The trial in the district court of Tarrant County, Texas, is now slated to kick off on August 6, 2012, instead of the previously slated date, June 13, 2012.

The effect of the ruling is that the truce in the airline-GDS war will remain in effect for a couple of months longer.

American Airlines and Sabre have been battling on the legal front over antitrust issues, and in the marketplace over a new contract, distribution economics and direct-connect.

Sabre issued a statement about Judge Donald Crosby’s extension ruling, noting that the GDS vendors’ travel agency and corporate customers, as well as consumers using sites such as Travelocity, will have access to American Airlines’ fares through the end of the trial.

Sabre spokeswoman Nancy St. Pierre adds:

  We are disappointed with the extension, as it yet again delays the long-term certainty Sabre’s agency and corporate customers have told us is important and which we are dedicated to achieving. It’s unfortunate that AA has chosen a path of litigation with Sabre, particularly since the airline is now focused on its bankruptcy. Our preference is to negotiate with AA and we continue to call on the airline to work with us to reach a deal that meets the needs of all constituents.

In turn, American Airlines states:

American has always been open to resolving our disputes and entering into a fair, new agreement with Sabre through negotiations. Despite American’s past efforts, we have not been able to reach such a resolution. Because we have discovered that Sabre engaged in serious misconduct in violation of the antitrust laws, however, we intend to pursue our losses, absent an agreed resolution. This is just a brief extension, but it is important to give American breathing room to focus on both its successful restructuring efforts and this lawsuit. As a reminder, American’s current distribution agreement with Sabre will remain in effect until 14 days after the conclusion of the Texas antitrust lawsuit.

Who and what are you (including personnel and backgrounds)?

Distribute was set up to enable new distribution opportunities for tour operators and OTAs, and provide businesses breaking into travel with a powerful platform to do this.

Our senior team:

• Nic Costa, managing director – Nic has been instrumental in the development of travel advertising technology products and services since 1997. He was a founder of travel specialist affiliate network, AffiliateFuture and instrumental in building the business to be the fastest-growing affiliate network in the UK with an unrivalled stronghold in the travel sector when it was sold in 2007.
• Giles Parnwell, commercial director – Giles is a well-respected travel industry figure, having won personal and company awards for services to the travel industry. He started at Singapore Airlines 20 years ago, responsible for UK sales and driving a number of online firsts in online advertising and marketing for the airline. He has extensive knowledge of affiliate marketing and travel technology, and proven commercial experience at managing business portfolio’s exceeding £180 million per year.
• Daniel Chick, technical director – Like Nic, Dan was with AffiliateFuture from the start and was the technical force behind its award-winning technology. Since selling the business in 2007 Dan has taken an advisory role for many big names in the industry. He has a strong background in all aspects of Internet related technology, with specific expertise in scalable web application infrastructure, online advertising, tracking technology, API development and ‘Cloud’ based computing architectures.

What financial support did you have to launch the business?

We’re self-funded so far.

What problem are you trying to solve?

We’re helping to create new high-volume distribution opportunities for tour operators and OTAs and providing complimentary brands with new revenue streams from travel without any technical resource requirements.

Describe the business, core products and services?

Distribute’s technology aggregates live data from a wide range of big name travel suppliers for syndication to high-profile web sites looking to promote holidays. The flexibility and open nature of the product uniquely allows any brand to deliver live pricing into websites, email or specialised marketing campaigns such as retargeted banner advertising.

We publish white label holiday search websites for complimentary brands, such as web portals, tourist boards, and price comparison sites.

Customers can be directed at live results pages in many ways:

• Via a colour customisable search box. We provide simple tools to do this
• Via a holiday search website homepage
• Via links within website text, email, banner ads, Google PPC ads to specific results pages, eg.
• Holidays from East Midlands Airports to the Canary Islands leaving in the next 6 weeks
• All inclusive holidays from London to Kos for 2 adults and 2 children next summer

The underlying high-capacity holiday price and availability data is also fed direct to existing leading travel aggregators and specialist advertising and marketing agencies for use in their own products and services.

Who are your key customers and users at launch?

• Travel suppliers: Thomas Cook, Lowcost Group, On Holiday Group, On The Beach, Expedia
• Travel aggregators: TravelSupermarket, Teletext Holidays
• Agencies: Struq & Flashtalking (retargeting), Rocketer (social), Fusepump (affiliate feeds & tools)

Did you have customers validate your idea before investors?

We presented the first version of our white label technology to Thomas Cook five months ago. They were clearly impressed, and suggested a use for it that we hadn’t thought of; on the late deals section of their own website. They carried out split tests to validate the technology, and found that conversions significantly increased. We couldn’t have asked for a better test case.

What is the business AND revenue model, strategy for profitability?

Software-as-a-service (SaaS) with monthly licensing fees dependent on volumes. Our strategy is simply to sign up more partner websites to increase our distribution network and revenues for all parties. In 2012 we’ll be adding flights, hotels, dynamic packages, car hire, and travel extras.

SWOT analysis – strengths, weaknesses, opportunities and threats?

Strengths:

• The technology is extremely complex and volumes of data are huge. Our team have obsessed about travel distribution for years and have worked with most of the parties involved on the supply side with different hats on.
• We’re specialised in travel, and our technology has been designed from the outset to deal with the volatility in pricing and live availability specific to the travel sector.
• Having access to new cloud technology products in development before they are launched

Weaknesses:

• It can often take our suppliers months to track down the source of their data, or it may be tied into other distribution systems.

Opportunities:

• Substantial new distribution opportunities for our travel suppliers
• A hungry set of clients that are keen top showcase their product in new areas online
• High traffic websites that are keen to offer travel products to their visitors

Threats:

• Other players coming to market, but as we’re already working with the big players, and there is so much development work involved, we’re at a distinct advantage

Who advised you your idea isn’t going to be successful and why didn’t you listen to them?

We’ve only had encouragement so far.

What is your success metric 12 months from now?

• Substantial levels of targeted visitors delivered to our travel clients’ websites via our technology.
• Providing a genuinely simpler, more useful way for travellers to compare holidays, flights, and hotels.
• Creating a new revenue stream for many large players keen to break into travel.
• Expansion into other countries.

NB: Here is a Prezi overview.

NB: TLabs Showcase is part of the wider TLabs project from Tnooz.

VRMA says that in the lead-up to its annual conference last month, it signed an agreement with Pegasus Solutions, which is renowned for its hotel-distribution switch.

Pegasus had been developing a vacation rental switch for VRMA, but the two companies broke off talks in June when they couldn’t come to terms on issues such as who would foot development costs and various volume thresholds.

In an email a couple of days ago about its October conference, VRMA says the two companies will jointly develop the switch over the next 150 days and it will “allow vacation rental managers to distribute inventory across multiple channels, including listing sites, CVB/destination portals, online travel agencies and more. ”

VRMA adds: “Participating software companies will provide a feed to the Switch, and vacation rental managers will select which channels to distribute through, allowing for full control of inventory, rates, blackout dates, company branding and more.”

Pegasus is believed to have done a considerable amount of development work on the switch earlier in 2011 and had vowed to proceed with it without VRMA’s participation when a stalemate ensued in June.

