Media Watch: the Australian puts a "c" in Webjet

Quick media watch moment his morning. Front page of the business section of the online version of the Australian newspaper contains a piece speculating on Fairfax media (owner of newspapers that compete with the Australian) might be considering a move on Webjet (#1 online air agency in Australia). Unfortunately the front page sub-editor has stuck a "c" in Webjet and is running the headline "Fairfax had Webject on board" linking to story headlined "Fairfax held Webject stake last year". Second photo below and full story here.

PS- as regular readers know I am probably the last person who should be pointing out typos.

The BOOT at Asia Pacific Aviation Outlook Summit 27-30 July - Sydney

I will be speaking this week at the Australia Pacific Aviation Outlook Summit 2010 at the Four Seasons hotel in Sydney. The conference runs July 27-30. Day three of the conference (July 29) is the "Travel Technology & Distribution day".

Also speaking on the Tech and Distribution day are:

• Richard Noon (CEO Webjet);
• Claire Hatton (Head of Travel, Government and Local for Google);
• Steve Sherlock (MD Oodles);
• Shashank Nigam (SimplyFlying) and
  
• Martin Symes (CEO Wego)

I am in two sessions

Solo at 235 pm on

The role of airlines and distributors in the “inspiration funnel”

* What are the four phases of online travel?
* How consumers get from an idea to going away and making a booking
* The role of airlines, tourism authorities and OTAs in the inspiration funnel

and on a panel at 440 on

Leveraging social media to create customer interaction and brand awareness

* Making better use of existing channels vs investing resources in newer distribution avenues
* How well do suppliers understand the value proposition of social media?
* Brand management through social media
* Integrating User Generated Content into the booking path

Hat tip in advance to Martin Collings of the Shearwater blog who first introduced me to the role of airlines in the bow tie/inspiration funnel.

Webjet to relaunch hotels with a GDS backed retail model. Three reasons why I don' think this is the best plan available

Webjet are having a great time selling domestic air in Australia. As we have discussed before their tech leadership in developing the Travel Services Aggregator back in 2004 enabled them to sell multi-carrier domestic air including low cost carriers before anyone else. Even though other sites now have similar functionality, Webjet continues to enjoy customer loyalty and growth (despite charging dramatically higher fees per booking).

The company has made a number of attempts at diversifying their
revenue with land product. In mid 2003 they launched Bookabed as a standalone hotel brand. In 2006 they revamped the product under the new name Lotsofhotels. Then in June 2008 they announced plans to take Lotsofhotels onto the eBay platform. Unfortunately none of these efforts have developed traction in a very competitive market.

In their recent results they announced the launch of new hotel product called "Stay and Pay" (Travel Weekly story here). This new product moves them away from merchant sales to the retail model (consumer pay at the hotel, Webjet collects commission from hotel). They are launching two twists on the retail models you see from big players like Booking.com and Venere. Firstly there is no negotiated inventory. The inventory is drawn from the publicly available rates distributed through a GDS feed from Travelport. Secondly there is a service fee of $10 per booking charged up front by Webjet.

I like the fact that Webjet are trying hotels again. Fees on air make up 97% of their operating revenue (just down from 98% last year). They need to have other revenue streams to compete with packaging experts Expedia and Zuji (Travelocity) and the Wotif group owned air intermediaries Travel.com.au and Lastminute.com.au (not to forget the Orbitz owned hotel only players HotelClub and RatesToGo) [disclosure]. That said there are three reasons why I don' think this is the best way to go about hotels for Webjet:

1. Webjet will struggle for Rate Parity: The GDS companies (Travelport included) have done an admirable job working with the Chains and some independent properties to secure rate parity through GDS distribution. By that I mean working with hotels to have the rates that are loaded in the GDS be on par with the negotiated rates provided to the OTAs. However the rates in the GDS are never cheaper and by charging a $10 booking fee, Webjet will end up with pricing that is almost always more expensive than any other channel. There will be a convenience factor for consumers but this will be at the margins compared to the consumers who will be turned away by the higher price on Webjet;
   
