You WILL Like New Twitter Promoted Tweets

YES my Liege... I will

Even if I dont want to I will have to put up with them.

Just another example of what was a free service coming with catches.

I wonder if there can be anything that could be done to prevent that?

Is Airbnb suffering the legal challenges of a Zombie Mutant in both Travel and Apartment Rentals?

***Caveat*** I am not a lawyer and cannot provide formal legal interpretation of the law for the purpose of this article.***

Like many of us, I have been following the Airbnb story for some time. The recent high profile cases of renters abusing the apartments of those offering them via Airbnb have caused me to think long and hard about Airbnb’s model. The idea of a referral service is really quite attractive and a way to reduce the cost of hotel stays especially in expensive cities like New York and London.

From personal experience, I can comment directly. I have used Craigslist to find apartments in New York as well as many non-traditional hotel type accommodation services in London, and I used HomeAway to book my summer holiday in Greece last year. When I first heard about Airbnb, it sounded like an attractive proposition and even though I am a long time travel industry participant, I applauded its take on the market as an alternative accommodation provider.

However, I have been concerned that these companies should compete legally and fairly with others in the market. In the case of HomeAway, I was able to arrange a good contract and standard terms and know that the service was reliable, ALL as a direct result of the checking and care I was able to exert myself. In the case of the Craigslist in New York City – all I can say is that September during Fashion Week is not a good time to be renting a cheap hotel room, so I took what I could get and it turned out OK… just. And yes I did feel I was doing something that was breaking the odd regulation or two but economics trumped those qualms. In London I have dealt with brokers and direct property owners who are legally authorized to allow short-term rentals. This usually saves me a lot of money and I get a larger room.

I have tried to use Airbnb several times and found a wide mixture of agents as well as direct owners and individuals subletting among the offers; so far I have not been able to find a suitable rental that worked for me. The reasons are the usual level of not quite a good fit. However I was only prepared to bend the rules if the offer was economically compelling. I was surprised how many of the offers were not in my view that attractive in terms of cost saving. So I could get a better offer from a reputable brand rather than someone in whom I have no way to validate other than their “online reputation.” At best that is risky.

From a professional viewpoint, I would like to openly evaluate the legality of these types of services by reviewing the service premise and the possible issues arising from that premise. For the sake of brevity, I am going to distill this down to five factors:

1. What type of entities are Airbnb and their competitors? Is Airbnb a legally authorized body to perform the services it is offering, and does it need to register in every jurisdiction it serves?

2. Is Airbnb governed by any housing/accommodation service laws?

3. Is Airbnb providing or required to provide consumer protection, and if so what is appropriate?

4. Is Airbnb required to collect taxes?

5. Is Airbnb encouraging classes of people to break laws and/or their housing contracts?


1. What is Airbnb?

As far as I can tell Airbnb describes itself as a directory or listing service. As such it felt that it could provide a significant value with little downside to a business model that aggregates demand and supply in one place. Here is how Airbnb thinks of themselves. http://www.airbnb.com/home/about (scroll down through the section)

Travel in general remains one of the more regulated business sectors, particularly in air transportation as very strict rules apply to domestic and international travel. Accommodation services tend to be federally unregulated because there is so much local law that applies to hotels, apartments and other types of accommodations. However the commercial law around renting accommodation – short or long is very extensive.

In any travel transaction there can be a number of potential entities involved, including agent/broker, seller, product owner, etc. Travel is interesting as it is a market place – one might say several different marketplaces – dealing in electronic units of inventory. One of the characteristics of travel is that it is rare that people take inventory risk – travelers are confident the airline seat or hotel room will be available when they show up at the gate or at check-in due to regulations applying to the sale of such inventory. If it not there is time honoured solutions to the issue such as compensation.

I would question if a company such as Airbnb (and I name them only because they are the one we see most clearly) is actually a marketplace. Or is Airbnb a seller, or something else such as an agent or a broker? I am not legally qualified to add to the definition with absolute surety. However it seems that by collecting money, such an entity is not in the same league as Craigslist, nor would it resemble eBay. Companies can call themselves anything they want but just because one says something does not make it so.

Whatever one cares to call the party to a transaction, once you have a commercial relationship then corresponding commercial (and in some cases criminal) law applies. I believe this is at the heart of several of these so-called P2P business concepts. I may be a bit repetitive here but because you try to classify yourself one way – that is not relevant ; the laws have different ways of interpreting it. (No prizes for guessing which one is the one likely to win). If you make money then you are a commercial enterprise; as such you are the seller, the buyer, or a broker/agent. It would be hard to expect an entity such as Airbnb to avoid being classified as one of these.

In travel there are a number of laws that could apply. One is that you are a seller of travel according to this definition:

(a) "Seller of travel" means a person who sells, provides, furnishes, contracts for, arranges, or advertises that he or she can or may arrange, or has arranged, wholesale or retail, either of the following what?:

California law uses this definition (http://ag.ca.gov/travel/pdf/statutes_2007.pdf) but stops short because it defines travel as something that does not actually include the accommodation services. However there is a grey area because when they come to define “Travel Services” – then almost any service is covered by the law:


§ 17550.9. Travel services

"Travel services" includes, but is not limited to, lodging, surface transportation, transfers, tours, meals, guides, baggage transfer, sightseeing, recreational activities, vehicle rental, or other travel-related services, however denominated, including, but not limited to, travel certificates, registration fees, and processing fees. "Travel services" does not include travel services rendered by providers of lodging such as a hotel, motel, or similar lodging establishment where the provider of lodging supplies only that service.


However the State of California is so far not inclined to regard what Airbnb, HomeAway et al do as being part of the class of “Travel Services.”

There are several other states that have Seller in Travel laws, including Florida (http://www.800helpfla.com/pdfs/StatuteTravel.pdf) where one key section reads:

"Offer for sale" means direct or indirect representation, claim, or statement or making an offer or undertaking, by any means or method, to arrange for, provide, or acquire travel reservations or accommodations, tickets for domestic or foreign travel by air, rail, ship, or other medium of transportation, or hotel and motel accommodations or sightseeing tours by a seller of travel who maintains a business location in Florida or who offers to sell to persons in Florida.