The switch will launch on VRMA’s DiscoverVacationHomes site, the association says.

The VRMA-Pegasus switch is seen by some as a hoped-for alternative to HomeAway, which has been trying to make inroads into the professionally managed vacation rental market.

Vacation homes is a notoriously fragmented market, with much of the booking activity taking place offline.

Not officially announced as yet, but the move will also see different areas of its existing distribution division brought in under one executive, Holger Taubmann, currently vice president for Amadeus in Northern, Eastern, Central and Southern Europe.

The shake-up coincides with the departure of executive vice president Philippe Chérèque who is to retire shortly.

The new airline IT division will be headed by existing vice president Julia Sattel. Francisco Pérez-Lozao Rüter, currently vice president of corporate strategy, will lead the new business department.

As a result of the changes, current vice president for marketing and distribution Ian Wheeler will be leaving at the end of September 2011.

Wheeler was promoted to the role in 2009, nine years after joining Amadeus as director for travel agency partners.

The media is a classic one (we’re online-only at Tnooz, just in case anyone is wondering when the print version will come out) and while the music industry was turned on its head by MP3 players and file sharing (much of its illegal initially).

The battles described in a recent piece in Infoworld techie journal included items on medical support, customer service, media, and many others.

One area the article focused on was Cheaper Flights vs Hidden Cost. Oh dear.

The point is relevant in that the web eliminated barriers to airline pricing information – and it makes sense to look at the impact of the web from the consumer’s perspective.

But while the article focused on air, the same could actually be said for other products in the travel industry.

In the first phase, previously privileged information that only an airline or a travel agent could provide became publicly available.

This was initially via airline websites and online travel agencies, and more recently via the general metasearch/search players such as Kayak and Skyscanner or niche offerings such as Getflight.

This enabled search and shopping, but caused the demise of the legacy channel (agents who only acted as agents for airlines). The scale of data processing that the web enabled was fantastic and opened the digital world up for many new players.

In the next phase, a degree of quality was introduced – better offers, and more information. The writing was on the wall for homogenous information.

Now, most travel and travel-related experiences are now available online. The long tail arrived.

Today we see that the social element has changed how we obtain ideation and validation in our search for travel. This helps get us better results – we hope.

TripAdvisor is the primary example of how we get to find out what others feel about travel. There is also a strong sense of community and personalization. But, sadly, travel products are not keeping pace.

Furthermore the ability to de-commoditize one’s product and to allow different services to be sold either directly or indirectly has changed how travel is presented.

Dynamic packaging allows us to mix and match services in a way that previously only a travel agent used to be able to do. Suppliers learned that their products needed to fight harder for space on the virtual shelves of the web.

But the key question from the article is clear:

Did the web enable cheaper fares and did the web create airline fees? Yes to the former, no to the latter.

Cheaper fares are now easier to find, but the logic underpinning the article claims that cheaper fares are only possible through unbundling.

That is obviously an over-simplification. Product owners/sellers, particularly in air, want to obfuscate the true market price. That is the pure price argument. But there are two other factors that the article misinterprets:

1. Functionality and unbundling enable a la carte and de-commoditization.

This is decidedly a benefit to the consumer. Buying what we want and need rather than a one size fits everything powers consumer choice.

This has to be a benefit. But not purely in terms of travel. Almost every product category has undergone this process.

2. Personalization down to the consumer of one (aka ME!!!) has benefitted all of us.

True, there have been a lot of abuses and many of these remain but in general “mass personalization” has driven consumer benefits unimaginable prior to the web.

Because the infoworld article was short, it did not draw a conclusion, but it’s worthwhile to consider some.

The logical argument should be that the infrastructure of travel needs to get a whole lot better to support additional functionality and personalization at a lower cost.

Now THAT is an epic battle – and price point is just one element of that.

The world is changing and the infrastructure to support it needs to change. The focus on consumer user experience hides some of the ugly stuff behind the scenes – but that cannot last.

We (collectively) must provide more efficient processes to enable the coming wave of better services and products. Innovation will find a way. But that is not a battle – except in the execution.

In fact, officials say that during the second quarter, which ended June 30, Delta.com’s share of ticket sales climbed 4 percentage points to 37% of all Delta tickets sold.

How did this happen?

Since last last year Delta has terminated its relationships with 21 online travel agencies and has barred other online travel agencies from showing Delta flights in metasearch engines such as Kayak, Bing Travel and Hipmunk.

Those 21 online travel agencies on Delta’s hit-list included CheapAir, CheapOair, Vegas.com, AirGorilla, Globester, BookIt.com and OneTravel.

Expedia, Priceline, Travelocity and Orbitz continue to sell Delta’s flights.

But, the changes mean if you see a Delta flight in a travel metasearch engine, the link will be to Delta.com and not to an OTA.

And, Delta also barred OTAs from showing interline flights under the Delta brand.

Delta, of course, also invested in and overhauled Delta.com to make it easier to use, officials say.

“And our strategy really is to control our content, both with respect to combinability [interlining] and scheduled display criteria, so that we make certain that our schedules are accurately displayed and there’s no combinability,” CEO Richard Anderson said during the airline’s second quarter earnings call July 27.

“And utlimately, if our fair rules are followed and our display and content rules are followed by OTAs, then the only question is their fees have got to be similar to what it would cost us to distribute on Delta.com,” Anderson added.

In the context of the website improvements, Anderson also mentioned a direct-connect agreement the airline has with Farelogix to enhance distribution to travel agencies and corporations.

In connection with that agreement, Delta is expected to re-introduce a travel agency portal.

Travelshark closed the round today from DLA Holdings, bringing its total investment so far to $8 million.

The travel site network provider recently admitted its former name, Swiftrank, was not resonating with customers and users and decided to make a wholesale change to corporate image.

Travelshark CEO Sue Heilbonner claims the company has achieved “impressive revenue growth and global sales” since its last year (TLabs Showcase – Swiftrank).

The latest injection of capital will fuel investment in sales, marketing and product development, Heilbonner says.

Companies named on the customer roster include Intercontinental Hotels Group, MGM Resorts, Highgate Holdings and TIG Global.

Instead, the company [launched in June 2010, TLabs Showcase - Swiftrank] has come up with the name TravelShark.

CEO Sue Heilbronner reckons:

“I can list a wealth of complex strategic reasons for the rebrand and depict the forecasted impact on detailed graphs, but the truth is, we had a less-than-optimal name and found a better one. Having a resonant name has opened the door to new possibilities for marketing and brand development unavailable until now.”

There is also a rather bizarre video to celebrate and hopefully explain the change:

httpv://www.youtube.com/watch?v=cefU0DgSvdQ

That question comes to the fore following yesterday’s announcement that the U.S. Department of Justice Antitrust Division closed the books on its Hart-Scott-Rodino Act review, clearing a path to merger.

Southwest says it expects the merger transaction to close on May 2, 2011, and one of the next steps will be to secure a Federal Aviation Administration single operating certificate, which could happen in the first quarter of 2012.

It will likely take several years after that to merge the two airlines’ fleets and crews, and to figure out how to blend disparate reservations systems.

