A new TripAdvisor subsidiary stealthily is working to launch a new private sale offering of four- and five-star hotels.

The new Expedia Inc. operating company, working under the project name RICO because details weren’t public, would be part of Smarter Travel Media [including BookingBuddy, SmarterTravel, SeatGuru, Airfarewatchdog and FrequentFlier.com], which in turn is part of the TripAdvisor Media Network.

Plans may be subject to change and there are a lot of lingering questions about the under-the-radar initiative since nothing has been officially announced about project RICO, which likely won’t be the ultimate name of the company.

But SmarterTravel Media is outlining the following details to prospective hotel partners.

The new website, slated for a soft launch in late August or early September, would offer four- and five-star hotels only and give them the ability to offer their properties exclusively — at least by region — for up to seven days to qualfied members.

Initial plans call for RICO to target high-income individuals, particularly affluent women 35-55 years old.

The target RICO consumer-member, who supposedly can join by invitation-only, is a “selective, brand-conscious shopper who loves to brag about the rare find she’s scored” and is “always aware of the trends but doesn’t necessarily follow them,” according to sales materials.

Hotels signing up for this Smarter Travel Media private sale offering would offer net rates, have no up-front costs and do not need to sign long-term contracts.

As is standard with the merchant model, consumer hotel bookings would be nonrefundable.

The hotel can control the room type and blackout dates, and reservations are handled via Excel spreadsheets, with no extranets or rate codes required.

Karen Kirsten, a spokeswoman for Smarter Travel Media, wouldn’t discuss project RICO or confirm its existence, saying the company never discusses new products before they are launched.

“As a leader in travel deals business, deals are our sweet spot and we will continue to evolve and grow our products,” Kirsten says.

Smarter Travel Media’s entry into private sales coincides with the travel industry’s new flirtation with this trend, as evidenced by the relatively recent launches of JetSetter, Kayak Private Sale, RueLaLa.com, Vacationist and Tablet Private Sale, to name just a few companies in the segment.

RICO would be a departure for Smarter Travel Media, which until now focused exclusively on the advertising and media business and not merchant-model hotel transactions.

It’s unclear whether RICO would handle the transactions itself or outsource them to a third-party company, as Kayak did with its private sale effort.

It also remains to be seen why Expedia Inc. decided to add a new operating company for the RICO effort instead of having Expedia.com, SmarterTravel or another existing subsidiary merely introduce a new private sale product to its portfolio.

There are a number of theories on the new subsidiary angle, ranging from speculation about the possibility of TripAdvisor having acquired an as-yet undisclosed company to kick-start project RICO to the advantages of focus that a separate operating unit would bring.

So, what do competitors think of the fact that TripAdvisor President and CEO Stephen Kaufer now would have a private-sale transaction site to round out TripAdvisor’s advertising and metasearch businesses?

Says one competitor: “It’s great to see validation of the category. Everyone likes this space.”

NB: This is a guest post by Pedro Colaco, president and CEO of GuestCentric Systems.

Due to the recent economic downfall guests are searching for alternative accommodation products for their leisure travel.

Vacation rentals are capitalizing on this trend and finding ways to reinvent their offer and look for new online distribution channels.

Firstly, there are now important distribution sites like Homeaway to sell their units.

Secondly, vacation rental owners and managers finally understood that having their own website and a reliable ecommerce system with social marketing tools can help them grow their business.

These two aspects, coupled with consumers’ willingness to accept lower levels of service, are now turning vacation rentals into real alternatives to hotels for leisure travelers. But what aspects of the environment are influencing the shift to vacation rentals?

1. Guest search is intensifying

Industry studies show that the overwhelming majority of travelers (up to 80%) select their accommodation through the Internet and over 50% end up booking online.

In addition, online search is intensifying and consumers are searching tens of sites for experiences outside the “normal” hotel before booking.

New accommodation products are emerging with an experience and budget orientation: vacation rentals, design hostels and couch surfing are now all valid accommodation alternatives for leisure travelers.

2. Specialized distribution networks are being established

Searching for and booking vacation rentals online has been difficult to date. Mostly, vacation rentals have been rented out via intermediaries and word-of-mouth.

But, since HomeAway acquired VRBO in 2006, the vacation rental online distribution business has grown very rapidly as an alternative to traditional mediation agent.

HomeAway.com has been the unifying force that has taken a highly fragmented and localized business and made it easy for consumers to search for vacation rentals on a global scale.

This rapid adoption of distribution sites is similar to the adoption of online travel agents like Expedia as a preferred tool to search for and book hotels in the late 1990’s and early 2000’s and is the foundation of establishing e-commerce and distribution networks for vacation rentals.

3. Professional website design and high quality pictures are affordable

A successful online business starts with a website that transmits quality, professionalism and credibility through professional design and good pictures.

With today’s technology it is extremely easy for vacation rentals to have a professional website that:

• Communicates their property’s unique look and experience to web visitors.
• Is quick and easy to setup, avoiding long and complex web design “projects”.
• Can be kept updated without external involvement.
• Provides a pay-as-you-go model, so that upfront investment is minimized.

When setting up a website, images are paramount, as they are the second factor right behind pricing in terms of influencing the choice of property to stay in.

With the proliferation of digital cameras, it is now extremely easy even for amateur photographers to create good pictures that provide renters with the experience at the property.

4.Ecommerce solutions are readily available

82% of hotel guests prefer to book directly at the website of the property if they can get a good price and a trustworthy experience.

While vacation rentals are not experiencing this level of direct business yet, industry studies show that direct rental business is increasing at good pace, and it is expected that the same behavior as for hotels will apply.

If you tie these results with the rate of growth of online bookings in 2009/10, then now is the perfect time for vacation rentals to capitalize on the online opportunity.

