21 February 2009

Google - The Fallen Hero

A great article article from WebProNews, but it still leaves the door open that Google really isn't a fallen hero:


For those of us in Travel this has long been the case. Google hasn't been a hero for a very long time. That sucking noise is Google's great cash vacuum cleaner, it empties pockets of big and small enterprises across the entire travel segment spectrum. As it reaches a crescendo, we all realize that now we are totally powerless to stop the inevitability of Google as the Travel Industry's most profitable company. Travel is a wonderful cash cow for Google - an its likely to be so for quite some time.

The iron fist doesn't even have the pretense of a velvet glove. Perhaps as Google matures it has come to resemble Jabba the Hut. Perhaps we should just call it that from now on - Gabba the Hut. It almost makes Microsoft look like the good guys.


OTAs Lose Hotel Tax Battle in Mouse's House

In a landmark ruling which is the clearest to date - the big online travel agencies - Expedia, Orbitz and Travelocity have lost a major battle in taxation war with Cities throughout the USA, in this case - the City of Anaheim, home to Disneyland and several other theme parks.

Up until now the courts have been divided in the issues with rulings on both sides. The Anaheim case was much clearer as the ordinance was better written.

At issue is the collection and retention of taxation due to the city for prepaid (net) hotel rooms.

There are two issues.

Issue 1 - the taxable amount collected on the gross rate by the OTAs has not been transmitted to the City of Anaheim. What was transmitted was the taxable amount based on the net. So despite the wonders of transparency on the web - the OTAs we retaining the difference.

Issue 2 - the taxes collected for rooms not taken have not been transmitted to the cities. While not an issue in this case this has been part of the legal battle between the taxation authorities and the OTAs.

In the Anaheim case after a two-week evidentiary hearing, the Hearing Officer found that the online travel companies were both "operators" and "managing agents" as defined by the city's ordinance, which is key in establishing their responsibility and liability. The ruling therefore means that the OTAs as a class have to fork over $21 million. Multiply this by the number of other municipalities and the money could be significant to all 3 companies.

This battle which has been simmering for years will see the OTA's having to find a way to handle taxes now in a clearer and more open way. This in turn will lead to enough transparency to figure out how much the profit per room booking they are making.

Isn't the law a wonderful thing...

20 February 2009

The Great Content Emperor's Clothes

I have followed the debate on Sabre's cancellation of one of its development contracts with interest. Many regular readers of this blog will note that I believe the GDSs are going through radical change no longer of their choosing and that they need to be realistic with their GDS cash cow business model.

First I will defend Sabre's right within the appropriate legal constraints to make its own decisions about who it does business with. However I do find it somewhat amusing that Sabre is laying claim to a position that is essentially at best untenable and probably not true. Namely that they are providing a complete aggregated content service.

But this behavior is not new. GDSs attempting to control the world. Consider in history when the GDSs used to provide everything - the access, the network and the content. Lets rewind the clock to circa 1987 when they did provide the entire system. Even then the GDS's access to content was inadequate. There was no access to many remote, regional and international airlines. They did a poor job in hotels. etc etc. They fought tooth and nail against companies like Lanyon who provided independent open PC access to the GDS systems.

Fast forward to today and the GDS no longer provides a network. They no longer provide the hardware for access and their share of content provision is even less. So the claim of complete aggregated content is somewhat hollow.

Further the the market has been de-regulated. Airlines are not forced to participate in the GDSs and GDSs are not forced to accept participation from airlines. In effect it should be a free market. Even in Europe as I have noted before their share of content aggregated or not has been steadily falling.

The GDS share of total traffic has been falling worldwide. As we have seen from recent statistics - ARC transactions are falling faster than airline passenger traffic. Expedia's traffic this week confirms transaction counts are falling faster than traffic counts. This bodes ill for GDSs who today almost exclusively power the agent based traffic.

But shhhhh don't tell the Courtiers in Dallas. If they want to carry on believing that the company is truly the Content Emperor then perhaps they need to examine the quality of the cloth. I think somebody sold someone an invisible suit.