Meanwhile, on the distribution front, AirTran and Southwest have diametrically opposed views on distribution through online travel agencies.

You can find AirTran flights and schedules on major OTAs such as Expedia.com.

And, Southwest shuns distribution through OTAs and once threatened legal action against Orbitz in the early days of the site when it merely posted the airline’s schedules.

Once the AirTran brand fades away, OTA distribution likely will disappear, as well.

Unless Southwest has a major about-face.

Meanwhile, Southwest will have to sort out reservation system choices for the merged airlines.

Southwest currently is considering transitioning to systems from Sabre or Amadeus to better-accommodate merchandising and international flights, while AirTran’s reservations system vendor is Navitaire.

Henry Harteveldt, Forrester Research’s principal analyst for travel, says Sabre, headquartered in the Dallas area and with long ties to Southwest, may have some logistical advantages over Amadeus in the competition.

Here’s an image of Kayak results for a Newark, N.J. to Knoxville, Tenn., query for March 21 to March 29. It shows results from USAirways.com, CheapTickets.com [owned by Orbitz Worldwide] and Expedia.com:

Notice that US Airways and CheapTickets show $528 fares while Expedia merely displays “check rates.” If you click “Go” for Expedia.com or select “See all price details” and then “click to see rates” for Expedia, you navigate to Expedia.com, which displays US Airways flights for $527.81.

Kayak considers the Expedia placement an advertisement while US Airways and CheapTickets are distribution partners.

Advertisements come and go and Expedia’s flight search ads are back on Kayak despite an Expedia statement March 7 that it had temporarily stopped investing in Kayak’s core flight search results.

An Expedia spokesman labeled its return to Kayak flight search results as “just day-to-day business.  It’s an ongoing process dependant on all sorts of factors (e.g. Expedia site conversion rates, CPC rates, etc.”

Orbitz, however, apparently doesn’t appreciate the distinction between distribution relationships and advertising partnerships on Kayak.

Orbitz believes it enjoys certain exclusivity rights in Kayak’s U.S. flight search results, and alleges the Expedia ads violate a 2009 agreement with Kayak.

Kayak and Orbitz have submitted the dispute to arbitration.

Of Expedia’s reappearance in Kayak flight search results, Orbitz spokesman Brian Hoyt reiterated a March 7 statement on the topic.

“We continue to have an important marketing partnership with Kayak and believe any existing disputes will be resolved to uphold our exclusivity provisions within our business agreements,” Hoyt said.

Kayak declined to comment, citing confidentiality provisions in supplier relations.

But I do have 20 years of business and marketing acumen working in other segments of technology and, as a result, have noticed a few elements of the AA-GDS battle that seem peculiar.

It’s about differentiation

One of the main arguments I hear about why American wants to pursue direct-connect is that its want to compete less on price and use the different fare bundles and ancillary fees as a point of differentiation.

I completely agree that brands ought to try to differentiate their offerings. Differentiation drives preference.  Differentiation can lead to brand loyalty. Brand loyalty can lead to outsized margins and reduce real competition.

Unfortunately, what American seems to be pursuing is obfuscation, not differentiation.

The numerous brand families and ancillary fees, for amenities like “extra leg room” seats or the right to board an airline first, which are being pursued by American and many other airlines, simply makes it more difficult to compare one airfare versus another.

But is there inherently anything different between an extra-leg room seat on American Airlines or US Airways?

If many airlines are pursuing the same fare packaging and ancillary fee strategies, is there anything truly differentiated about the tactic? Does this tactic create preference in the mind of the consumer I would venture to say no.

Yet they are betting a lot that this strategy will work.  A recent Compete Pulse blog post lays out the gamble that AA is taking:

“…American’s brand loyalty is clearly being put to the test. Will consumers know enough, or care enough, to find their way to AA.com as the airline’s product becomes increasingly difficult to find?

“Will AA bookings on Expedia and Orbitz migrate to other suppliers on the same site, or will these shoppers actively seek out American Airlines in channels where they remain available?”

But is brand loyalty the reason that people will seek out American? To answer that question, I think we need to clarify what brand loyalty is and what it is not. I think that many people confuse brand loyalty with repeat purchase. They are absolutely NOT the same thing.

Loyalty versus repeat purchase

In Simon Sinek’s excellent book, Start with Why, he clearly described the difference:

“There is a big difference between repeat business and loyalty. Repeat business is when people do business with you multiple times. Loyalty is when people are willing to turn down a better product or a better price to continue doing business with you.

“Loyal customers often don’t even bother to research the competition or entertain other options. Loyalty is not easily won. Repeat business, however is. All it takes is more manipulations.”

Let’s move out of the airline industry for a moment. The number one example that Sinek, and many branding experts, point to as the leading example of a company that has nailed brand loyalty is Apple.

Apple has developed an amazing level of brand loyalty. People actively seek out Apple products and happily pay a premium for them.  Did the iPod offer more memory than other MP3 players? Not really.

Are Macs and MacBooks more expensive than similarly equipped PCs? Absolutely. And yet people buy them in droves (Apple is the fastest growing “PC” maker).

Look at the iPhone. Yes it completely changed the game for the mobile phone industry, on many levels. But up until next week it has only been available on one network in the United States, AT&T. A network that people despised. And many claimed it wasn’t even that great of a phone.

Yet people lined up around the block each time a new one was released. Waited hours, even camped out overnight. They overcame obstacles to be customers and were willing to pay a hefty price for the privilege.

Most “Apple fanboys” don’t even consider other alternatives. And best of all, Apple makes more profit on the phone itself – not to mention the profits from the AppStore – than any other handset maker on the planet.

So, back to the airline business…

The airline business strikes me, more often than not, to be about repeat business, rather than loyalty. Let me tell you why I think so:

• Gates, Gates, Gates. In real estate they say it’s all about location. It seems very similar in air travel. If you want to go to DFW or MIA, pretty much American Airlines wins. They have the most flights. Going to SFO? United becomes the most likely choice. So while other options exist at different airports, certain airlines have built in advantages. And as such, airlines are guaranteed a certain level of repeat purchase based on their market power, not any level of differentiation or brand loyalty.
• Consumer Travel is still very transactional. How many times do most families travel for pleasure? Once a year? Twice? So it’s rare for a family to earn status on a single airline (unless a parent has for business, but I cover that next). So as mentioned above, the destination has a major impact on the airline choices that are presented.
• Corporate travel policy works against airline loyalty, not loyalty programs. Loyalty programs and the promise of better treatment or free flights is a common mechanism that airlines use to try to lock in customers.  For those that do travel for business, many absolutely try to work their airfare choices around the frequent flyer programs that they affiliated with. I fly a modest amount, say twice a month. But not often to the same city. So the airlines that I fly are not all that consistent. Further my choices are sometimes restricted by corporate policy. So often I may choose an airline within policy because they are a member of alliances that enable me to earn miles on a single airline. But that makes me loyal to the program, but not necessarily to the airline itself…until it’s time to redeem the miles.

But there are airlines that have done a good job in differentiating their service and engendering loyalty: Southwest, JetBlue, Virgin (all flavors) and Singapore Airlines.