Thus far the State of Florida has thus far elected not to challenge HomeAway and Airbnb. I believe that other states – such as Iowa will pursue the issue. Indeed the latter has now come out and said they will demand such adherence. This may make California and Florida re-evaluate their position. Other states such as Massachusetts will also be looking at this carefully.


2. Is Airbnb governed by Travel Legislation and/or Housing Laws?

If you provide an accommodation service then you are typically covered by many layers of laws. Basically the laws cover the areas of:

• Protection of Renters – mostly to prevent abuse by Landlords

• Protection of Landlords property

• Ensuring that properties are used for the correct purpose – i.e., for residency, not for money making enterprises

I would refer you to www.housing.org as a great resource for information. In my view Airbnb has specific issues as a provider of accommodation services even as a referral service. Probably the most complex market for this is New York City who has tuned its laws to ensure best fit in finding and collecting tax revenues. The reason is that NYC passed a law that governs the short-term rental market. In essence the law was specifically written to target HomeAway, Airbnb and Craigslist - http://open.nysenate.gov/legislation/bill/A10008-2009.

The battle raged long and hard. Supporters of the bill argued that there were issues of safety, citing fire codes and housing maintenance regulations and of course the collection of taxes. In essence the supporters wanted to bring these rentals into the same realm as hotels.

Opponents of the law argued it was an infringement of homeowners' rights and accused supporters of caving to pressure from the hotel industry who saw the lower rates on Craigslist and Airbnb as a threat. Even if that had been won – there would still be the issue of subletting. Read more: http://news.cnet.com/8301-13577_3-20009095-36.html#ixzz1TuobA7EF.

In many states and cities, there are standard rental/lease agreements to simplify the process of consumer protection in housing. These agreements have some pretty standard terminology that has been honed over many years. For example New York City enacts a standard form and most other commercial renters follow suit often more stringently - http://www.housingnyc.com/html/resources/faq/leases.html#purpose. This enables who class of landlords and the population of that city as a whole to have a common framework of legislation.

More traditional suppliers- would prefer to deal in service level agreements.
Expedia and others who have been long time sellers in Travel all have recognized processes and registrations. American Express as a financial seller has many extra issues it has to cover. So here are their disclaimers
https://www212.americanexpress.com/dsmlive/dsm/int/importanttravelnoticestermsandconditions.do?vgnextoid=01e35fc56445c210VgnVCM100000defaad94RCRD

In particular for the online agencies Expedia who does a good job in this area check out their terms and conditions:
http://www.expedia.com/daily/service/legal.asp in particular look at the New York City requirements: http://media.expedia.com/media/content/expus/graphics/other/travelscape_nys_certificate_of_authority.pdf this shows their right and ability to collect sales taxes under Local Law 43. A service such as Airbnb should likely register and have the same documentation available for consumers.

For renting apartments etc – there are a large amount of compliance issues that need to be covered. Check out City Rentals Terms and Conditions. http://www.cityrealty.com/how_cityrealty_works/terms_of_use.cr Compare this with how Airbnb covers the same territory. In my view therefore Airbnb falls under both travel (hotel type) and housing laws.



3. Does Airbnb have to provide consumer protection?

Comparing Airbnb to either Craigslist or to eBay is interesting because both go out of their way to address this issue.

When you have a full marketplace such as eBay care is needed to ensure that people transacting in your market are not hurting each other. EBay has a degree of caveat emptor as it has a clear set of rules of behavior and a guarantee - http://pages.ebay.in/aboutebay/eBay_Guarantee.html. Note eBay makes money from listings and from a cut of the financial transaction.

In a “free” space such as Craigslist, you can do certain things as the marketplace (as with eBay) or as a referral – it clearly understands it can be interpreted as either. Craigslist went through a degree of trauma because it found itself the unwitting participant in a battle between those who had to comply with a set of laws on accommodation services (ranging from hotels to apartment complexes) and those who did not for example private individuals. As a result, Craigslist has a great resource it developed with Project Sentinel Fair Housing - http://www.craigslist.org/about/state_fair_housing_laws. Remember that Craigslist does not collect money from private individuals only from brokers and agents, plus of course advertisers.

The issues of consumer protection are very long. They range from protecting against open scams to insurance for loss. Providing a guarantee creates a cost for the provider, and the provider must also prove compliance of that guarantee, creating another cost. EBay’s guarantee took a long time to settle in and even now the dispute resolution service is not easy.

The recent and very public cases of Airbnb arrangements going awry forced the company into a very public apology and climb down. Only after intense media and blogger attention did the company finally act. This is all voluntary because the company maintains it broke no laws despite a very public display of sackcloth and ashes by its CEO. However if the case can be made that the company has been offering accommodation services when they are in a regulated jurisdiction, then the company will have to address the consequences of that. So far no local jurisdiction has taken them through any legal process as far as we can tell. The attention I am sure will cause both conventional competitors and the regulators to sit up and take notice.


4. Is Airbnb required to collect taxes?

Airbnb collects money. As such it is running a commercial service. There has been a long running dispute between the Online Travel Agents - OTAs and the local hotel tax authorities over taxes paid and collected. After more than five years some jurisdictions have become smarter and closed previous loopholes governing what determines that tax. In New York City, the latest and most comprehensive change became known as Local Law 43. This applies to Airbnb in my opinion (and others) because of a decision the City recently made in how it classifies accommodation.

In July 2009, the city decided to change the definition of room “rent” to include “any service and/or booking fees that are a condition of occupancy.” The new law requires a “room remarketer” to collect and remit to the hotel the portion of tax based on the net or negotiated wholesale rent; the hotel operator will remit the tax to the city. In addition, the remarketer must collect taxes on the difference between the wholesale rent and the amount it charges for the room—the portion it calls its “fee”—and to remit that tax to the city taxing authorities directly.