So who is the child who is going to tell them the truth? Since the Professor is a little old - I cannot say for sure if that suit really has this great cloth. But I am sure that there are many others with younger (better) eyes than me who really can see what is going on.


No Time for Airtime Any Time Soon.

The saga of Airtime (who probably doesn't deserve my time) doesn't look like seeing them burning up flight time any time soon time.

Professor Paul in ZA reports that the fledgling time based airline who has also seriously pissed off established ZA LCC 1Time - failed to get its license application in for domestic or international travel. Consequently it will be enjoying some downtime for quite some time to come.


Expedia's near $3 Billion Q4 loss.


Expedia announced a massive writedown of its goodwill resulting in a net $2.76 billion loss. Expedia's revenue was down 6.7% for the last quarter of 2008, to $620.8 million. Gross sales were down 11%, to just over $4 billion.

This is about what we have been seeing for the last quarter from everyone. about a 10% drop in traffic. Expedia's traffic reductions come in the USA and indeed worldwide and display some worrying trends for the company. While the profitability/yield curve improved - it is clear that the business has lost momentum and will now trade at or below the transaction traffic in the market. While this does not mean that consumers are abandoning Expedia and OTA's in droves for conventional travel agents - it does mean that there is clearly a resetting of the world order. Online has stabilized its share of the market and has reached the point of maturity (let's not say saturation for now). For the online travel agency sector to grow its share of the global market - there needs to be something of greater value in its proposition to the consumer.

Surprisingly I see this as an opportunity for a sea change in the market. I believe that the GDS powered OTAs will start to lessen their dependency on sole/primary content sources such as a GDS. I believe we will see a rise in alternative content sources. I also foresee that airlines and suppliers will pursue a third way. With maturity in their own direct distribution and stagnation in both Corp (TMC) agency and OTA business - there is now a clear gap for alternative forms of distribution to take hold and establish themselves. The form of these alternative distribution channels is not yet clear. But in this downturn - the consumer will have a flight to value.

Can you say that about your distribution?


The Death of Conventional Media

I live in Seattle, one of the last 2 newspaper towns in America. For the astute the Times was more center right and the Post Intelligencer was to the left of the spectrum. Both however in a heavily blue part of the country. Death hangs over the PI as its owner - the media giant Hearst Corp tries to sell it. Now we are into the last 30 days - they will most likely cease the print edition. It gets lighter and lighter on my doorstep every morning.

I have watched venerable traditional media like even the Christian Science Monitor reduce fold or move online. Infoworld - my favorite tech rag has also disappeared in print form despite having editions that were over 144 pages.

Yesterday I read with a degree of sadness that the once proud vision of a global brand in our industry - Travel Weekly - has shuttered its Asian edition. No longer part of an integrated family it struggled and now too has succumbed to the inevitability of the death of conventional print media. My friend and the launch editor Siew Hoon wrote this lament on her Transit Cafe site.


From my perspective - I have enjoyed being a person who pushed the envelope and the world change that the web and associated technologies has brought. However there is always that small tinge of regret at the collateral damage. The sheer inevitability of the death of conventional media is a loss to us all. To me its a loss of trusted independent opinion. The loss of people whose integrity (most of the time) you could count on.

I hope that our children and the next generation of consumers find a way to develop a trusted source of information whose name does not begin with a G, a Y or an M. Perhaps a W will become something that means goodness. Lets all hope so.


18 February 2009

Sabre Pricing beats ALL other GDSs most of the time

....Well at least according to Sabre and Topaz consulting.

Here is the report from Sabre: http://www.sabretravelnetwork.com/images/uploads/collateral/2008_Global_Low_Fare_Search_Comparison.pdf

Having done many of these studies myself - I can verify that the methodology was sound. I find it interesting that Sabre claims the lowest fare title. Traditionally in the past they have not been the lowest fare engine when using different metrics. So most of the time I have tended to blow off their claim of the lowest fare king. However these numbers appear to be pretty significant and for once I can actually examine them and validate their efficacy - however I hasten to add that I have not had time to run such an audit.

Before you all trash me and say I am being partisan towards Sabre - far from it.