2. Webjet will not have access to important Inventory Types: Again the GDS companies have worked hard to expand the range of hotels and properties available. However there is still a bias towards chains and a bias towards geographies with a history of GDS distribution. This means Webjet will be missing important independent properties and have less coverage in the Asia Pacific, Latin American and Middle East regions than the negotiated hotel agencies and OTA competitors; and
   
3. Webjet will miss out of the the best Specials and Promos: In this "year of the deal", hoteliers are providing deals and promos the likes of which have not been seen since 9/11. Most of these come with conditions, specifically a range of cancellation options ranging up to non-refundable. The GDS is not able to support this functionality as well as the negotiated inventory providers. Means that many of the great deals (especially last minute ones) will not be in the feed accessed by Webjet.

I can understand why Webjet went down this route. It would be very expensive for them to build a hotel contracting team from scratch. Impossible in fact if they wanted to gain coverage outside of Australia. Therefore they need to work with partners to access inventory. However my recommendation would be to work with an inventory provider with negotiated rates rather than the GDS. [disclosure - I work for a company that provides negotiated hotel rates]. It will provide them with a fix to each of the issues above.

The new Stay and Pay product is due for beta-launch today (18 Aug 2009). Will put in a functionality review post later.

Update - make sure you check out the comments where Richard Noon (Webjet CEO) puts his side of the story

Update 2 - I thought of one more reason why this product won't give consumers as good an experience as a negotiated provider will. The room type description and hotel content on the GDS is not as clear or attractive as those from a negotiated provider. Here is an example of a room type for a Sydney hotel in a GDS " PREMIER ROOM CITY VIEW 1 QUEEN OR 2 SGLSNON SMOKING LCD TV HI SPEED INTERNET FOR A FEE".

PS - last year at TRAVELtech Webjet CEO Richard Noon gave his estimates of the turnover of the various Austrlaia online air intemediaries.

Cheapflights.com.au launches in Australia - but this is not meta-search as it should be

It is supposed to be interesting when an international online travel company launches in the land of the barbecuing shrimp. So here I am on staycation leave quietly reading my newsfeed and blog email address when I spot care of m-travel and an email from Steve Sherlock of Oodles that "Cheapflights have launched an Australian and New Zealand version of their site". I should be excited by an international launch in Australia but Cheapflights is not exciting for two reasons.

Firstly, as I said back in July 07 when the rumours first started of Cheapflights coming to town (where 2008 was the planned launch date), this market (online air in Australia) is already too crowded for a domestic market with 2/3 carriers. OTAs like Webjet, Travel.com.au (owned by Wotif), Flight Centre, Expedia, Zuji (Travelocity) and Bestflights and regional meta-search player Wego (part owned by News Corp) are fighting for scraps left over by the online air dominance of the major airline websites (Virgin-Blue, Qantas and the Qantas owned Jetsar). Granted those scraps are getting bigger and bigger but still this is not an easy market to enter. Secondly, the Cheapflights product is simply not good enough to be of value to the consumer.

For those that don't know, Cheapflights is a quasi meta-search company started in the UK way back in 1996. Even describing them as "quasi" is generous because to me the hallmark of a meta-search business is an integrated display of up to date results in one place. The UK version of Cheapflights has the integrated display but the results are not up to date. Have a look at this extract from a London to Paris search

Notice where it says "updated 9 minutes ago" next to the BA quote and "updated 2 days ago" for ebookers. Also have a look at the URL for the page

It is a static landing page - http://www.cheapflights.co.uk/flights/Paris/London/ - rather than a dynamically generated page based on the timings of my specific search. The results are not timely or up-to-date. I clicked on a few of the links and they ended up on either dead search pages or some other destination page where the results did not match the search terms. In short the UK version Cheapflights - the oldest and most established version - does not work on a stand alone basis nor meet the minimum criteria for a meta-search player.

The Australia version of Cheapflights is even worse. It may be just early days for the product but the AU version is many steps behind the UK product which itself is steps behind competitors Kayak and TripAdvisor.