That sounds like Airbnb would fall into the category of remarketer. Note that taxes collected are to be stated separately on the bill for the room. For hotel and motel owners the law is explained here: http://www.tax.ny.gov/pdf/publications/sales/pub848_308.pdf. However the interpretation of the law will continue to evolve because of ongoing disputes between users of the service and any entity that is classified as “arrangers” and “remarketers”.

Note that the State Supreme Court in New York upheld the law in 2010 - http://www.tnooz.com/tag/new-york-city-tax-law/.


5. Is Airbnb encouraging classes of people to break laws and or their housing contracts?

This is again a tricky area. Americans lawyers love class action suits, and there could be a basis for one here. The argument could be made that there are specific clauses in most renters’ contracts that prevent two activities:

A. Subletting, even for a short period of time

B. Conducting commercial operations from a place designated as a residency

Referring back to the City of New York standard renter’s agreement, the definition is clear - http://www.nyc.gov/html/nycha/downloads/pdf1/rc_lease.pdf:

The Leased Premises shall be the Tenant’s only residence and shall be used solely as a residence for the Tenant and the members of the Tenant’s household (i.e., those named in the signed application, born or adopted into the household, or authorized by the Landlord) who remain in continuous occupancy since the inception of the tenancy, since birth, or since authorization of the Landlord. The Tenant and the members of the Tenant’s household shall have the right to exclusive use and occupancy of the Leased Premises

One could make the case that Airbnb does not vet for nor does it seem to care that anyone with this clause in their rental agreement is breaking a contract. As such a class of property owners (as a class) who have rental accommodation could clearly argue that Airbnb is promoting renters (another class) to break their contracts on these two points. Such a situation is often grist for the mill of a happy set of lawyers.


Conclusion?

I believe that Airbnb and services like theirs have a responsibility to address these issues. Fundamentally they ensure the following four principles are in place:

1. Consumer and vendor protections are available
2. Marketplace protections make it fair
3. Taxes are collected
4. Laws and guidelines – where and when applicable – are clearly followed

Today I believe that Airbnb and its ilk are failing these standards on one or more of this number of points. I welcome any comment from anyone competitor, regulator or consumer. I would also encourage local authorities to examine the situation to ensure that compliance is indeed in place to protect the consumer.

There are many organizations who have fallen foul of these types of laws. P2P businesses are still just that. Businesses. Would it be fair (even if legal) to allow such a player advantage in a market place where others are complying with both letter and spirit of the legal jurisdictions?

As we all know – ignorance is no excuse under the law. Especially when you just had $112 million handed to you.


Cheers

Image from the movie Pandorium.

"How I Screwed Up A Great Brand" Starring Netflix

Netflix has really pissed off the people in my neighbourhood. Almost universally - with a little prodding and evangelizing from some of them - almost all of the people have the standard account. Unlimited streaming and one DVD at a time.

Then they go ahead and split the service announcing that they will let you do the same but in 2 separate programs and it will cost you 60% more at least.

Here is the email they sent out:

Dear Professor Sabena,

We are separating unlimited DVDs by mail and unlimited streaming into two separate plans to better reflect the costs of each. Now our members have a choice: a streaming only plan, a DVD only plan, or both.

Your current $9.99 a month membership for unlimited streaming and unlimited DVDs will be split into 2 distinct plans:

Plan 1: Unlimited Streaming (no DVDs) for $7.99 a month
Plan 2: Unlimited DVDs, 1 out at-a-time (no streaming) for $7.99 a month

Your price for getting both of these plans will be $15.98 a month ($7.99 + $7.99). You don't need to do anything to continue your memberships for both unlimited streaming and unlimited DVDs.

These prices will start for charges on or after September 1, 2011.

You can easily change or cancel your unlimited streaming plan, unlimited DVD plan, or both, by going to the Plan Change page in Your Account.

We realize you have many choices for home entertainment, and we thank you for your business. As always, if you have questions, please feel free to call us at 1-888-357-1516.

–The Netflix Team

WTF???

Well let me show you what I think of Netflix now....

Oops this is a family website I can't do that. But let me show you what it did to Netflix's brand.

Image courtesy of BrandIndex.com

Will I be using Netflix quite as much as before... no.

Redbox is laughing all the way to the bank. Blockbuster deserves to be shot as they were really stupid in how they responded. Special pricing to bring me - a lesser service than Netflix at the same price.

Are these people drinking from the same water fountain. Back to school chaps.

Cheers

Are Tablets A Guy Thing?

I am a bit of a geek. It drives my family nuts when they see if I have the latest gadget. Latterly I have tried to moderate the number of devices I have. Consuming precious electricity and scarce resources - especially rare earths. But I still like them. The one I am having a lot of travel with is the iPad. Yes I have one. Its pretty cool. However I have tried to get used to it by playing games and reading books on it. Not that great an experience but these are early days. Finding the right apps that will be appropriate for me - is an interesting process. So far I use about 10 apps on a fairly regular basis. Some of the same that I use on a regular basis on my laptop.

In my view this is very much a 1.0 product. It has great potential but that doesn't make it ideal yet. Even as a "third" device that I believe it will become. (Laptop being one, mobile being two.

I struggle with the notion of having to be always on. Having used a 3G connection exclusively for the past 3 weeks - I cant wait to get back to full time broadband all I can eat - but that will have to wait for another 2 weeks.

A study by Gfk MRI makes for interesting reading. There is a definite gender bias towards the devices. Moreover the usage of these devices paints a picture I would not have expected. IE that the Tablet and eReader community are heavy written word consumers. While it is natural to assume that people read alot via these devices I am surprised at the amount of conventional book, magazine and newsprint they consume. Check out the press release on the study.

Forrester and Bizrate also have some interesting insights into the usage of these devices.

