainly be disruptive.

Why would consumers navigate to TripAdvisor to read hotel reviews or to Kayak to compare prices, if they could do it all and get a more comprehensive look through Google?

Why go directly to a hotel website or to an online travel agency if you can get user reviews, maps and pricing on Google?

I received an inquiry from a business publication in Japan several months ago, asking me for answers when unfounded rumors were swirling that Google was going to launch "another Expedia."

Don't look for that sort of scenario. Google isn't going to become a travel agency.

Instead, there is plenty of room(s) for Google to expand its reach as a hotel kingmaker.

Wednesday's Travel InsideOut

Does Twitter's new home page disintermediate deal publishers a tad? The entire travel industry -– airlines, hotels, car rental firms, cruise lines, wholesalers, and destinations eventually will take note of the change that Twitter made to its home page yesterday, putting “search” front and center. All of these sectors eventually will be searching for ways to respond.

Dennis Schaal Blog: Twitter Travel Search: the Start of Something Big: Twitter relaunched its home page to emphasize "search," and the impact will reverberate for travel, financial services, lawn mowers -- you name it. Read more

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It’s a busy news day with the Twitter news above and this Bing-Yahoo development, too. A search partnership, which instantly makes Microsoft Bing a player, may be welcomed by travel advertisers as a hedge against the Google behemoth.

TechCrunch: Microsoft-Yahoo Search Deal Imminent: Analysts Weigh In: As we first reported yesterday, Microsoft and Yahoo are on the verge of announcing a complicated search and search marketing alliance that will combine the no. 2 and no. 3 players in search into something that may have a chance of competing with Google (although combined they will still have less than half of Google’s 65% or so search market share). The deal will be announced shortly after signing, and could come as early as today (Wednesday). Read more

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Jay Witzel is out as president and CEO of Carlson Hotels Worldwide.

Finance and Commerce: Joly takes over Carlson hotels: Minnetonka-based Carlson, parent company of Carlson Hotels Worldwide, announced a reshuffling Tuesday that will give Hubert Joly, president and CEO of the lodging, restaurant, travel and marketing giant, leadership of Carlson’s hotel business. Read more

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Barry Diller, the man who controls Expedia Inc. and IAC, is up to something again in the media business, pledging to "bridge the gap between traditional television and the Internet." Expedia meets Home Shopping Network meets YouTube?

Business Week: Diller, Silverman: Expect the Unexpected: You can go blind trying to keep track of Barry Diller's many twists and turns. The 67-year-old former TV programming wunderkind started as the ABC (DIS) program executive who brought America the Movie of the Week; became a Hollywood mogul when he green-lit Steven Spielberg and his Indiana Jones franchise for Paramount Pictures (VIAB); bolted to the studios, where he correctly divined that the Big Three TV world order was falling apart and launched Fox Broadcasting (NWS), which began fracturing TV's viewing audience. Along the way, Diller had a hand in perfecting the notion of online shopping when he ran QVC and then put online travel and concert booking into a higher gear after buying Expedia (EXPE) and Ticketmaster (TKTM). Read more

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A lodging industry analyst compares current RevPar woes to the aftermath of 9/11 and the pundit is pretty glum about the pace of a recovery.

Yahoo Finance/The Wall Street Transcript: Lodging Industry RevPAR Declines Worst Ever: All Segments Down Significantly and No Upturn Until 2011: n the following brief excerpt from just one of the 10 detailed interviews in the 44 page report, Lodging industry expert Smedes Rose discusses the outlook for the Lodging Industry and for the REITs specializing in that sector and picks high return stocks with sustainable dividends for investors in this industry. Read more

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Is Orbitz a phoenix rising or a company rolling a rock uphill in its attempt to build a strong hotel business?

Dennis Schaal Blog: Is Orbitz Poised for a Priceline-like Comeback?: I reported yesterday how Barney Harford, the Orbitz CEO six months or so into his tenure, is stirring things up at 500 W. Madison St., Chicago, in trying to come to grips with building the Orbitz hotel business. 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.

Is Orbitz Poised for a Priceline-like Comeback?

I reported yesterday how Barney Harford, the Orbitz CEO six months or so into his tenure, is stirring things up at 500 W. Madison St., Chicago, in trying to come to grips with building the Orbitz hotel business.

I spoke to a handful of analysts about Orbitz's prospects and they agreed that a rebound would take a protracted effort.

The Orbitz situation, in its broad outlines, sort of reminds me of Priceline's struggles when its stock was trading at $1.31 on Dec. 29, 2000. Orbitz Worldwide stock, trending upward, sits at $2.41 before this morning's open, a lowly figure when compared with Priceline's stock at $122.72.