These airlines each provide ancillary services and different classes of service as other airlines do. But they have each staked out a strong positioning and deliver a unique experience that has helped them drive demand and strong financial performance.

Personally I believe that it’s the traveling experience more than their direct-connect/direct-to-consumer strategy that has enabled their success. But that’s a topic for another post.

Who and what are you (including personnel and backgrounds)?

Hotelmine, a Groups International brand, is based in Houston, Texas and is a startup “direct connect” distribution model for the online leisure travel market segment.

The company was founded by Tom Costello and Chris Wenz who have been involved in both the group and leisure travel market segments for more than 15 years and have designed and developed patent-pending technology solutions that serve both of the aforementioned markets.

CEO and Co-Founder Tom Costello is an accomplished entrepreneur whose career includes more than 25-years of experience in the hospitality, corporate travel, meetings, and special events industries and is a highly regarded authority in the field of online meetings and events solutions.

COO and Co-Founder Chris Wenz, a ten-year veteran of the hospitality industry, is no stranger to new business ventures and has designed, developed, and implemented online housing and event solutions that facilitate the procurement and management of guest rooms for both groups and individual leisure travelers.

What financial support did you have to launch the business?

The company is privately owned and operated.

What problem are you trying to solve?

The costs associated with the distributing a hotel’s inventory through an indirect third-party channel is the most expensive distribution channel to-date.

This indirect distribution model resulted in hotels paying abnormally high merchant commissions estimated at $5.4 billion in 2010 that went into the pockets of online travel agencies (OTAs) like Orbitz, Expedia, Travelocity, Priceline, and Hotels.com in 2010.

As a direct connect distribution channel, Hotelmine can lower a hotel’s distribution and conversion cost by up to 80% as compared to the same transactional cost as charged by an OTA.

Hoteliers need a robust direct online strategy accompanied by adequate marketing funds to be able to:

• Take advantage of the steady growth in the Internet channel.
• Shift bookings from indirect (OTA) to direct (hotel website) online channels.

Describe the business, core products and services?

Hotelmine has developed a proprietary, patent-pending technology that combines the power of B2C with a robust peer-to-peer social media architecture that allows members to book direct with a hotel and to share their research, travel plans, and transactions with family and friends.

Hotelmine offers more than just a rate on a guest room and members can choose from a variety of options that include Deals of the Week, Hot Dates & Rates, Packages, and Last Minute Deals. We even provide our members with the tools to help them find the best rate on ten guest rooms or more.

What makes Hotelmine different is that we’re not a travel agent and we don’t have anything to sell. Unlike mega-OTAs and travel agents who charge a commission, booking fee or markup wholesale rates, we don’t.

When a member sees something that suits his taste or budget, he books directly with the hotel by calling the hotel or through the hotel’s website booking engine.

Who are your key customers and users at launch?

Our key customers will include full and limited-service hotels that are privately owned, franchised owned and corporate managed as well as hotel management firms.

A user is anyone who is searching for more than just a rate on a hotel room.

Did you have customers validate your idea before investors?

We talked with literally hundreds of hotel owners, hotel sales and marketing representatives, hotel management companies, end-users, and software development companies who are involved in our space.

The feedback and response has been overwhelming and continues to spur us on, with great anticipation, to the successful launch of the site.

What is the business AND revenue model, strategy for profitability?

We will introduce two different marketing packages that are specifically designed to meet a budget and marketing strategy of either a full or limited-service hotel.

The price point for either package is affordable and we offer our hotel partners a plan that would require a small percentage of the annual subscription rate and the balance spread out over quarterly invoiced payments.

SWOT analysis – strengths, weaknesses, opportunities and threats?

Strengths:

• Combined 35-years experience in group and leisure travel markets
• Experience in development and implementation of technology solutions
• Excellent existing relationships with hotels at both the corporate and local level
• B2C platform combined with robust P2P architecture

Weaknesses:

• API under development
• A new business model for an industry that historically lags 2 years behind

Opportunities:

• 40 percent of U.S. leisure/unmanaged business travel bookings booked online
• Affordable low-cost entry for hotels
• Search methods changing from search engine-based to social media-based
• GDS channel is in steady decline
• Cost of indirect booking eight times the cost of direct booking
• Commission leakage in 2010 to third-party sites estimated at $5.4 billion

Threats:

• Larger or better funded competitor entering our space
• Educating consumers on the “direct connect” value proposition
• Lack of strict rate parity
• Economic instability combined with double-dip recession

Who advised you your idea isn’t going to be successful and why didn’t you listen to them?

A former VP suggested that there was no room for a direct channel distribution model in a crowed market dominated by Orbitz, Travelocity, Priceline, and Hotels.com and hotels would not be interested in the service.

We did not listen to him because we receive our direction and inspiration from a much higher source.

What is your success metric 12 months from now?

• Expand our hotel content to include Canada, Europe, and the Caribbean.
• Continue the development of our mobile solution.
• Launch a web-based application that will enable hotels to engage with prospective customers the minute they start to think about travel.

NB: TLabs Showcase is part of the wider TLabs project from Tnooz.

Jeffery Smisek, president and CEO of United Continental Holdings, said the airline wants to continue to work with its distribution partners, including travel agencies and GDSs, but the airline also has to ensure that its customers are not hampered by legacy technology.

“We need folks to keep up with us,” said Smisek, referring to distributors and speaking during the airline’s fourth quarter 2010 earnings call on Jan. 26.

Jim Compton, the airline’s chief revenue officer, pointed to the Continental.com FareLock program, introduced in December, as an example of a product that the “legacy platforms” can’t handle.

Under FareLock, travelers using Continental.com can pay $5 to lock in a fare for up to 72 hours or pay $9 to do the same for seven days.

Regarding other ancillary services, Smisek noted that United distributes its Economy Plus extra-legroom seats through Sabre and is working with Travelport GDS to deliver something similar.

Still, Smisek inferred that the airline’s current distribution costs need to decrease, saying distribution has to be cost-efficient and on par with the value received.

Those are code words for — the costs have to get lower.

Also this week, US Airways indicated it intends to take a pragmatic approach toward distribution.

So, both United Continental and US Airways have gone out of their way this week to publicly differentiate their stances on distribution from American Airlines’ more aggressive approach.

On other fronts, Smisek of United Continental said the airline would be offering no public position on Google’s pending acquisition of ITA Software.

Asked why there would be no public statement, Smisek said the airline, which is an ITA Software customer, would let the antitrust regulators sort out the issue.

That’s the view of Michael Linenberg, Deutsche Bank’s U.S. airlines analyst, who says: “I do think you are going to see the airlines do what they can to move bookings to the lowest cost distribution channels.”

Linenberg joined Herman Leung, Deutsche Bank’s Internet and online travel analyst, for a conference call with clients on their “Latest Thoughts on Airines vs. the OTAs (Online Travel Agencies).”

Leung estimates that airlines pay about $10 in GDS costs on a $300 ticket and the GDSs pass along about $5 to the OTAs.

By seeking a direct relationship with the OTAs, American Airlines is striving to eliminate that extra $5 it pays to the GDSs, Leung says.

In the scuffle between American and Orbitz, American was seeking “cost-effective distribution” for some of its lowest-yielding tickets, namely multi-segment tickets that some consumers book to beat the higher cost of nonstop fares, Linenberg says.