Here is where you should be able to see a presentation. It was down the last time I checked but hopefully it will be back up on Monday,

Cheers

An Airline Seat - A Commodity No Longer

If you will indulge me - I am going to take a little time out to share with you one of my pet thoughts at the moment. As the Professor is formally on holiday - I have had an opportunity to think about the meaning of life. And I have been trying to get my head around the forces at work with regard to the battle for airline distribution.

An airline seat has been considered a commodity for a very long period of time. Brand differentiation has been considered as a loyalty issue. But today there is a very different perspective emerging. The airlines across the world led by the Low Cost Airlines have found that they can differentiate their product and that they can not only discriminate by price (the current exclusive currency) but by product feature.

As regular readers of the Professor's Wisdom know that I am not a fan of airline behaviour to their customers, as a frequent flyer - I am subjected to a litany of abuses at the hands of the airlines. Airline customer service is an oxymoron. But I need to use them and therefore have learned to accommodate some of their quirks.

However I am an ardent capitalist. I believe in freedom of markets along the lines of Milton Friedman. I believe that the owner of a product has the right to do what he wants with it. And if he is stupid with it - then so be it. As long as consumer rights are not trampled on - then the market should be free and open. (of course there has to be some societal constraints particularly for the environment and paying taxes).

Somehow in the past 10 years since 9/11 the airlines got smart. I think someone put something in the wine at Airline conferences to change the way airline execs approach the market. We have moved from the "capacity at all costs" approach to a more true market based supply and demand control model. The web of course has a lot to do with this. The creation of pricing transparency by the OTAs, Search players et al has changed consumer behaviour.

It is time to acknowledge that the world has moved on. There is no god given right to constrain a market and ALL contracts and practices that do so must be declared null and void. Preferred relationships can be allowed providing consumer rights are not trampled on. There still has to be balanced but innovation does not do well when trampled on by oligopolies or monopolies. (Think Google is a free and fair player - of course they are not). There are a large number of arrangements in various parts of the product lifecycle of an airline seat that constrain consumer choice and market freedoms. Airlines being allowed to create JVs – mergers in all but name being one. GDS contracts being another.

We need to acknowledge that the airline product is not a commodity but that it is also a utility. So it has certain responsibilities. Acknowledging the game of obfuscation by the airlines should not be something that is spoken of in hushed whispers!

What I think is going to be interesting is that there is a new issue on the table which needs to be addressed. This is the definition of who has the definitive "right price" for a particular seat on a specific flight. Under the present systems in place - the airlines have long delegated the pricing capability to the GDSs via ATPCo. That means that they are not in control of their own destiny. The obvious answer is to define a single (or controlled few) sources for approved pricing. Some airlines already do that. The LCCs for example have true dynamic pricing so you dont know what the pricing is until you have told the airline what you want. Bespoke pricing is not a new concept but it has always been hard to implement. The new technology developed for web engines however makes that quite normal and an easy low clost for the supply owner to manage. There are a lot of smart pricing engines out there in very complex products. Why not in airline seats?

So while the government's try to regulate ancillary services, in my view they are going about it in the wrong way. I think they should make the airlines publish a price list and then allow the airlines the freedom to define where the definitive pricing is stored and how to access it. It would make the process of regulation easier and by opening it up to all comers it would make the consumer be able to go to a definitive source(s) for information. The current system of different systems of proprietary logic and control is just outdated and needs to be blown away. A very good outcome is that the consumer would know where to go for a trusted and correct price – the definitive lowest fare. The current system creates confusion and also prevents Trust by the consumer.

Ultimately I believe that there should not be any mystery in it, we should think of other Utility markets and manage them appropriately and accordingly. Let all airlines compete freely. Let all consumers access the information fairly. Then let the intermediaries figure out how they can make money from offering services to the supply and the demand sides.

Yes - I am advocating a change in the system. I am so motivated by this that I am backing several ventures that advocate this position. In my view it is now time to just acknowledge that market freedoms are critical and that now is the time to do a good job in fixing the current screwed up marketplace that we have now. Today we have a closed system that has resulted in poor pricing transparency, an effective hidden tax to the consumer with innovation trampled on. All in the name of protecting the status quo. Well that needs to change. And clearly evolution is not appropriate. With both the EC in the form or regulation and the US in the form of the DoJ investigation are now looking at the situation.

So they should. But this time as consumers we should be getting a better deal. As capitalists we should let the most efficient way win.

Agents Tell Cooks & TUI To Hold Nerve - Are They Mad?

Agents in the UK on the back of a profits warning from one of the big two UK Travel players - Thomas Cook are encouraging the company and its bigger rival TUI to hold the line on pricing and not to discount so reports TTG.

As usual in a situation like this - the knives and the pundits come out. Blame is being splashed around. But the fundamental reason for the problem is too much capacity and too high prices.

Well welcome to the world of the open market. Cooks and the market got it wrong. The expectation is that magically that by Cooks holding the line on pricing the market will respond positively and then the problems will go away. Well that is a load of horse manure.



The clear problem is that there is excess capacity in the UK market and that is not going to get better for a while. The decline in traffic across all sectors as well as a flight away from the traditional bucket and spade brigade - is hurting the traditional VTOs. This is not a new phenomenon. It has been ongoing for some time. The decline away from the traditional package holiday is begining to plateau but with so few people taking this type of holiday - its no longer as relevant. The peak was 18 million pax in the early 1990s - now that comparative number is down to about 3 million. While the unbundled model points to a larger use of the resources inside one of the big two - the total pax is now much smaller. In my view the big two didn't move fast enough to migrate to the more consumer appropriate model a la carte services. Low Cost Carriers managed to eat away at everyone's market share. The days of infinite growth are over. Ryanair has actually been judicious and has pulled back capacity form STN. For whatever reason - this has benefited their bottom line. The big two could have thought that this would mean they could recapture customers.

Nope

So now there should be significant discounting or the inventory will just go to waste. There is a big need to stimulate the UK market and the only logical way to do that is by price. That means in my view slashing prices.