I speculated a few weeks ago, that some sort of Orbitz-Kayak combination could be in the offing because Orbitz, with all of the consumer traffic that it draws, needs to leverage its potential in the advertising/media business.

One of the parties called my idea "ludicrous."

Alas, my ideas have been called worse.

But, there indeed was something to my speculation because Orbitz recently relaunched Trip.com, a facilitated-search vehicle, to take advantage of all those lookers who don't book.

In researching this post about Orbitz, I also learned that there was speculation late last year and early this year that Orbitz separately had talks with Priceline and American Express about merger agreements.

A Priceline combination with Orbitz might have helped Priceline expand into European and Asian markets that it has yet to penetrate.

However, I'm told that an Orbitz consolidation with American Express, which didn't lead to a contract signing, was much closer to fruition than the Orbitz discussions with Priceline.

Amex has yet to distinguish itself in the online travel arena -- far from it, actually. Perhaps its rumored talks with Orbitz were a bid to jump-start that effort.

However, the feeling I'm getting now from speaking with a handful of analysts is that nothing is imminent on the Orbitz consolidation front, including other scenarios such as an Expedia-Orbitz merger, a Travelocity-Orbitz marriage or a Kayak-Orbitz joining of forces, although all of these players undoubtedly have pondered these strategic combinations.

Tom Botts, a partner in Hudson Crossing, says there would be too much conflict in an Orbitz-Kayak merger because Orbitz "has staked out a position as a friend to many," including its relationships with Bing Travel, FareCompare and Kayak, among others.

Botts believes Orbitz will pursue a go-it-alone strategy for now.

Along the same lines, Soleil Securities analyst Jake Fuller believes an Orbitz-Kayak combo is not on the table, noting that Orbitz buying Kayak "wouldn't work."

With the Orbitz balance sheet loaded down with $652 million in debt and a market cap of $200 million, Kayak would need to access hard-to-obtain external capital if it were to ponder an Orbitz acquisition, Fuller said.

It's also unknown, Fuller said, whether the Blackstone Group, which controls Travelport and Orbitz, are in a selling frame of mind.

Another industry veteran, who declined to be identified, suggested that an Orbitz-Kayak merger would be a winner in terms of its potential in travel search and the media business, but some sort of paradigm shift would have to occur to make it financially feasible.

"Something would have to happen," this analyst said, mentioning that perhaps Blackstone would forgive some of Orbitz's debt for the right kind of deal.

Forrester Research travel analyst Henry Harteveldt says he doesn't see Orbitz combining with another online travel company like Priceline, Expedia or Travelocity because of antitrust reasons, but he could envision OTCs picking off parts of Orbitz Worldwide, such as ebookers or HotelClub, if OWW conducted a fire sales of its pieces.

"I think the Orbitz franchise is solid," Harteveldt says. "The challenge for them is to rethink their user experience. The shopping experience hasn't changed much since they launched."

Another analyst, who commented anonymously, said Orbitz must focus on generating enough free cash flow to pay down its debt much quicker than it has been doing.

He doesn't believe Orbitz, under Harford, whom he termed "the smartest guy in the room," will become insolvent, but could face a protracted struggle with its "product not becoming very big."

The up-side, this analyst said, is that Orbitz could rebound, if some of its hotel initiatives take hold, in two to three years.

Several analysts said it was too soon to tell whether Orbitz can make the kind of comeback that Priceline began to pull off some seven or eight years ago.

All were awaiting some hint of Orbitz's prospects from the release of its second quarter financial results Aug. 5, and wanted to assess OWW's results for the rest of 2009 before taking a position on OWW's fate.

Said Botts of Hudson Crossing: "I don't know enough yet to say if it is the phoenix rising."

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

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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

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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

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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

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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.

Mega, Not Meta, Move: Orbitz Enters Search Business

I wrote several weeks ago that Orbitz would attempt to maximize all of those lookers perusing its shop, take its media business a leap forward and get into the search business, possibly through a merger of some sort with Kayak.

Well, Orbitz, has entered the search business on its own, for now, by relaunching Trip.com as a search business. This fairly huge development was brought to my attention by Tom Botts of the Hudson Crossing Travel Industry Insight blog.

All of the online travel agencies, who rightly refer to themselves as online travel companies, are attempting to ratchet up their advertising/media businesses because trying to make consumers complete a transaction sometimes appears to be as easy as finding the proverbial needle in a haystack.

So Orbitz, through Trip.com , will attempt to garner meaningful revenue through all of that traffic.

Perhaps one day Orbitz's search business may eclipse its transaction business.

Tim Hughes blogged the other day about the differences between online travel agencies and metasearch companies.