To give them some due, meta-search in Australia is not easy. As I discussed here in a Webjet vs Wego post (another Steve Sherlock tip) it is has proven very difficult to facilitae multi-carrier domestic meta-search in Australia. Wego has tried a work around (again go back to this post for more) but Cheapflights are not even trying. Have a look at this shot below of Cheapflights.com.au

This is the results of a search of Sydney to Melbourne. Rather than being presented with a set of even un-integrated (or disintegrated if you prefer) results I am given four options, four different websites that I can click on. Each click generates a new pop up with search results from the named party. If I want to do what meta-search is supposed to be for - comparing multiple sites - I have to open all four sites and looked at the results one by one. In other words do exactly what we used to do before meta-search came along. In some other words, it adds no value to the standard surfing practices of a regular internet consumer. In some more blunt words, next to useless.

In truth I don't think even Cheapflights think of themselves internally as a meta-search company. They target more of their effort and energies in their Travelzoo style Hot Travel Deals newsletter. Am undecided if there is value here,

Either way I am not predicting success for this product. The product in its current form adds little to the market and the competitors have more money to spend on marketing.

Told you I would get tough again? Am I being too tough?

Webjet vs Wego: sometimes an OTA is better than meta-search

Steve Sherlock of Oodles sent me me a email pointing out a very interesting quirk that can give OTAs a functionality advantage over meta-search. Typically I would have thought that top notch meta-search are going to be better at delivering customers to the top fare combinations versus OTAs. The OTAs would have the advantage in packaging, customer rewards, content and community and other retail elements but that meta-search would have the lead in the search and user friendliness.

But in the Australian domestic market the airlines have structured their fares in such a way that they are very user unfriendly for meta-search. The results list is full of all the fares you would want to see on a typical Australian domestic city pair (say Sydney/Melbourne) but you have to book the outbound and return separately. There are two click offs prompted by the metasearch. Here is a shot from Wego to show you what I mean



Clearly this is something on the airline side, not within Wego. Meta-search results are dependent on their source material. Since the vast majority of domestic in AU is sold as one way segments then a meta company needs two searches and two separate results to produce a fare. The bulk of long haul is still defaulted to return so they have different value. I suspect this may even be a deliberate limitation that the airlines are using to drive customers back to the direct sites of Qantas, Virgin-Blue, Jetstar and Rex.

Webjet are the largest Australian OTA (by gross bookings). They have found away around this problem through the design of their underlying technology (called the TSA or Travel Services Aggregator). They are able to capture all of the segments from multiple carriers. The customer's card is collected once and then sent to all of the points of charge. For a multi-carrier fare this may mean that the card is charged three times (once by the first carrier, once by the second and a third time by Webjet for the fees) but the consumer has only had to enter the details once. In the battle between Online Agents and Meta-search, when it comes to domestic Australian flights it seems to be advantage OTAs.

Anyone out their from Wego or Webjet care to comment - would love to do a follow up post with your views? Anyone else know of similar consequences in other domestic markets?

Update - please read the response in the comments from Ross Veitch, Chief Product Officer at Wego.com

Disclosure - in the past I provided some consulting services to Wego. The work is finished but I remain a long term fan.

TRAVELtech: Webjet CEO Noon calls the AU market sales of Expedia, Zuji and more

Final speaker of the first session was Webjet CEO Richard Noon. Had a great slide that I was able to quickly copy down to share with you. He showed his estimation of the annual Gross Bookings of major full service OTAs in Australia. Here is that graph as I copied it.

If you are interested in the Australian turnover of Webjet, Expedia, Bestflights, Zuji, Lastminute.com.au, travel.com.au and online for flight centre check it out.



He prepared a formula using comparative page views and PhoCusWright estimates of the Australia online travel market. He took the page views of each of the players locally and then apportioned gross bookings from the PhoCusWright estimates of total Australian OTA sales.

Later during the panel session these numbers were put to each of the bosses of Zuji and Expedia.