HRG's David Radcliffe Weighs In On GDS vs Airlines

In a recent article in ABTN - Air and Business Travel News, HRG's David Radcliffe was interviewed on a number of topics.

He had some choice things to say on a wide variety of topics. On the issue of Distribution he was quite sanguine. The specifics were the questions posed by the newsletter on the topic of the dispute between the airlines and the GDSs. He was empathetic to both sides. He did not think the agency community should be worried but rather aware and tuned into the debate. He took the long view - also shared by the Professor that there was something quite natural in the debate. He was clear that there was something wrong that needed to be addressed. Walking the fine line between the two warring parties he focused on the principle of the debate.

".....and you just look at the principal of what the airlines are trying to do... They’re not trying to do anything different to any other manufacturer or service industry, or anyone that supplies a product. What they’re trying to do is distribute that product in the way that they want to distribute it." He further expanded the comment "but ultimately if you look at what they’re trying to do it’s quite simple. They want the ability to distribute their products and not be commoditised by a single distribution point. I have sympathy with that."

This makes the debate more rational. And kudos to Mr Radcliffe for taking this position. If we go back a little in time - we have had other heads of TMC based agencies be less than forthright about some of these issues. Amex for example was famous for stating that they felt the low cost carriers were actually disrupting the smooth flow of the Agency's operations and that therefore the company would discourage its customer's from booking them.

At the moment we have the big 4 Global TMCs taking tentative steps on the subject. CWT has come out clearly against it and imposed what amounts to a financial penalty to anyone booking AA via the direct connect. Thus they are trying to preserve their model of conformity gets rewarded and exceptions get punished. In my view they have not been paying attention to what is going on elsewhere in other product categories in distribution.

Returning to Mr Radcliffe (no relation to the actor who plays Harry Potter), he reminded us all how we got to this point. Describing the growth, "Historically, the airlines were part of building up the GDSs, they even used to own them at one time. Some of them still do. So they built this monster, which they now want to change."

For the TMCs there has been a rational approach to the market of how they hook into the supply chain. They have developed a profitable model by working on cost plus and then removing from the equation the benefit packages of incentives from the supply side.

Early TMC contracts were built on a cost plus model and most of this continues to this day. TMCs are incentivized by their corporate customers to save them money, PROVIDED that they agency never loses sight of its role as a full service provider. To do this transparency exists largely in the dealings between the agency and its clients. All financial benefits from the supply side are passed to the corporation who in turn is charged transaction fees by the agency. Thus a corporate customer can see the goings on by the agency. But there are a large number of variations in arrangements. Some agents have held back the GDS benefits and kept them. Some GDSs have decided to contract directly with the company for GDS services. While this is a normal behaviour it can cause conflict and make the agency more vulnerable to shifting opinions by the corporation.

In a top of the hat to the GDSs he didn't want the GDS to think that they would leave the stage empty handed. The ubiquity model of today's one size fits everything of the legacy GDS is attractive to HRG. As MD he could clearly state "I also have sympathy with the GDSs’ point of view, from the simple philosophy that they are probably still the most efficient distribution method that there is."



But HRG was very aggressive in working with their technology platform. While some of their competitors have been focused on tuning the model, HRG has invested heavily in an open design to ensure that they can accommodate both the Low Cost Carrier Model (in Europe where approx 20% of all lift is on non-network airlines) and the independent supply chain products and services such as direct connect. He describes the capability that has been developed in Aldershot as follows: "to make sure as a company that we are capable of adding our value in the new distribution chain. I’ve been quite open to anyone who has asked me that we adopted a philosophy many years ago where we held on and developed our own technology. We do have the capability of direct connecting if that is the best path." Bill Brindle is the point man for this delivery at HRG. His heritage is GDS but he has focused on building a neutral and independent platform.

As Brindle's boss, Radcliffe wanted the readership of ABTN (who are largely UK and corporate travel management people) to understand what HRG's capabilities and vision are: ".... Our role is to keep the client informed of what the best options are moving through this and to make sure as a company that we are capable of adding our value in the new distribution chain. I’ve been quite open to anyone who has asked me that we adopted a philosophy many years ago where we held on and developed our own technology. We do have the capability of direct connecting if that is the best path."

That was a nice job of fence sitting and maintaining independence, which in his position is a very prgamatic point of view. In the Innovation in Distribution conference in March of 2011, HRG confirmed the capability: "We already have five or six direct connects today, but these are not mainline carriers," confirmed Bill Brindle speaking at the conference.

HRG is not waiting for someone to declare a winner - they are ready now for the changing nature of the supply chain system in Travel. Perhaps some of their competitors need to adopt a more open approach that mirrors this capability - or risk being left in the dust. The bigger tech players who come from the OTA world clearly have the technology to directly connect. Whether they choose to embrace it as Expedia has or actively work against it as Orbitz and 48% owner Travelport have comes down to a punt on the future. For American Express who has quietly mothballed its long time project of Travelbahn and others who are players in this space follow the open platform path or the closed traditional dependence on the legacy GDS will likely define their future success.

Corporate customers don't necessarily see the issue as being as essential as the agency community does. They know ultimately they will be picking up the tab. Their focus is on serving the traveller. For most corporations - the debate of limited ubiquity of the one-size fits everything GDS vs the pragmatism of offering a comprehensive and open supply chain to service the customer is interesting academically. While the finance departments may be concerned with operating efficiencies the fundamental role of a full service operation trumps any operational cost savings that might accrue from just using a GDS as the sole source.

Perhaps the most telling of the situation was Radcliffe's comment of how he views the war between the legacy GDSs and the airlines. "...But, clearly, something is broken between the two of them."

Images from FT.com and TTU.

Thoughts On the News Of The World

Truly they say the sins of the fathers are visited on their children ... so it is that Murdoch the younger one James (well at least the current fave) had to take the fall for the goings on at the News of the World.

For those of you who have never read the News of the World - the largest selling English language news paper - you have been missing a treat.