One difference that he didn't talk about in any detail is that metasearch and other companies that facilitate searches of other booking engines, which is Trip.com's tack, are sprouting up faster than you can keep track of. Meanwhile, launches of new OTAs are rare.

The reason is because search and metasearch is where the money is at, and the OTA business, with looker-to-booker ratios climbing every second, is under increasing pressure.

After all, Expedia Inc., with Expedia.com as its jewel, recently launched flight metasearch through TripAdvisor.com.

It is interesting that although Orbitz and Kayak haven't merged -- and such a game-changing move may be far-fetched or in the cards -- Kayak and sister brand SideStep are participating in Trip.com.

And so is everyone else, including Expedia, Hotwire, Priceline, Travelocity, Bing and fly.com, among others.

Of course, Orbitz's Trip.com is now in competition with many of these companies in the search business. Expedia, after all, has TripAdvisor, Travelocity fields igoUgo, Bing has Bing Travel and fly.com belongs to the Travelzoo portfolio.

This is a huge move by Orbitz, and more proof that Orbitz Worldwide CEO Barney Harford was serious when he said the company would push hard to ramp up its advertising/media business.

With air booking fees gone, the media/search business is looking so much more important.

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.

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.

Expedia Not So Happy About United's Credit-Card Plan

Major online travel agencies have been missing-in-action about their take on United Airlines' plan to make some travel agencies foot the airline's credit card fees, beginning July 20.

Expedia recently broke the silence, if you read between the lines.

Expedia Inc. spokeswoman Katie Deines, noting that Expedia.com had not been included in the United plan yet, said: "Expedia has not received a letter on this topic from United. We won't speculate on how hypothetical actions taken by our supply partners may or may not impact Expedia's business, but we are unsupportive of actions by travel suppliers that increase costs to consumers. We are closely monitoring the developments and have no further comment at this time."

So, Expedia is "unsupportive of actions by travel suppliers that increase costs to consumers."

This means that if United forced Expedia.com to pay United's credit card fees when Expedia.com customers book a United flight, then Expedia.com likely would pass on the cost to travelers.

The development occurs just as the dust has settled on the move by Expedia.com and its competitors to eliminate consumer booking fees on flights, and could force them to reinstitute the booking fees, implement new fees of some sort or eat the costs.

PhoCusWright financial analyst Jake Fuller has estimated that Expedia and Orbitz earn about $10 per ticket in GDS incentives and commissions, while Priceline gets about $2 on retail flights. Paying the airlines’ credit card fees would cost the online agencies about $6 to $8 per ticket, effectively wiping out the bulk of their GDS incentives and commissions.

The other OTAs have been reluctant to step into the line of fire on the sensitive topic.

In late June, Travelocity stated: "We are engaged with United to understand their planned actions regarding payment processes, but aside from that we don’t have anything else to say on the matter at this time. Thanks for understanding."

And, Orbitz Worldwide and Priceline both declined to comment on the issue.

Likewise, Amadeus has been the lone global distribution system (GDS) vendor taking a stance.

Amadeus North America spokeswoman Debbie Iannaci told me: "Airlines need to be cautious about adopting policies which could potentially have a detrimental affect on travel demand in the current environment. And we have always believed that the marketplace ultimately determines the success of any model. This action could potentially shift significant costs and risk to travel agencies at a time when they can least afford the burden. That cost could also inevitably be passed on to the traveler. Those additional costs and inefficiencies could have a detrimental effect on demand at a time when the industry needs travelers traveling."

Behind the scenes, I'm sure the OTAs and GDSs have plenty to say to United on the credit card issue.

It's good to see Expedia and Amadeus, at least, having the guts to be public about it.

Update: Hotels.com Founders Introduce 'Reverse Opaque Rates' and Point to hotels.com Shortcomings

I wrote a post the other day about how Bob Diener and Dave Litman, the founders of HRN (a.k.a. hotels.com), have launched getaroom.com, and indeed they intend to shake things up.

Diener, who owns getaroom.com 50-50 with Litman, described the site's introduction of "reverse opaque rates" for hotel sales.

getaroom focuses on top destinations so if you enter your travel dates and click on Orlando, for instance, you'll see the Sheraton Vistana Resort at a published rate of $125.38 per night.

However, the reverse opaque model comes into play when you register on the website and phone getaroom's call center, staffed by a third-party company, in Dallas.

Diener said that over the phone you'll be able get an unpublished rate for that hotel and others for 10 percent to 50 percent less than the online published rate.

"Our goal is to bring a lot of vitality back and make booking hotels exciting again," Diener said.

The opaque-over-the-phone channel enables hoteliers to market their inventory at rates that they would rather not disclose online, enabling a four-star hotel, for instance, to compete against a three-star property if it so chooses, Diener said.