Linenberg argues that it is only a matter of time before other airlines, including Delta Air Lines and United Continental, get more aggressive.

“Every carrier is in a slightly different stage of development,” Linenberg says, adding that both Delta and United Continental are still preoccupied with sorting through the tech issues of their respective mergers.

That provided American Airlines with an opportunity, Linenberg says, as Delta and United Continental have “bigger fish to fry.”

Still, Delta indicated in its earnings conference call Jan. 18 that it has now removed its flights from about a dozen lesser-known online travel agencies, and also has barred distributors from selling its lowest-cost fares when they are paired in itineraries with low-cost fares from other carriers, Linenberg says.

Both Delta and American are tackling distribution-cost issues, albeit from different angles, Linenberg says.

Linenberg noted that Southwest Airlines gets more attractive economics than is the norm in the GDS deal it struck with Travelport. American Airlines and other carriers approached GDSs for similar deals and were “flatly refused,” Linenberg says.

Regarding American’s battle with Sabre, Leung thinks the two parties are playing a “game of chicken” and both have too much at stake not to come to an agreement.

“I see a resolution happening sooner rather than later given that summer seasonality is coming up … ” Leung says.

Linenberg adds: “It is difficult to fathom American tickets not being sold on Sabre.”

So as American continues its faceoff against Sabre, Travelport, Expedia and Orbitz, Linenberg sees a relevant angle in Google’s proposed acquisition of ITA Software and thinks he knows why several OTAs are publicly battling the deal while “airlines are silent.”

Linenberg argues that a Google-ITA combo, with so much detailed data at their disposal about consumer shopping behavior and airfares, could act like a GDS and deliver high-quality leads to airlines at a lower cost than airlines today pay to the traditional GDSs in fees.

Linenberg added he’s unsure whether airlines would use Google-ITA for distribution under this scenario instead of GDSs.

Meanwhile, Leung expects a Department of Justice decision on Google’s acquisition of ITA within the next week or so.

Leung’s handicapping of the decision is that there is a 80% to 90% chance that DOJ will approve the merger, albeit with conditions.

Original story:

Travelport said a judge in Chicago denied its request for a preliminary injunction against American Airlines, which sought to remove its inventory from Orbitz.com.

The move paves the way for American Airlines to pull its inventory off Orbitz.com, although no such action has been taken, with the airline confirming only that it is establishing “next steps and will communicate plans shortly”.

Travelport says despite the adverse ruling, “the case will continue on its merits until the request for a declaratory judgment is adjudicated. Travelport remains confident that it will ultimately prevail on the merits of the matter.”

A judge in Chicago on Nov. 19 temporarily blocked American Airlines from terminating its contracts with Orbitz Worldwide Dec. 1.

The judge in the Circuit Court of Cook County in Chicago granted Travelport’s motion for a temporary restraining order and thus barred American Airlines from ending its agreements with Orbitz.

If American had gone ahead and terminated its contacts with Orbitz, as it had notified the online travel agency it would do Dec. 1, then American Airlines’ flights would have disappeared from Orbitz.com.

In mid-November, Travelport won a temporary restraining order barring American from pulling its inventory off Orbitz, a move that the airline originally indicated could take place Dec. 1 with the termination of the American-Orbitz Worldwide contract.

Hearings involving Travelport and American Airlines over the Orbitz issue, with Travelport arguing that an American pullout from Orbitz would violate the American-Travelport GDS full-content agreement, are continuing in Chicago Dec. 17.

American Airlines is pushing a direct-connect strategy for travel agencies and GDSs, and was locked in court battles with Travelport over its desire to remove inventory from Travelport-controlled Orbitz.

Travelport is poised to begin biasing certain American Airlines’ flights by including an airline surcharge to travel agencies in fare displays, fare quotes and shopping displays beginning Dec. 20.

This means that some American Airlines fare displays in Travelport’s Galileo, Worldspan and Apollo GDSs would appear more expensive than some competitors’ fares, and travel agents using the GDSs and consumers shopping on online travel agency websites outside the U.S. likely would look beyond American Airlines for flights.

Orbitz says in a statement:

“We will continue to seek an arrangement with American Airlines to distribute American’s tickets on Orbitz.com and Orbitz for Business. Revenue earned on American Airlines tickets and the associated ancillary products – including destination services, car, hotel and insurance – booked on our Orbitz.com and Orbitz for Business sites accounted for approximately 5% of Orbitz Worldwide total revenue for the nine months ended September 30, 2010.

“In the near term, we believe that if American Airlines removes its flights from our websites, most of the impacted ticket volume will be replaced by other suppliers, and we will continue to earn most of the associated ancillary revenue.”

American Airlines adds in its own statement:

“We remained confident that we would prevail once all of the facts were considered and applaud the court’s decision to dissolve the temporary restraining order.

“In today’s competitive marketplace, it is important for American to be free to customize its product offerings to improve the customer experience as well as distribute its products in a way that does not result in unnecessary costs.”

The backdrop to the controversy is that several weeks ago Travelport apparently increased the booking fees it charges American after the airline revealed its intent to remove its inventory from Orbitz over distribution costs and the direct-connect issue.

American then revealed it would begin charging travel agents outside the U.S. a Booking Source Premium — or surcharge — for American bookings to recoup Travelport’s higher GDS fees.

American was slated to begin leveling the surcharges Dec. 20 and would collect them from travel agents beginning in February through debit memos.

Quick to wade in today was the Business Travel Coalition, with chairman Kevin Mitchell claiming the ruling is “merely the first shot” in a wider battle.

“The stakes in this conflict are clear: either an improved airline industry and distribution marketplace centered around the consumer, or one that subordinates consumer interests to the self-serving motivations of individual airlines endeavoring to impose their wills on consumers and the other participants in the travel industry.

“Single-supplier direct connect proposals, like the one advanced by American Airlines, can cause massive fragmentation of airfares and ancillary fees depriving consumers of the ability to compare the total cost of air travel options across all airlines.”

American Airlines is clearly not making many friends with passenger groups either. Charlie Leocha, director of the Consumer Travel Alliance, says:

“At its core, this dispute has nothing to do with business agreements, legal arguments, or distribution technologies.  This is simply a heavy-handed attempt by American Airlines to prevent consumers from easily searching and comparing its fares against those of other airlines.

“In short, the only ‘direct connect’ American really seems to want is a ‘direct connect’ to consumers’ wallets. American appears to have no idea why we fly.  We fly to get from point A to point B in the most convenient and cost-effective manner possible.  We don’t fly to be manipulated by proprietary airline reservation systems that limit our choices, prevent comparison shopping, and hide the real cost of travel.”

NB: Additional reporting by Kevin May.

This means that some American Airlines fare displays in Travelport’s Galileo, Worldspan and Apollo GDSs would appear more expensive than some competitors’ fares, and travel agents using the GDSs and consumers shopping on online travel agency websites outside the U.S. likely would look beyond American Airlines for flights.

For example, a Galileo GDS fare display in Germany for an American Airlines flight would include an extra $23.75 in the fare for a 2.5-leg flight.