Here is just a brief sample from the website today:

http://www.newsoftheworld.co.uk/notw/exclusive/e_news/1340855/Prince-Harrys-better-than-Jenson-in-bed-says-new-girlfriend-Florence.html

I leave the link in the clear so you can appreciate the artistry of the headline and URL writing.

This is British Tabloid journalism at its finest. However sadly this is to end on Sunday July 10th 2011 when the last edition will appear. Thus ending 168 years of sensational and truth bending yellow journalism.

The organ known variously as:

NOW
News of the Screws
The Church Times

and other less than subtle or kind words. Old man Rupert Murdoch has leveraged his ownership and profit into a number of UK based businesses over the years. Now his sons are running the business and possibly his daughter too.

Closing the News of the World is a bad decision in my view. The management and News International's supervision of the paper and its staff are the problem. The Newspaper with all its sleeze and junk is only the product of people.

Who did what and how that was approved was plain bad and wrong and the people responsible should be punished. Shuttering the venerable newspaper as a result is a waste. At the very least the organization should have put the paper up for sale.

Are there some lessons here?

yes - brand value no matter how deep can be lost easily and quickly. This is probably an example of come-uppance for the paper that has raked mud over any celebrity from A listers to D Listers.


Cheers

Herb Still At It

Southwest's Herb Kelleher is still out there giving advice and chain smoking.

In an AP piece published in the Seattle Times amongst other newspapers, he gives his view on a lot of things.

The article has one of his best expressions - one I love.

"It was a contrarian decision - it followed my old adage that if it's common it's not wisdom, and if it's wisdom it's not common." Let's hope that someone gets this message.

One nice quote was the following one:

Q. Consolidation makes sense for the industry. What about consumers? Should they be worried about consolidation?

A. There's been a tremendous amount of consolidation that's gone on in the airline industry since I started out. There are far fewer carriers in terms of carriers that failed and carriers that were acquired. There's no more Pan Am, there's no more Eastern, there's no more Braniff, there's no more Western. Every time that that has happened, people have voiced concerns about diminishing competition adversely affecting fare levels, and it's never happened because the airline industry is still enormously competitive compared to other industries. When your principal capital asset can be moved 1,500 miles in three hours, strike anywhere within that length of time, you have an industry that's enormously competitive.

I do worry about competition in the space. I worry that consolidation brings overt market control by the supply side. But he doesnt... time will tell.

Cheers

Is WAYN For Real?

I am sure that Kim is very nice but I have no idea who she is and why she has anything to do with my travel.

Well WAYN seems to have a secret sauce that thinks that I as a dirty old man will like Kim. And that she (personally) has been dying to know what I think of her. As I while my time away with my head in books as opposed to living on Facebook or gawking at girls on the WAYN site, I hate to disappoint both Kim and WAYN but I am not interested.

So with all due respect to Kim and many other girls that WAYN has been sending my way for some nefarious reasons I will decline.

One day perhaps they will just stop doing it. But in the mean time - it is clear that WAYN like Florida Orange Juice - isn't just for breakfast or any other time of day for that matter.

Cheers

Travelport Ends Air Malta Agreement

In a galaxy far far away....

In a former life - I worked for Worldspan. In that job - one of the things we did was to break conventional models for airlines and distribution.

My team built a solution which let an airline have the benefit of a GDS connection in their market without having an onerous GDS contracting scheme to go with it. This solution was delivered outside of all conventional wisdom at effectively zero cost to the airline and no incremental cost to the agency community. Over the years it returned a nice revenue to Worldspan and then Travelport after it.

While this was not the first time that a dual mode terminal had been delivered in a market - it was the first time and as far as I can tell the only version that enabled a cut over of seamless nature in a market at really no cost.

Today's market costs by the GDSs are very different from the agreement that lasted more than 18 years in Malta. Travelport and Air Malta have announced the end of the agreement.

So hats off to all the team who worked on this project, to the airline's management who understood the value and to an era that has long gone replaced by a higher cost structure that ultimately adds cost to the passenger's ticket.

Cheers

Why I am Tired Of Working For Google...

One of my pet peeves about the development of product today is that as a user I am expected to do things over and above and beyond being - er - well - a USER!

And really I am SO TIRED of having to tell Google what is crappy about their system.

And here we have it again. Another Lite product from the Googleplex. You would think after so many failed efforts in the Social Space to replicate or combat (or both) Facebook that they would put out something that was more fully featured and well frankly not as lame as Google+.

AS we saw Google's first efforts in air - the schedule tool - is pretty darn lame to start with. And we should no longer be surpirsed. What we are seeing is that Google's output is increasingly built on a familiar formula.

V1 - TRUE beta - lame product with a lot of promise and minimal functionality.
V2 - the first real effort based on what the Googleplex drones have slaved away to develop for the hive. The drones have in most cases no idea what they are doing but the Acolytes take the overt and the covert learning and try and built a product. In the early days this used to be pretty good - but lately it has been more like a microsoft V1 product.
V3 - the first product that actually functions properly - typically delivered 2 years after V1 and the first to have the word "BETA" removed from it.

Google+ is following this very tired formula.

Yes I am tired and frustrated with Google for doing such a poor job. With all your squillions you should consider paying us rather than pocketing the cash and making us pay with our increasingly shorter leisure time.

So am I an unpaid Google worker? Yes. Because they take my data and manipulate it. And yes because they steal time from me with their less than perfect apps that make me work their way, not the best way.

Of course I could just stop using Google and its applications.

Couldn't I?

........ message terminated by order of the Googleplex.

PROFESSOR’S TRUE NOTE. As soon as I wrote the word – GOOGLEPLEX – my Blogger account started showing an error. Coincidence or are the REALLY watching.

MySpace Goes For A Pittance

This is really rather sad. It also demonstrates that big media still doesn't get social media.

