Travel Metasearch, OTAs Sweating the User Interface, Stupid

When it comes to the new availability of optional services data for the airlines' fee frenzy, the travel metasearch engines and online travel agencies (OTAs) are sweating the user interface (UI).

How do you cram the options into search choices and displays when checked-bag fees may be suited for apples-to-apples comparisons among airlines, but in-flight entertainment choices or paid seats may not?

The challenges for Kayak, FareCompare, Mobissimo, Farecast, TripAdvisor, CheapFlights and the OTAs is how to present a clean UI to consumers that would entice them to pick their optional-services preferences before they execute their search so travelers can take advantage of the new data without the metasearch engines and OTAs totally messing up the UI.

There also still is a technology debate, I'm told, concerning whether the new ATPCO standards are robust enough for airlines bent on those incremental revenue streams that optional services will generate.

Although 13 global airlines, ITA Software and Amadeus made some travel news by testing optional services' feeds with ATPCO, some carriers undoubtedly will build their own nonstandardized solutions, as did United Airlines, Midwest Airlines and Frontier Airlines with the Sabre GDS before ATPCO had completed its standards-crafting.

The GDS UI issue can be easier and more complex than the problem for the metasearch engines and the OTAs. On the one hand, putting optional services on green-screens and in the hands of travel professionals might be easier from a display perspective. On the other hand, the GDSs need to jump through hoops to make all this work with their legacy technology.

Meanwhile, there was an interesting debate yesterday in the comments section about my post, "Airline Optional Services: TripAdvisor, Kayak, Farecast, FareCompare, OTAs to Get the Data."

Hudson Crossing and Valyn Perini of Open Travel Alliance fame cast doubt on whether many consumers will choose to shop for flights based on optional services choices.

A very legitimate point.

But, the more I think about it, the more I think that the issue is a chicken or the egg kind of question.

I think if the metasearch engines and OTAs succeed in creating clean, compelling UIs out of this admittedly morass of optional services choices, then a significant segment of travelers will take advantage of the choices.

That's because it is in consumers' interests to know what they will be paying for in advance, especially if the airlines are offering any new services that actually add value.

On that point, I like the comments yesterday in my blog by Sam Shank, the CEO of Dealbase.com.

Shank wrote: "I've long felt that if a la carte products are positioned as upgrades (vs. add-on fees), and strategically-placed within the purchase decision process, they'll represent a key new source of airline revenue. Metasearch, with their focus on innovation and rapid iteration, is the logical partner for airlines to roll this out to consumers."

He added: "As an air traveler, I'm looking forward to spending more money to have a better flight experience. But, if the only products offered are things I used to get for free, my wallet will remain shut."

Mine, too.

Airline Optional Services: TripAdvisor, Kayak, Farecast, FareCompare, OTAs to Get the Data

Before the end of 2009, metasearch engines powered by ITA Software, and online travel agencies (OTAs) and airline websites pumped up by Amadeus and Travelport, likely will get the optional services data necessary to transform the flight-shopping process.

As I reported in Travel Weekly today, more than a dozen airlines, ITA Software and Amadeus are testing airline-fed data through ATPCO for services like checked bags, Internet access, premium seats, lounge access, onboard gin and tonics, and even portable oxygen. Travelport GDS, too, says it will get the feeds by the end of the year.

This bit of travel news is huge.

Here's why:

ITA Software is part of the metasearch guts behind Farecast, TripAdvisor, Kayak and FareCompare, and it also powers Hotwire and a host of airline websites, including Continental's and United's. These metasearch sites use ITA to get fare, schedule and availability data so they won't have to scrape airline websites and get into new legal scrapes.

And, Amadeus powers some of Kayak's and Expedia's global sites, as well as ebookers, Opodo and LastMinute.com. Travelport GDS, including Worldspan and Apollo, provides booking engines for Orbitz, CheapTickets, Priceline and many others.