And, consumers get the advantage of finding a great deal and knowing up-front which hotel they are booking, unlike with Priceline, where you bid on a particular star category in a certain section of a city but learn the hotel's identity only after booking it.

Diener points out that most companies are trying to push consumers online, whereas getaroom.com is incenting consumers to dial for the best deals and values.

Diener and Litman obviously believe in doing things differently and are employing a strategy similar to one they pushed with HRN back in the day.

This is how one hotel consultant described getaroom.com's strategy.

"The strategy is EXACTLY the same strategy they used to launch HRN way back in the early 1990s," the hotel consultant said. "They focused on a few specific high-demand cities, got a handle on the revenue management/yield opportunities and managed the hell out of the pricing to optimize sales and margin."

"They wound up with a low-tech setup that had better demand/price point info than the hotel chains and leveraged it," the consultant added. "Also, speed is king to Litman -- note the results' screen populates within a second."

Diener did not have much to quibble with when I read him that analysis. He said getaroom.com is focusing on key destinations and offers a limited number of hotels with the best values in each of these markets, and "yes, speed is key," he said.

Commenting on the position of hotels.com under Expedia Inc. today, Deiner said hotels.com is a major player "and still has a great brand name, adding that he and Litman were "much more focused on value" when they ran the show.

hotels.com wants to be "everything to everybody," Diener said. "They have lots of hotels even if some are of low value. Their philosophy is to put on everything everywhere."

Diener said he and Litman decided to jump back into the fray after their five-year noncompete agreements expired because "we love the industry, it's in our DNA."

He said the duo saw a great opportunity because "the economy fell off a cliff last September" and the lodging industry needed a new channel to market its inventory.

"The industry really hasn't moved [in the last five years]," Diener said. "It really has stayed the same."

It is fitting then that getaroom.com has "several million dollars" for marketing and is launching spots on satellite radio and soon it will unveil TV ads, too, all to the tune of the William Tell Overture. getaroom, getaroom, getaroom.com.....

As you may recall, the William Tell Overture was also used as the theme music for the classic Lone Ranger television show.

However, there are no Lone Rangers in this story. Diener and Litman are back at it together -- and they may be driving their new model at a very ambitious pace.

Hotels.com Founders At It Again

For those of you who wax nostalgic and long for the days when the sales staffs of Expedia.com and Hotels.com went after each other with figurative tire irons as they sought one-upmanship in merchant-model hotel deals, your prayers may have been answered.

Tom Botts of the Hudson Crossing Travel Industry Insight blog scooped me again (you gotta cut it out, Tom) and reported that hotels.com founders Dave Litman and Bob Diener have launched hotel website getaroom.com.

You might want to think of Litman and Diener as the E.E. Cummingses of the hotel space as both hotels.com and getaroom.com are lower case.

With their five-year noncompete agreements having expired by Jan. 1, 2009, maybe it is poetic justice that the duo is back in the game.

You have to love it when entrepreneurs sell their baby, in this case in bits and pieces to Barry Diller's USA Interactive (USAI) in 1999 and 2003, and then reconvene years later to compete against their offspring.

Likewise, some of the key players in the early years of SideStep, unhappy about SideStep's dismantling after Kayak bought it, introduced Voyij.com , and are blazing a path that Litman and Diener are following, as well.

Back in the day, when Expedia.com and Hotels.com were consolidated inside USAI, they had such a hold over merchant model hotel deals that one hotel executive told me in 2002 "they've [almost] created their own distribution system."

Today, Expedia Inc., the parent of Expedia.com, hotels.com and Hotwire, still is a dominant player in hotels among the online travel agencies.

How dominant? Consider that when the City of Anaheim, Calif., billed Expedia, Orbitz, Priceline and Travelocity $21.3 million in back hotel taxes and penalties earlier this year, Expedia, hotels.com and Hotwire owed $17.7 million -- and Orbitz, Priceline and Travelocity owed a mere $3.6 million combined.

In getaroom.com, Diener and Litman are approaching the market in a different way, as the website focuses "on a limited number of major destinations and selects the properties in each destination that offer you the very best values. By focusing on a select group of properties, we are able to negotiate better rates for you."

But if that is a new twist, then some aspects of getaroom.com have a familiar ring. hotels.com was founded in 1991 and bookings were made on discounted rooms by dialing a toll-free number.

And, in that tradition, getaroom.com displays a toll-free number at the top of its home page, although online bookings undoubtedly will be the predominant booking method.

Times have changed since the days when hotels.com and Expedia.com were at loggerheads, and even more powerful than they are today. Hotels have reasserted their control over pricing with best-rate guarantees, and the merchant model is under pressure.

Still, it will be interesting to see what kind of mark these two hotels.com veterans can make.

Tire irons, anyone?