So now we can see how the damage works

Murdoch's NEWSCORP purchased MySpace 6 years ago for $580 Million. Now the troubled site has been sold on for less than $37 million with NewsCorp retaing 5%. Specific Media is an ad business and will likely treat MySpace as a vehicle of nefarious ad laden overhead.

Sad really

AA Changes Boarding - Interesting Take

So American Airlines is changing boarding to by the time you check in.

No big deal you say?

Actually it is. Check out the local newspaper story.

Now what is interesting is two major factors. One is to do with Carry on and the other with boarding efficiency.

With carry on there are no US flights where all the bags fit. So the airlines bag fees have resulted in different behaviour. IE people try and carry on as much as they can. For AA this has resulted in an interesting characteristic. They try and load passengers quickly but quietly offer no charge bag tagging at the gate. Clearly this practice has become widely known so the resulting potential revenue loss is not insignificant lets say $100 per flight (4 bags @$25 per bag). With AA moving more than 3400 flights per day on average this could add up.

Yup that's a cool $31 million a year.

Let's now consider the airport operations issues.

The airport boarding process is one of the least liked processes for a passenger. Right up there with TSA Screening but we are not touching that one right now.

The problem is that everyone wants to board at the same time. It is a hydraulic problem. Getting the people fluid into the vessel. However if you are a long time reader of this blog - you will find that I have examined this issue before. Random boarding beats everything but some very specifically controlled boarding. So randomly boarding people at different points on the plane was one of my suggestions based on check in number.

Seems AA is a good follower of the Professor and agrees. So this is now likely to speed traffic through the boarding gate.

How well it works - TBD.

Cheers

Sabre AND Travelport Take Big Steps Outside Air with New Hubs

While Amadeus has been retreating to focus on the air business - the other guys seem to be going the other way.

Sabre announced the major acquisition of Softhotels which will beef up their Hospitality business - already a vibrant component of Sabre and a major force in hospitality.

Travelport - free of the GTA boat anchor business - has now started a new Agent based leisure service for non-air.

Both of these announcements demonstrate the need of the core business to expand. As the GDS component of the Big 3 GDS companies declines and the market moves to a more open model - we can expect this form of behaviour.

However - for those of you who watch the space carefully - will this be a worthy replacement for the standard GDS business?

Well in my view the GDS yields will be hard to find replication for Travelport unless the former sink below 20% which seems to be on the cards. For Sabre this is a complimentary business and looks to help them in their quest to edge Pegasus out of the nest as the central player in Hospitality distribution.

Are Your Really A Consumer Lover?

Announcing the first Witovation Awards.

Are you a real Consumer Lover? Do they love you back?

Well enough Rhetoric. Show me

Check out the criteria for the awards here and get that presentation together. An esteemed team of judges will be joining me in determining the ultimate Customer Lover.

Go on - put your money where your mouth is.

Cheers

Understanding Groupon and Living Social

I am not a fan of the Groupon/Living Social Model. I fact I detest it. It just smells bad to me.

However - clearly the consumer's like it. So it has value. But this is a zero sum game which is so blatantly obvious that either I am stupid... or they are.

So have a read of the article from eMarketer. It does show some interesting dynamics of the two players.

Sadly it just approaches things from the consumer end not the supplier end.

But worth a read anyway


Cheers

Why I Hate The Manipulation Of Search

Hands up those who think that Search is ALL of the following:

Honest
Easy
Consumer Friendly
Pure
Ethical

Right - all you Google Acolytes can put your hands down now.

I thoroughly dislike the manipulation of search. I hate that SEO has become synonymous with all that is dirty and ugly on the web. Back when the web was young and Google was but a glint in someone's eye, we used to worry that because the web was like the Universe - limitless. Therefore making money on the web was going to be hard as you could never own a piece of real estate long enough for it to have any value. Web Homesteading meant any person could put out his shingle and start selling stuff. The downside was that we could hardly find anything. The upside was that this was the purest. It removed the barriers so that the little guy could compete with the big guy. It was going to be the great leveller.

Today - we have the massive gatekeepers like Google (OK so the Googleplex IS the gatekeeper). Which in turn means we have to play games in order to get any presence. And this means we have to resort to - I can think of no other way to express it - but to call it cheating. In order to Optimize your abilities - you have to get on the Hamster Wheel and run that mad just to stay in place.

The different tricks that people get up to are indeed all over the map. And we are spiraling down to more and more extreme forms of cheating.

Let me just put up a few examples:

Unscrupulous SEO advisers, digital agencies and even individual companies some of whom are quite reputable (normally) engage in these practices.

1. Put keywords that include brand names of your competitors. While largely stamped out this practice remains prominent

1. Freelance blog for money commentators who are usually factory farming people writing from home or in low cost countries who mascarade as real bloggers or commentators. These people are trained in techniques that they can use to commentate. They are literally nothing more than robots. ( would hazard a guess that some indeed are machines now). I have been getting quite a few of these appearing on my blogs.

2. Fake people. a 19 year old professional "faker" masquerading as a 35 year old housewife from Stockport replete with fake name, normal sounding email and other persona credentials.

3. Compensation mechanisms which are tied to the latest version of Google's algorithms. (EG Panda v1 and v2).

For a great list and discussion on this topic go to InfoWorld here.

And who is to blame? We all are.

However I think there are ways to do something about it. Firstly the consumer is tired of this and HE/SHE KNOWS YOU ARE CHEATING. So anyone who thinks you can do this and get away with it - you might gain some short term advantage.

For my part - I believe that one of the drivers of Social Media is that the Trust of the peers - are helping to raise the stakes. But now we have "Fake Social" peers who are attempting to become arbiters of this Trust. I have about the average number of "Friends" in Facebook and a larger number of Linked in contacts. I routinely weed people out and only accept people I know personally. However fakers still slip in.

All of us have the responsibility to route out these fakers and cheaters.

So think about this today - go into your Facebook and Linked in Accounts and remove people who are not personally known to you.

Cheers

FTC FINALLY Opens Up Broad Review of Google’s Market Dominance.