With standards for optional services in place and ATPCO finished writing the code and transmitting the data to ITA Software and the GDSs by the end of the year, the way travel agents and consumers search for flights will be transformed.

A bit of the complexity in flight shopping will get simplified.

So, if enough airlines go ahead and agree to file their optional services information and the metasearch sites and OTAs take advantage of this data bonanza, consumers would be able to shop for flights by preferences.

Travelers would be able to search for flights, for instance, that offer pay-as-you-go exit-row seats, lounge access and Internet service and compare these to flights that offer similar services.

Metasearch engines that don't offer these apples-to-apples comparisons in their search-results grids, could use the data to enhance transparency in their fee-translators, such as TripAdvisor's Fees Estimator.

And, the OTAs could come up with similar solutions, although access to the same standardized data from the airlines doesn't mean that all the displays will be identical.

Access to the data is just an enabler. There is plenty of room for innovation, and at least one prominent metasearch site is working on its unique solution as of this writing.

OK, shopping for flights still will be complex and a pain in the butt, but access to the optional-services data at least will be a major step forward in navigating the fog of helter-skelter service offerings.

Next on the docket, the airlines and ATPCO will be working on filing data on branded fares, or fare families, but that is stage 2 in the process, and probably won't get implemented until 2010.

Mr. Sandman: Orbitz and Expedia Play Gotcha on Fees

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

An acquisition? A merger? Another frenzy of discounting?

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

The American Dream: AA to Try to Turn Distribution Costs Into Distribution Revenue

In AMR Corp.'s first quarter earnings call yesterday, CEO Gerard Arpey spoke of his "long-term vision" to make travel agencies and global distribution systems (GDSs) pay for the privilege of distributing American Airlines' flights rather than the reverse.

And, even short of that goal, the move could be, well, priceless.

Arpey was quoted as saying: "Tom [CFO Thomas Horton] can jump in here, but I think the same approach that we’ve taken here in the U.S. certainly lends itself to the international distribution of our tickets where we’re still paying much higher levels of commission and booking fees, etc., and I think a lot that hinges on the use of technology and the competitive environment because a lot of those commissions or overrides or booking fees are paid in order to stimulate traffic and if we can, as an industry, do a better job keeping the supply of seats in line with the demand, I think that will help us on those fronts."

Warming to the topic, Arpey spoke of his dream: "So I think there are significant opportunities around the world to make the kind of progress that we’ve made here in the U.S. and not to be too dramatic but I can see a day, and maybe I’m dreaming here, where those folks who are the intermediary between us and our customer, have to pay for access to our product rather than us paying them to distribute our product. So that would be my long-term vision."

Any airline, GDS or travel agency executive in the U.S. recalls the distribution dramatics of 2005 and 2006, when the airlines threatened surcharges and radically cut the distribution fees they paid to GDSs and the incentives that Sabre, Galileo, Worldspan and Amadeus passed on to travel agencies.

Well, Arpey is signalling two things:

1) American Airlines, and others no doubt, are set and already are trying to export to the international arena the slash- and-burn distribution tactics that they successfully employed in the U.S. several years ago.

2) In the U.S., the next round of GDS-airlines booking-fee negotiations in a couple of years may make the prior face-off look like amateur night.

Airlines, of course, have every right to trim their distribution costs to reasonable levels. Before GDS deregulation, the GDSs used their clout and virtual monopoly power to tack on excessive fees to airlines that had little bearing to actual costs.

But now, as Arpey's comments show, the airlines are poised to try to force intermediaries to distribute flights to airline customers for free -- or, taking it to dream-like proportions -- to make online travel agencies, traditional agencies and GDSs pay for access to flights, which, of course, the airlines control.

Between Sabre, with its still-sizable distribution grip, terminating its relationship with Farelogix, and airlines poised to wield their hold over flight inventory to pummel intermediaries, it almost -- but not quite -- makes one wax nostalgiac about the days when these sectors were regulated.

The disruption that the travel industry faced in 2005 and 2006 would be considered a tremor compared with the earthquake that would occur if the airlines succeed in forcing through payless distribution in the next round of contract talks.