However there is always this element that you find in the use of the tool. The method of testing tended to investigate Sabre more frequently in a beneficial manner - IE there was no deep query of the other GDS failures. Still even if you take that into account Sabre still looks like they are the winners here.

Now - does this necessarily relate to real life?

Yes and no.

If you are using an automated XML application my team has found that consistently Worldspan serves up better fares via the Webservices/XML offerings. However we have not had time or resources to do this in 2009 on a comprehensive test because we usually only compare GDS A with GDS B. The last set of tests we ran were in Jan and Feb 2009 and were for UK and Germany (the largest 2 European markets) only. In our tests we found that Amadeus's applications got to the fare faster than anyone else's. So we give the edge to Amadeus.

In native screen applications using the services of the provided GDS screens (1A Selling Platform vs. 1S MySabre), we saw more failures in transactions in Sabre than in Amadeus. We also found that Sabre's tax calculations were often lower than Amadeus but we would definitely question some of the tax logic in Sabre. So we would be concerned about some airlines raising debit memos for inaccurate pricing. This is a caution we would raise for any long term use.

Remember that the Airlines attitude is Shoot First (ie issue ADM) then ask questions later.

All in all the boys and girls in Dallas deserve kudos. But I will remain cautious. This is a bit like the mileage rating in cars. Your driving may result in different answers. One thing is for sure - the GDS pricing systems are not infallible. A good agent can always manipulate the system but most are too busy to get that lowest fare. And besides who buys retail anyway...


17 February 2009

David's Ghost Walks No More - JetBlue Chooses Sabre

David Neeleman is happily spending a new round of investor's money in Brazil - but meanwhile back at the ranch, jetBlue has decided enough is enough and has defected to Sabre for its core PSS. This marks the second major loss for Navitaire in less than a month with WestJet deciding to bail out of Navitaire's New Skies also.

With Ryanair's well publicized difficult implementation last year and prior public embarrassments for its customers (such as AirTran's awful cutover), you have to think that Navitaire's product line is just not quite right for the bigger businesses. While simpler carrier's such as Volaris and others who start with a simple model - the problems related to a more complex carrier overtime makes the value of the NewSkies/OpenSkies product lines somewhat less attractive.

So this leaves even the somewhat creaking older system of SabreSonic as the lesser of two evils. With Amadeus ALTEA/CITP chronically late, no news on the ITA Polaris System, and all quiet at Travelport - you have to wonder who does have a decent PSS product these days.

For many airlines suffering from the commercial market and the difficulties of using the traditional legacy PSSs to address ancillary revenues - the time of the holistic single one size fits everything model continues to fade. Perhaps we should look at the example of Frontier as the newer model for PSS/Airline internal functionality


16 February 2009

AirTime Mark 3 - DIY.

Dont you just love stories where someone tries to go around the system and then gets hammered for doing it.

So it would seem is Airtime in South Africa. Thanks to Professor Paul for keeping my up to date on this one.

The latest is that after trying to go around by operating on someone else's certificate - now Airtime will apply in its own right. So look for no activity for about 6 months while they try to do this.

Oh yes and at the same time they are being sued by existing ZA LCC - 1Time for copyright infringement.

Gotta love this.

Savage Cuts at SQ - 17 a/c "Decommissioned"

SQ is swinging the ax on its routes. Cutting hard and deep into its route structure. Some routes will be combined. Some stations will see less than daily services. Some routes will lose multiple daily flights including such stalwarts as SIN-LHR. Some markets will actually be suspended such as Vancouver.

Axing 17 aircraft and parking them is a big issue even for and airline the size of SQ. Gone will be mostly 747-400s which are currently flooding the market.

SQ is saying that total capacity cut will be about 11%. They are reporting that freight is off 20%. Ouch.


15 February 2009

For a View on the Travel Economy - Tune in on Thursday

Expedia will be reporting its Quarterly numbers on Thursday. The analysts will be eagerly picking apart the tealeaves from Bellevue looking for signs.

We know they will be bad so here is an indication guide you can look for.

If December's numbers are off more than 15% then that is bad. If the Quarterly transaction numbers are off more that 10% then that is bad.

The revenue numbers should be reasonable given the uptick in ad spend, but the traffic numbers will be key