As I have pointed out over many a blog, In my view Google as a company of one. It cannot be judged by any precedent. Because frankly there is none. FTC to Serve Google With Subpoenas

No other company in the history of technology has held as much power and sway as the now sits in the hands of Larry Sergey and Eric. Google’s protestations to the contrary – they are now clearly a company that transcends the ability of any single government’s ability to control them via conventional regulatory means. The law – arcane and archaic as it maybe does have one or two tricks up its sleeve. Based on its limited controls – the US Law allows the various instruments of the US government’s executive branch to determine anti trust behavior. It is here that the Department of Commerce in conjunction with the Dept of Justice has come with the conundrum of what to do about Google.

While I believe that there are few if any Google employees who are outright evil. The ability to exert that power is just too strong. Google is doing bad things. This will come out in the investigation. But as regular readers know I am a strong believer in Newton’s Second Law. I firmly believe that Google is doing bad things through its lack of effective oversight of its employees who are in many cases determined to crush the opposition to anything that will get in the way of the Googleplex Borg. It is not – thus – that the people are doing bad things- but rather that they can manipulate a marketplace by either their direct actions or their withholding of certain facilities or even just by trying to do one thing – Google will (and yes sometimes inadvertently) effect a change in the marketplace that benefits the company. My opinion was that there was little that the US Government could do to prevent the Google acquisition of ITA Software. This proved to be right. BUT Google has stepped beyond the role of a conventional marketplayer.

Google knows this and its people know this. But Google has not yet put in place those controls to prevent damage to the marketplace. Google therefore has therefore been allowed to “get away” with things in the past. In my view this has only emboldened the Google Acolytes to behave even more without constraint. Should the Government have stepped in before? Yes. But they chose either through lack of direct evidence or through negligence or even because they lacked the resources to engage the giant. No matter – the decision has been made to go after them.

Am I right or wrong? On the one hand Google’s resources may indeed be greater than that of the Government’s ability to pursue this case. Thus there is no sure thing that the US Authorities will prevail. On the other hand successive US and International Authorities have failed to place any controls on the tech giant. As it evolves into a product based company from being a pure search utility – it has blown through many control gates.

In travel their power is not absolute. However do they have the ability that they can and will use? In my opinion yes. The lackluster appearance of Google Places for Hotels and the mediocre Google flight product may be a harbinger of a somewhat less than stellar product that will come from Troogle. But make no mistake – these are first generation products and Google will do better. So before these products start to appear to dominate the market, we need better controls. Well sadly it is too late for that. We will get products from Google’s cash pile that will kill certain players in the market. Some of these players probably will deserve to die. But others will be harmed irreparably. There will be “Mapquests” in travel. Indeed let’s be clear here – in travel’s case - there will be some “victimless” crimes. But there will be victims and that awesome power has yet to be revealed.

But by any measure the company is a monopoly and therefore its power must be curtailed. However that is achieved will determine much of what we can and cannot do in the coming years particularly in innovation will shape not just the Travel Industry alone.

I urge you if you are a new or occasional Reader to type the word “Google” into the search box and read some of the posts I have written before. Wander through the Professor’s prognostications. This represents my opinion. Let’s hope that both common sense and the what is “right” rather than what one company can do with its power prevail.

Everyone is entitled to an opinion. This is mine. Please feel free to write to me and tell me how you feel about this.

Cheers

Delta steps into the Dog Poo CORRECTION SEE UPDATE

PLEASE NOTE CORRECTED INFORMATION AND POSTSCRIPT BELOW

Skyteam has come from a late last place to a good second with Star retaining its global dominance in airline alliances.

However along the way – as the key players have been snapped up and now more than 70% of all global airline traffic can be booked on one of the big 3 alliances – there was bound to be a cultural problem or two.

And sure enough there is. As the Huffington post is reporting – Delta passengers on the code share flight with SV-Saudi Arabian Airlines (also known as Saudia) must comply with Saudia’s rules. This includes..

1. No Jews or Israelis
2. No Outward displays of religious affiliation other than that of Islam
3. Women must be accompanied by their husbands or a close male family relative
4. No transportation of religious artifacts of the Christian or Jewish or indeed any non-Islamic faith.
5. Oh yes and don’t expect any Martinis on the flight.

CORRECTION: DELTA IS NOT CODESHARING WITH SAUDIA.
When I checked the story to start with I could not find any DL Code shares out there with SV. Now I understand that Delta has issued a statement that indicates that they will not code share but will of course (as they do today) still interline.

This is of course well within the right of Saudia to insist on this policy which has existed for many years. Further entry into the Kingdom of Saudi Arabia (KSA) is governed by the same level of restriction through its strict Visa program.

EVERY country has the right of self determination, however – Code Shares across boundaries somewhat messes up the global order. OK for conventional arrangements but not for situations like this. So what is Delta to do? Hmmm – someone in International planning is probably sweating bricks right now. Cultural sensitivity is always hard. So the simple answer is that you hope and pray that the controversy blows over. Fat chance. You can cancel the agreement and then Delta becomes the symbol of American Jewry to all Islamists. OR Delta takes a pragmatic approach that is all inclusive. IE That on DL served flights the rule applies and non DL operated flights those rules apply. If then those who arrive in KSA with these bad things – then they have to accept the consequence. BUT DL must now accept that it has to operate some of these flights rather than allowing SV to operate all DL coded flights to KSA.

Clear?

Good luck…

Cheers

EDITORIAL ADDENDUM

This makes most of the point of my story different in the narrative. However my point is writing the story in the first place is that these restrictions will occur no matter what happens. There are different policies some of which are governed by national requirements, some are operational requirements. As a frequent flyer I am exposed to these issues ALL the time. It is an occupational hazard of code sharing. I have pointed out in the past that the so-called seamless experience between carriers is a myth.

As the practice of code-shares proliferates then you will find more of these types of situations emerging. And that was the point of this story. Thanks for reading!!!!