These days, the brouhaha may not sell a lot of newspapers, but it would drive a lot of traffic to travel news websites.

Meanwhile, another interesting point about American's first quarter results, is that although AMR's revenue declined 15 percent to $4.8 billion, those checked bag fees and other ancillary services indeed are paying off.

American's revenue from change fees, on-board meals and checked bag fees jumped 6.9 percent to $558 million in the quarter.

In the American (Airlines) Dream, those feels increasingly will be in the picture.

Connect by Hertz Retools with Acquisition

I'm glad to see some travel-industry suppliers are forward-looking and doing some things that blend nicely with environmental demands.

Thus, Connect by Hertz just made a bit of travel news and acquired the Paris-based company, Eileo, which provides all sorts of back-office technologies for the car-sharing industry.

Hertz obviously sees a future and a winning business proposition in car-sharing.

Connect by Hertz, which enables you to input your Connect card and rent EPA SmartWay-certified vehicles for as low as $8.50 an hour, seems like an attractive, environmentally friendly solution for businesses and people located in congested cities who choose not to own a car or pay exhorbitant parking-garage fees.

Hertz claims that each Connect by Hertz car on the road puts 14 other vehicles curbside. I can't verify that claim, of course, but am willing to believe that car-sharing makes environmental sense. And, I'd love to see some Hertz documentation for that claim.

I had to admit that Connect by Hertz wasn't high on my radar until recently, but I see it is getting fairly good reviews in the blogosphere, including this post by Robbie Mitchell.

Congrats to Hertz for giving car-sharing a ride.

On Fees: easyJet, We Feel Your Pain

The ancillary revenue drama continues with another bit of travel news out of the U.K.'s Luton Airport, which is set to introduce a passenger drop-off fee.

Drivers who decide they don't want to pay the fee would have to park in the boondocks [an Americanism that means a parking lot in the stratosphere] when depositing travelers at Luton.

The airport already charges fees for luggage carts, clear plastic bags to get liquids through security and fast-lane security access.

But, now easyJet and at least one other airline have seen enough of these ancillary-service fees -- at least when it is an airport that's collecting the revenue.

"Whatever next?" e-tid.com quotes easyJet spokesman Andrew McConnell as saying. "We have seen charges for fast track security and plastic bags. Now they want £1 for dropping somebody off at the airport.

"This new scheme is a recipe for traffic chaos, which will see people stopping on double yellow lines or parking in the bus lane. Passengers already pay to use the airport facilities as part of their air fare."

One might ask the airlines, too, what's next? Many airlines believe it's OK for them to charge a bevy of fees for heretofore free services, but now they are balking when an airport gets in on the action.

To use another American idiom: It seems to me "like the pot calling the kettle black."

For more on the ancillary services question see:

Dennis Schaal's Proposal for the Airline Sales Channel and A La Carte Pricing Conference

Will Airline Fees Pinch Business Travelers?

Airline Merchandising: Trouble Getting Into the Spirit (Airlines)

Dennis Schaal's Proposal for the Airline Sales Channel and A La Carte Pricing Conference

The Elliott Blog tipped me off to the upcoming Airline Sales Channel & A La Carte Pricing conference in Miami.

I am not sure whether I can attend.

But, I have some recommendations for the conference planners in how they might extract some ancillary revenue (sound familiar?) out of the event.

I see that if you register for the confab by April 10, the discounted registration fee is $1149.

That is a bargain, of course, considering all the information available about increasing the airline industry's estimated $3.5 billion annual take from such nouveau services that heretofore had been available for free.

Anyway, times are tough, so here's my plan, unsolicited of course, for conference organizers.

Charge participants that $1149 fee, but when they arrive at the event, let them know that seating in the main conference ballroom will be $350 extra. If they don't want to pay the fee, there will be plenty of standing room.

No worries.

And, if they want a front-row seat with extra legroom, or an aisle seat for easy exiting from the main lecture hall, then tack on an additional $200.