These developments take American Airlines’ conflict with Travelport to a new level.

The controversy is taking place on several fronts.

American Airlines is pushing a direct-connect strategy for travel agencies and GDSs, and is locked in court battles with Travelport over American’s desire to remove its inventory from Travelport-controlled Orbitz.

Hearings involving Travelport and American Airlines over the Orbitz issue, with Travelport arguing that an American pullout from Orbitz would violate the American-Travelport GDS full-content agreement, are continuing in Chicago Dec. 17.

In a statement, American Airlines blasted Travelport’s pending move as “egregious,” and added:

Travelport is deliberately misleading agents and customers by hiding booking surcharge fees within base fares for American Airlines flights that it distributes to travel agencies, including online travel agencies. This deceptive practice falsely inflates the base fares for American Airlines flights, discriminating against American Airlines fares and deliberately misleading agents and consumers into believing that there are fewer choices available for low-cost flights. At the same time, Travelport is pocketing the increased booking fee.

The backdrop to the controversy is that several weeks ago Travelport apparently increased the booking fees it charges American after the airline revealed its intent to remove its inventory from Orbitz over distribution costs and the direct-connect issue.

American then revealed it would begin charging travel agents outside the U.S. a Booking Source Premium — or surcharge — for American bookings to recoup Travelport’s higher GDS fees.

American is slated to begin leveling the surcharges Dec. 20 and would collect them from travel agents beginning in February through debit memos.

And, Travelport would begin including those surcharges in fare displays beginning Dec. 20, as well.

In a statement, Travelport labeled American’s Booking Source Premium “wholly arbitrary.” Travelport says:

AA has announced a plan to impose a surcharge on bookings made by agencies that use Travelport in certain markets outside the USA and Caribbean from 20^thDecember 2010. Called a “Booking Source Premium” these charges are wholly arbitrary with extremes of variability by country that do not bear any discernible relation to what Travelport charges AA which only varies on a regional basis.  Through this action, the very travel agents who deliver valuable revenue to AA in these international markets are being penalised.

In addition, Travelport states that American’s surcharge to travel agents will effectively be passed along to consumers. Travelport states:

As these additional charges by AA will effectively be borne by consumers, Travelport believes that the true cost of booking an AA ticket will need to be shown to consumers at the point where a buying decision is made so that consumers can make an informed choice about which carrier to fly.

Travelport notified agents of its enhancement, entitled “Booking Source Premium Fee for American Airlines (AA). Here’s the notification, obtained by Tnooz:

American criticized what it considers Travelport’s attempt to portray the airline’s surcharge to travel agents as a passenger fee. American stated:

The Booking Source Premium is not any kind of passenger fee and should not be portrayed as such.  It is categorically not part of the fare for air transportation, nor is it related to any other kind of service rendered to the passenger by American or any other charge from American that in any way a passenger can be required to pay in the name of American.  To suggest otherwise would be, in our view, an unacceptable deception on consumers for any sales intermediary to engage in this deceptive behaviour while processing tickets for American, without prejudice to the intermediary’s possibility in its own name to ask its customers to bear some portion or all of the intermediary’s own costs separate from the air fare.

The airline further argues that Travelport “strikes a blow against transparency for air travel” and that “Travelport is using its subscribing agents worldwide as vehicles for retaliation against an airline that is looking for better ways of interacting with the agency community.”

Travelport rejects the notion that its enhancement amounts to display bias or discrimination but considers the move a way to provide more transparency to agents about the American Airlines Booking Source Premium that they will incur beginning Dec. 20.

“Travelport is showing our travel agencies the full price, including AA’s surcharges, so that they can inform their customers the true cost of an AA flight,” Travelport states.

The controversy is not just about American Airlines, Orbitz and Travelport, but might be considered part of a broader airline-GDS power struggle over the future of airline distribution.

The following is Travelport’s full statement about American’s Booking Source Premium and Travelport’s GDS display changes:

AA has announced a plan to impose a surcharge on bookings made by agencies that use Travelport in certain markets outside the USA and Caribbean from 20^thDecember 2010. Called a “Booking Source Premium” these charges are wholly arbitrary with extremes of variability by country that do not bear any discernible relation to what Travelport charges AA which only varies on a regional basis.  Through this action, the very travel agents who deliver valuable revenue to AA in these international markets are being penalised.

As these additional charges by AA will effectively be borne by consumers, Travelport believes that the true cost of booking an AA ticket will need to be shown to consumers at the point where a buying decision is made so that consumers can make an informed choice about which carrier to fly.

Therefore, this AA surcharge will be shown in the Travelport GDSs from 20^th December  in fares displays and fares quotations so that travel agents have full transparency and can compare the ultimate price and consumers know what they have to pay.  Furthermore, this means that where AA tickets are issued this Booking Source Premium will be collected along with the other fees and charges relating to AA plated tickets and remitted directly to AA, obviating the additional inconvenience and cost to the travel agencies of having to deal with ADMs issued by AA.  The vast majority of agency associations around the world have told Travelport that the planned approach of AA to use ADMs for this purpose is not in keeping with the purpose of ADMs and that there has not been the requisite, or any, consultation between the parties.

It is important to understand that this issue and resulting actions have been precipitated in direct response to AA’s actions to withdraw ticketing authority from Orbitz, a large customer of Travelport as a result of that customer’s refusal to submit to AA’s heavy handed tactic to force Orbitz to use the AA direct connect.  Further, based on AA’s public statements, this is clearly not an isolated incident concerning one U.S. based travel agency and AA, and neither is it anything to do with technology to enable the sale of airline optional services through the GDS. Rather it is an attempt by AA to fundamentally change an existing distribution model that works well for all constituents – airlines, travel agencies, and consumer travelers – and to do so by abandoning a pro-competitive and pro-consumer economic and technology framework.   Travelport is taking a position to oppose such a move which has not been fully thought through and where there is imbalance between the supplier and intermediary sides of the distribution equation.

Insofar therefore as AA’s planned surcharge fee will inevitably cause some disruption despite the mitigations we have put in place as described above, we regret any inconvenience to our travel agency customers.  However we do think that the travel agency community understands and supports the position that Travelport has in this wider matter and that it is fundamentally right to support the consumers’ right to have maximum transparency and the ability to shop, compare, and book travel services in whichever channel they chose to buy from.

The following is American’s full statement about Travelport’s actions:

Travelport is deliberately misleading agents and customers by hiding booking surcharge fees within base fares for American Airlines flights that it distributes to travel agencies, including online travel agencies. This deceptive practice falsely inflates the base fares for American Airlines flights, discriminating against American Airlines fares and deliberately misleading agents and consumers into believing that there are fewer choices available for low-cost flights. At the same time, Travelport is pocketing the increased booking fee.

The Booking Source Premium is not any kind of passenger fee and should not be portrayed as such.  It is categorically not part of the fare for air transportation, nor is it related to any other kind of service rendered to the passenger by American or any other charge from American that in any way a passenger can be required to pay in the name of American.  To suggest otherwise would be, in our view, an unacceptable deception on consumers for any sales intermediary to engage in this deceptive behaviour while processing tickets for American, without prejudice to the intermediary’s possibility in its own name to ask its customers to bear some portion or all of the intermediary’s own costs separate from the air fare.