Expedia AU MD Arthur Hoffman dismissed the $80mm estimate for Expedia saying that this was a very pessimistic view. That actual number was "far north of that".

Zuji CEO Scott Blume - "took the fifth" when asked about the $30mm estimate. Saying that they do not break out their bookings.

Ryanair hates Kayak - promises to cancel tickets booked through meta-search

eyefortravel are quoting Ryanair CEO Michael O'Leary as saying that he will cancel all bookings made on Ryanair flights through meta-search. As he puts it

"We want to cause as much chaos for the screen scrapers as possible"

This news comes a week or so after the coverage of a looming issue between AirAsiaX (long haul offshoot of Asian low cost carrier AirAsia) and Webjet (Australian based OTA that uses an aggregation engine to combine non-GDS available fares) over Webjet's reported intentions to screen scrape for access to AirAsia X fares.

I understand the argument of the carriers here that meta-search or aggregated search based engines end up pounding the websites (or rez systems) of the carrier, especially where the connection is based on a robot/screen scrape rather than a direct connect. But on the other hand when an airline opens itself to the internet and search engines and enjoys all the benefits of being indexed and discoverable by consumers, they cant then complain when people build mechanisms for more effective forms of search.

In the case of Ryanair, I am sure they are down on their knees and grateful to the SEO leprechauns that they are the number one for organic search result for "cheap flights london dublin" (see shot below)



To then turn around and complain about other search players wanting to build indexes as well is a bit like trying to have your un-fetted search cake and control it at the same time. This is especially true if you are a low cost airline. If as an airline you believe that your prices are the best and are the definition of your product then you should embrace aggregated/meta-search as it will prove your case every time. Seems like O'Leary now likes Expedia but hates Kayak.

BTW - what is Etihad doing bidding on Google.com.au for the keywords "cheap flights london dublin". I know the UAE airlines seem to have unlimited marketing budgets and an insatiable desire for growth but surely the clicks from this are a complete waste of money. Whoever their SEM agency is needs to be roused from the marketing conference bar room and put back to work.

Update - if you want to hear a different view check out Timothy O'Neil-Dunne's post on the same subject "Ryanair clams down on Screen Scrapers - Agents too?"

Winner of ticket to Eyefortravel Asia Pacific

I have been running a competition for one free two day (bronze) delegate pass (normally A$1,395) for a lucky BOOT reader to the eyefortravel Sales & Marketing in Travel Asia Pacific conference at the Shangri La Sydney on 29 and 30 July.

The competition was for the best question in the comments for a conference speaker.

Prize Winner

Jonathan's question for Martin Symes of Wego (see below)

First Reserve

Gath's question for Andy Conroy of Lonely Planet (see below)

Second Reserve

Adam Vance's question for Richard Noon of Webjet (see below)

What Next??

Can Jonathan and Gath please send me their contact details to timsboot [at] gmail [dot] com? If I hear from Jonathan by noon Sydney time Wednesday then he wins the prize. If not it goes to Gath. If I have not heard from Gath, then it goes to Adam (Adam I have your details).

I need your Name, Job Title, Company, Email and Phone numbers.

Here are the questions.

For Martin Symes of Wego With price parity increasing in popularity, do they perceive the decreased volatility in accommodation pricing as a threat to their business model, and if so then how do they plan to react/adapt

For Andy Conroy of Lonely Planet As free downloadable city guides take off (eg for iPods, iPhone, Amazon kindle etc) how is LP planning to keep up production on their guides as revenue from book sales diminish.

For Richard Noon of Webjet Due to the current economic climate in the US, we are seeing a number of major online travel agents rolling back the plethora of fees they charge in a bid to attract travellers away from the main airline websites. Given that comments in the past have indicated that up to 60% of your revenue comes from these types of fees/charges - what impact would this have on your business model and how could you mitigate this potential risk moving forward as the economic climate cools in Australia and consumers become more aware of how to "beat the system"? Would you agree that it's not a matter of "if" but "when"?