Conference delegates, of course, will be happy to pay for this extra value. Even if they only find out about it after they book their conference attendance.

Transparency? What's that?

All of this unbundling of conference pricing will be worth it because the conference promises to "guide attendees towards increasing this huge [$3.5 billion] revenue source, as well as how to sustain this revenue over the long-term."

And, if one of the conference keynote speakers gives an especially illuminating talk about the next horizon in charging for meals on jetplanes, then charge conference attendees an additional $75 for downloading the presentation.

Again, it's a bargain.

And, while they are at it, conference organizers might want to sell anonymous data about conference registrants to third-party advertisers, including credit card companies and stock brokers.

The conference attendees would appreciate being targeted as part of this new, behavioral advertising trend because the advertisers are providing their prey, I mean their customers, with valuable products and services.

After all, airlines are planning to target their passengers with such advertising when they view in-flight entertainment on their seatbacks.

And, if conference organizers feel especially altruistic after bumping up revenue from attendees, they might want to consider throwing in a few freebies, including perhaps some complimentary sodas or napkins.

There's nothing like building customer loyalty after playing the ancillary-services game.

On Orbitz: Is Flight Metasearch Even Dead-er?

OK, even with Orbitz's decision earlier today to remove consumer booking fees on most flights, I don't think that flight metasearch is dead.

And, neither does Yen Lee, the president of Up Take, who triggered a lot of great discussion and travel news on the topic through his post on the Up Take Travel Industry Blog, outlining how flight metasearch is in for some tough sledding because of a lack of price differentiation among online travel agencies (OTAs) and suppliers.

So, somewhat ironically, with Orbitz joining Priceline, Expedia and Travelocity in dropping consumer booking fees on flights, at least through the end of May, the OTAs, as a group, gain something of an advantage.

That's because airlines, with their all-out push to get consumers to book directly on the carriers' own websites, lose the price advantage they had over the OTAs because the airlines weren't charging booking fees and most of the OTAs, up until a month or so ago, were tacking on the extra $7 or $11 fees.

So, now, the playing field between the OTAs and airlines in metasearch tools like Kayak, Fly.com, Farecast and TripAdvisor, and elsewhere, is relatively even.

The airlines will still milk their advantages, prodding consumers to book on airline websites if travelers want access to various perks and ancillary services -- bag fees, premium seats -- and hopefully some more attractive products in the future.

But, when consumers shop for airline tickets, they will see that the $235 Delta.com fare is now also available on Orbitz.com or Cheaptickets.com for $235, as well.

As I wrote a few days ago, the Orbitz decision had been expected and will hurt Orbitz because the company is so reliant on air-booking fees for its profits. Unlike the three other OTAs, which are much further along in their hotel and vacation-package businesses, Orbitz, the child of major U.S. airlines, still is too heavily skewed toward selling airline tickets.

Kayak and other metasearch companies will be under pressure, too, because the OTAs will have about $300 million less available to spend on their advertising in the metasearch arena. The $300 million was one analyst's estimate of how much the OTAs took in annually in booking fees.

So, in sum, with booking fees gone, the OTAs gain some ground on airline sites, the metasearch companies will continue building their own hotel and related media businesses as revenue from flight metasearch becomes more challenged, and Orbitz itself, with its stock hanging by a thread at around $1.35 per share, is in a fight for its survival.

Last week, Brad Gerstner, a former NLG exec who founded Altimeter Capital Management, predicted that Expedia might swallow up Orbitz, or perhaps Orbitz would combine with Travelocity.

Indeed, metasearch is not dead. It will continue to evolve as it finds ways to enable OTAs and suppliers to differentiate themselves and to create some order out of the currently, very-disorderly consumer booking experience.

Airlines Bringing Behavioral Ads to In-Flight Entertainment Systems

I just found out, through the Shearwater Blog, that the latest bit of travel news in airlines' drive for ancillary revenue and behavioral advertising is that carriers will be delivering targetted ads to passengers through the airlines' in-flight entertainment systems.