By embedding the booking surcharge into the base fare, Travelport’s action is patently misleading and strikes a blow against transparency for air travel. This egregious action once again shows that Travelport is willing to stop at nothing to protect an outdated business model and platform for distribution of airline services from new technologies that are more robust, flexible, and cost effective.  Travelport is using its subscribing agents worldwide as vehicles for retaliation against an airline that is looking for better ways of interacting with the agency community.

Travelport has inaccurately told agents on several occasions that American acted on its own in implementing the booking source premium.  However, the fact remains that the booking surcharge for American flights was implemented only after Travelport arbitrarily increased booking fees for flights on American Airlines booked through Galileo and Worldspan, the GDSs owned and operated by Travelport.

Travelport sent a letter to Farelogix, which handles direct-connect distribution as a contractor for American Airlines, asking Farelogix to confirm that the technology it uses in AA Direct Connect does not infringe on an Orbitz patent, U.S. Patent 7,769,610, dated Aug. 3, 2010.

The patent dispute breaks out as Travelport and American Airlines already find themselves in litigation over American Airlines’ notice to Orbitz that the airline intends to pull its flights from Orbitz Dec. 1

That patent, filed in early 2007 and developed by Orbitz staff, including employee #5 Roger Liew, may have something to do with the Supplier Link direct-connects that Orbitz established with its founding airlines.

The Orbitz patent covers a system for booking airline tickets on multiple airline host environments when some airlines are connected directly with the distributor and others use GDSs for some functionality.

A summary of the patent states:

The present invention relates to a system and method for booking air travel itineraries on multiple host ticketing environments. According to an embodiment of the invention a method of booking an itinerary on at least one of a multiplicity of host environments includes providing a plurality of host adaptor modules. Each host adaptor module is configured to interact with one of the host ticketing environments. A booking engine is provided for receiving commands related to booking the air travel itinerary and determining an appropriate host ticketing environment for processing the commands based on a number of predefined criteria. Commands are received by the booking engine and the booking engine determines a first host ticketing environment which is the most appropriate for processing the command. The booking engine then forwards the command to a first host adaptor module which is associated with first host ticketing environment selected by the booking engine. The host adaptor module receives the command and issues the command to said first host ticketing environment.

Of its actions, Travelport states: “Travelport continues to invest in innovative technologies, including licenses to various technologies and we will protect our intellectual property rights in those innovations.”

Since none of the parties — American Airlines, Farelogix, Travelport and Orbitz — are going into details publicly about the patent dispute, it is difficult to determine which elements of the American Airlines/Farelogix direct-connect Travelport believes may impinge on the Orbitz patent.

The nitty-gritty of the patent dispute may involve the Farelogix FLX Supplier Content Adapter (Direct Connect), which Farelogix says “allows users to make and manage ‘direct’ bookings and reservations out of the Supplier Reservation System without any third-party intervention, and at significantly reduced cost to the supplier.”

So, in theory, if American Airlines and/or Farelogix were possibly infringing on the Orbitz patent, why would it be Travelport that steps in to enforce the patent instead of Orbitz?

Travelport’s private equity owners acquired Orbitz Worldwide as part of their purchase of Cendant’s travel distribution businesses on Aug. 23, 2006.  A little less than a year later, Travelport spun off Orbitz Worldwide as a public company, but Travelport still owns 48% of Orbitz’s outstanding equity and believes it inherited the right to enforce Orbitz patents.

American Airlines and Travelport already find themselves in litigation on several fronts over American Airlines’ notification that it intends to pull its flights from Orbitz Dec. 1.

The airline is seeking to upend the current airline-GDS distribution model and merchandising  paradigm for ancillary services by enticing travel agencies, including Orbitz, to use AA Direct Connect instead of GDS services.

Travelport alleges that if American removes its inventory from Orbitz, then this would violate the airline’s full-content agreement with Travelport GDS.

The dispute between American and Farelogix, on the one hand, and Travelport and Orbitz on the other, over the Orbitz patent widens the current battleground.

It certainly would be a significant setback to American if it or Farelogix were found to have infringed on the Orbitz patent and forced to reconfigure AA Direct Connect.

And, in the interim, Travelport would be able to argue to large travel management companies and other travel agencies that they would be entering a quagmire if they invest resources into interfacing with AA Direct Connect.

Meanwhile, Farelogix expresses confidence that it hasn’t violated anyone’s intellectual property and views Travelport’s letter as a scare tactic, designed to stall the American Airlines initiative.

What is patently clear from all of this is that the overall dispute inevitably will get messier, and may turn into signature moment in the looming merchandising and distribution fight over flight inventory and ancillary services.

Speaking during Orbitz’s third quarter earnings call, Harford says Orbitz continues to negotiate with American over the issue, but believes the airline’s actions are designed to fragment content, limit consumer choice and force travelers to bear American’s distribution costs.

Harford said GDSs play an essential role in negotiating with airlines on behalf of travel agencies and that a direct-connect approach would serve to fragment content. Although a public company, Orbitz Worldwide is controlled by Travelport, which operates the Galileo and Worldspan GDSs.

Harford said he was unaware if American is taking a similar approach with other online travel agencies.

The original story follows:

American Airlines apparently has expanded its direct-connect drive beyond the GDSs and taken it to the online travel agencies, specifically Orbitz.

In a regulatory filing, Orbitz says American notified Orbitz Worldwide that Orbitz.com and Orbitz for Business will no longer have the authority to ticket American flights beginning Dec. 1, 2010, Orbitz says.

The dispute, according to a source, revolves around American’s demand that Orbitz connect to AA Direct Connect for flight inventory and ancillary services, and consequent distribution economics. American wants to take control of its own merchandising through AA Direct Connect rather than have it handled by third parties, including OTAs and GDSs. Farelogix is contracted to handle direct-connects for American.

Orbitz says the airline notified it Nov. 1 that it will terminate Charter Associate and Supplier Link agreements with Orbitz Dec. 1.

The charter associate agreement had its origins when American and other major carriers founded Orbitz in 2001. It was due to expire at the end of 2013.

The charter associate agreement provides Orbitz with transaction payments, marketing support and nondiscriminatory access to seat availability for published fares. Also as part of the agreement, Orbitz pays a portion of American’s GDS costs.

The Supplier Link agreement, signed in 2004, requires Orbitz to book an agreed-upon number of flights through a direct-connect between Orbitz and American’s internal reservation instead of through a GDS.

American apparently is insisting that Orbitz connect directly to AA Direct Connect instead of through the current supplier link setup, a move that Orbitz is resisting because of the integration disruption, allegedly unproven track record of AA Direct Connect and unfavorable distribution economics.

Under the Supplier Link agreement, which American intends to terminate Dec. 1, the airline had to pay Orbitz a transaction fee for each ticket sold.

It looks like the Orbitz-American dispute is shaping up as a test case for American’s future relationships with OTAs, and it could have repurcussions for other airlines’ OTA contracts, as well.

Consider American’s notification to Orbitz as an opening salvo in their negotiations over the issue.