If I hadn't just read up on it, I would have thought this was a "Saturday Night Live" parody.

But, Jetera Precision Media, a Danbury, Conn., company owned by Venture Capital and Consulting Group and with former Southwest Airlines CEO Jim Parker on the board, just put into production an ad delivery and targetting system that combines reservations data about travelers' intent with publicly available information about individual passengers to serve up ads tailored to that passenger on seat-back TV systems.

It is unclear at this point which specific companies are selling Jetera their reservations data.

But, here's how it works. In a FAQ on its website, Jetera explains: "The reservation information comes from any one of the multiple travel e-commerce sites, hotel and airline reservation systems. Then by partnering with some of the largest publicly available consumer data companies in the world we enrich that reservation data. The result is that we can then ultimately offer, for the first time, marketers and brands an unmatched level of relevancy, timeliness and action-ability."

It looks like the reservations data would be coming from "Airlines, Global distribution systems (GDS), Large Travel Companies, Hotels and Vacation Ownership Companies, Rental Car Firms, [and] Cruise Ships" because Jetera aims to partner with these travel suppliers and distributors in addition to marketers and advertising partners.

As I wrote yesterday and March 24 in the Dennis Schaal Blog, and recently in Travel Weekly, Expedia, Google, BlueKai, and others with travel industry ties are working hard to further commoditize travelers' reservation data to deliver targetted ads to you when you surf the Web and now, it turns out, some marketers will be going after you in your aisle or window seat, too.

It's all to the advantage of the traveler, goes the refrain. Marketers are telling travelers that advertisers are almost providing passengers with a public service when those ads for cellphones or credit cards bombard you during your travels.

And, oh, "Yes," Jetera explains, "passengers will be in complete control and have multiple opportunities to opt out should they choose to do so."

It sounds to me as if such behavioral advertising may become so omnipresent that efforts to opt out could become a full-time job.

The Kayak Style and Other Mumbo Jumbo

Sockless Steve Hafner, the Kayak co-founder and CEO, can be brash, insightful and a laugh riot. At the recent TravelCom conference in Atlanta, for instance, he said metasearch is a lousy business because of its thin margins, that Kayak's TravelPost hotel-review business had an even worse business proposition, and that gaining global traffic and scale is the whole ballgame.

"Any donkey can build a metasearch site," Hafner said.

One can debate the pros and cons of Hafner's style.

But, I am definitely a fan of the Kayak.com website's style.

Consider that its privacy policy and terms of use are listed under the heading, Mumbo Jumbo.

On a Kayak Blog post about the launch of a Kayak iPhone app, Kayak writes: "That’s the most important part of this post. We have an iPhone app, if you have an iPhone and you travel, you should download it. The rest of this article is the story of how we made the iPhone app. If you are not a software developer, the intense boredom rays emitted from the information herein is likely to melt your temporal lobe. You’ll wake up in two or three hours with a face full of keyboard and a keyboard full of drool."

And, what really inspired me to write my post about the Kayak style is the site's description of its team. Kayak is known for the filters it offers consumers, giving them the ability to select or deselect individual airlines, airports and layover durations etc.

And, the page depicting Team-Kayak.com also has its filters. Among other choices, you can filter in and out the Nerds and the Capitalists among the leadership team.

Looks like the team is bereft of Nerds because no team members showed up using that filter.

However, if you select Capitalist, then the pics and titles of Keith Melnick, executive vice president of business development, and Hafner are displayed.

Well, let's hope that Hafner and Melnick and chief of geekdom Paul English can build up those global volumes that they've been working on.

Otherwise, Hafner's Capitalist status would be in jeopardy.

Well, probably not, but ...

Anyway, the site's verbiage is irreverent and refreshing. In that regard, I like Kayak's style.

And, incidentally, for those companies just starting to delve into social media, I think it is this sort of style that is the most compelling in a bunch of situations.