“For now, customers still can compare and purchase American’s fares on Orbitz and Orbitz-powered sites,” says Cory Garner, American’s director of merchandising strategy, referring to the Dec. 1 cutoff date. “American values its longstanding relationship with Orbitz and desires an agreement that works for both parties.”

Garner adds: “We continue to negotiate in good faith to reach a viable, mutually beneficial agreement with Orbitz. We believe it is important that our distribution channels be cost-effective and efficient. Consumers benefit when inefficiencies in the travel distribution marketplace are addressed.”

Orbitz also released its third quarter financial results today.

In the third quarter, Orbitz Worldwide’s net income increased 120% to $15.3 million on revenue of $194.5 million, a 4% jump.

Orbitz says the earnings growth was driven by gains in gross bookings, transactions and global room nights.

In the Orbitz Worldwide portfolio, eBookers was a particular standout.  Room nights at eBookers climbed 57% in the third quarter, compared with a year earlier, Orbitz says.

Alexis de Belloy, HomeAway’s managing director, North America, said the company is unfamiliar with all the terms involved with the switch, adding it’s “too early to say whether this deal is the solution for our industry.”

de Belloy was discussing the switch during today’s PhoCusWright webinar, “The Vacation Rental Revolution.”

And, he was expanding on comments that Carl Shepherd, HomeAway’s co-founder and chief strategy and development officer, made at the VRMA conference in Texas earlier this week.

de Belloy said a switch, in theory, would be a “fantastic way” to organize vacation rental distribution and the company is interested in anything that makes distribution easier. And, that’s understandable, since de Belloy said HomeAway adds about 15,000 properties per month globally.

Jessica Kornacki, vice president of sales and marketing for Endless Vacation Rentals by Wyndham, and Christine Petersen, president of TripAdvisor for Business, also spoke during the webinar.

Kornacki said Endless Vacation Rentals is glad to see technological innovation, as is under discussion with the VRMA-Pegasus Solutions switch, and is taking a “wait and see” stance about its development.

And, Petersen, without commenting directly about the switch, said TripAdvisor, too, supports improvements to vacation rental distribution, as well as to inventory management for vacation rental owners.

Petersen said online booking and payment systems would solve many problems for consumers by adding another degree of trust, but could be disruptive to the way owners manage their properties.

Asked by webinar moderator Douglas Quinby, senior director of research at PhoCusWright, whether lines were blurring between the professionally managed and vacation rental by owner sides of the industry, the three panelists agreed that is the case.

Quinby noted that FlipKey, of which TripAdvisor holds a majority stake, initially focused on professionally managed properties but now plays both sides of the market.

Petersen pointed out that TripAdvisor acquired rental-by-owner oriented Holiday Lettings in the U.K. and sees opportunities for TripAdvisor in both spectrums of the market.  TripAdvisor is looking “at both as potential wins,” she said.

de Belloy of HomeAway, which offers inventory predominantly from individual owners but has been adding professionally managed vacation rentals and technology to facilitate it, said HomeAway has never made a distinction between the two vacation rental types and has found in surveys that 50% of travelers don’t care about the difference.

HomeAway has recently acquired Instant Software and Escapia to assist in the online booking of managed properties, and de Belloy says HomeAway wants to make it easier for such properties to get distributed through its sites.

HomeAway’s overriding goal, he adds, is to convince consumers to book vacation rentals instead of hotels.

Kornacki said from the vantage of Endless Vacation Rentals, which deals with professionally managed properties, some aspects of the two types of property ownership are melding, but contended that those offered by vacation rental management companies are “the way to go” because of numerous features, including loyalty programs and best rate guarantees.

The industry needs to educate consumers about the differences, Kornacki said.

—–

Disclaimer: The writer does some work with PhoCusWright as a research analyst.

Who and what are you (including personnel and backgrounds)?

Swiftrank is positioned as the leading global online hotel networks. We are a network of 12,000 location-based travel sites with a truly global profile.

The company started in 2008, and we have since then built out a scalable site development platform and a superb collection of relevant travel domains – from short-tail sites like Lasvegashotels.com and Sydneyhotels.com, to mid- and long-tail terms with a focus on luxury, boutique, and other high-value hotel terms.

Our company is headquartered in Singapore, with offices in the US (Boulder, Colorado) and the UK. We are comprised of hospitality executives, product specialists, and technologists.

Leadership team bios.

What financial support did you have to launch the business?

Our company is self-funded by the founders.

What problem are you trying to solve?

We believe that location-based travel search is an important element of consumers’ online search and discovery process.

Our goal is to provide quality, relevant, and updated sites in key location markets to assist travelers in selecting from the finest hotels in those markets at the most competitive rates.

Describe the business, core products and services?

Our business involves the optimization and monetization of our network of sites. In terms of revenue model, we currently are working of three: first, all our sites include booking capability through a backend booking provider, and we garner revenue from consumed bookings.

Second, and most relevant at present, we are in the process of signing direct relationships with hoteliers, hotel brands, ownership groups and marketing agencies to drive direct visits and bookings to our hotel partners on our network of sites.  These today are being designed on a cost-effective CPC basis.

Third, there may be an opportunity for a display advertising business on our sites, but this is, indeed, a tertiary priority at present.

Who are your key customers and users at launch?

Key customers at launch are hotels, ownership groups, management groups, brands, and the agencies that serve them. Our key users are consumers searching for hotels for their next trip by doing location research.

Did you have customers validate your idea before investors?

Our business began with investment from our founder, and it continues as self-funded in this regard. As we’ve launched our sites publicly in mid-2010, revenues have followed.

What is the business AND revenue model, strategy for profitability?

This is above.

SWOT analysis – strengths, weaknesses, opportunities and threats?

Strengths:

• Strong set of sites and our technical ability to create good UI on those sites and to rapidly develop strong direct integrations with our potential partners to pull live hotel rates and availability.

Weaknesses:

• It’s inevitable at this stage – where traffic is growing materially monthly and revenues are following – to be sure which “deals” and partnerships will best optimize our users’ experience and our revenue per customer. This is an ongoing analytical process, and we’re learning by testing and carefully evaluating performance. These are exactly the problems we are supposed to have right now, but they always force lots of evaluation as we balance the numerous opportunities right in front of us.

Opportunities:

• International markets. Last month site users in 77 countries booked hotels in 46 countries across our network. That’s a staggering global distribution of customers with a high purchase intent, and this reach offers something truly incremental to hotels and hotel companies.   We are challenged by working through the best way to leverage this in favor of our site users and our company’s partners.

Threats:

• Ensuring that we are able to provide an excellent user experience across a wide array of travel sites in a wide array of locations.  We feel very good about our approach to doing this scalably, but this is of course one thing that keeps us on our toes.

Who advised you your idea isn’t going to be successful and why didn’t you listen to them?

We won’t name names, and time will tell whether we have what it takes to execute on this model. This worry keeps us humble, hard-working and focused.

What is your success metric 12 months from now?

• Revenue per site user
• User engagement and purchase confidence on our sites
• Interest on the part of our target customers to engage with us in important ways to increase their global footprint, reach, and performance.

NB: TLabs Showcase is part of the wider TLabs project from Tnooz.