A powerful ecommerce offer enables properties to maintain good levels of occupancy rates and decrease distribution costs.

5. Social engagement is the new word-of-mouth

The use of social media like Facebook and Twitter has changed the way people communicate, forever. Word-of-mouth is now amplified by millions.

This creates the perfect opportunity for vacation rentals to overcome the SNAD (significantly not as described) curse, as positive reviews of a property distributed by a network of friends can generate immediate referral business.

Satisfied customers will always provide and share good reviews and comments about their stay. Hence, no matter the size of the property it is very important to have direct communication with guests in order to promote and sell their units and understand their needs.

This will reflect on an increase in people that follow the property and create a snowball effect on the property’s brand. New technologies simplify this social interaction and provide the necessary information to create strategic viral marketing campaigns to increase market share.

Conclusion

Guest search is intensifying and alternative accommodation products like vacation rentals are becoming mainstream options for leisure travelers due to their willingness to accept lower levels of service.

Vacation rentals are capitalizing on this trend and behaving like mini-hotels by looking for new online distribution channels, establishing their own websites, e-commerce systems and leveraging social media to overcome the SNAD (significantly not as described) curse, and create referral business.

By adopting this strategy, vacation rentals are becoming mini-hotels that can compete for business and improve occupancy rates and profitability and weather difficult economic times.

NB: This is a guest post by Pedro Colaco, president and CEO of GuestCentric Systems. More information and case studies.

At Microsoft they have this great expression that has passed into common language – it’s called “eating your own dog food”.

It implies that you must consume the products that you create. As Microsoft was the epitome of the software world and changed the way people developed code, this made sense.

While the company may look a little dated and as less able to remain relevant than, say, 15 years ago when I was there, it still cuts a swathe in the world. And rightly so.

Microsoft like many companies particularly Google and Yahoo are deeply involved in social media.

In travel, the powerhouse in our little world has to be Expedia and it’s TripAdvisor product.

But it is by no means the only game. Twitter has taken the sector by storm – in my view not always for the better, but that’s another story.

There is another issue – that of the whole concept of social media within companies.

A recent study by Creative Group on where Marketing and Advertising Execs Get Their Social Media Information seems to be the antithesis of the “eating your own dog food” concept.

But what of the other side. Are there any studies that show us how people are consuming social media inside companies, and is it healthy?

Corporations have done plenty to build security into their corporate IT groups – social media seems to want to break down those barriers and, indeed, cause a company a lot of problems.

There is even software from a company called FaceTime whose product Socialite is designed to  “… track users across multiple social media platforms; prevent data from leaving the company, either maliciously or inadvertently…. ”

This is a bigger issue that perhaps people realize. Of course people spilling the beans outside of work with the data stores they carry with them (aka their memories) are hardly controllable by software (or hardware).

But there is an increasing trend towards social media monitoring tools from just about every software vendor worth his salt.

An interesting study was released last week on the subject (referred to here).

On the hiring side, companies are using social media to check out prospective staff (estimates vary from 25% to more than 50% of companies are checking you out on Facebook, Twitter and other social networks).

But it’s interesting to note that now they are starting to monitor and even control use of social media during office time.

Sadly there is still a dearth of talent in the area of social media. If you put “SM specialist” on your resume, you can get hired in a heartbeat.

Or so it would seem judging by some of the talent I have been exposed to lately inside some organizations who should know better.

At least one major hotel player has had to do conventional (aka public relations) spin/damage control after some ill-advise comments posted by an authorized employee.

And what of a company’s internal consumption of social media? Should this be encouraged or curtailed?

Perhaps we should encourage responsible use of social media inside corporations, even amongst ourselves.

Like everything else, moderation should be the order of the day.

My biggest concern is not that bad things will happen. I worry more about the amount of lost productivity.

To support this, UK Jobs website MyJobGroup published a survey earlier this month, asking 1,000 people to determine their use of social media at the office.

Employees spend an hour a day during work time on Facebook, thus accounting for £14 billion pounds of lost work time.

On the plus side – at least they are not round the pub gassing to their mates. But you have been warned…

TripAdvisor’s high-margin advertising and media business is on a tear and now accounts for nearly 10% of parent company Expedia Inc.’s revenue.

During the second quarter of 2010, TripAdvisor’s revenue climbed 55% to $82 million, compared with the same period a year earlier.

In fact, when you look at Expedia Inc.’s overall advertising and media revenue — including revenue from ads on transaction websites such as Expedia.com and Hotwire — it now accounts for 13% of revenue, even higher than air, which came in at 12%.

Among the highlights for TripAdvisor in the second quarter, it had 15,000 hotels signed up for its subscription product, Business Listings, which was launched in January. That’s up from nearly 12,000 in late April.

Expedia Inc. President and CEO Dara Khosrowshahi, speaking during last week’s second-quarter earnings call, characterized TripAdvisor’s organic and international growth as a “great combination.”

“TripAdvisor is growing in Europe on a country basis anywhere from 50% to 100% …” Khosrowshahi said. “It’s going very aggressively to the Asia-Pacific regions. We’re losing a lot of money in China, [but] that’s a good thing because that means we’re investing more aggressively in China than anyone else, we believe.”

User review giant TripAdvisor has continued its move to become available on-the-move as well as desktops by launching the service on Nokia smartphone handsets.

The agreement is in two-parts: an app (available in 12 different languages) and integration of TripAdvisor content into the Nokia Ovi Maps system.

The standalone app includes tools to search for hotels, restaurants and things to do in any given location (tapping into the handset’s GPS), read and post reviews, and browse the TripAdvisor forums.

The system also allows users to filter for services based on rating, distance and prices (for hotels).

Similar to the iPhone and Android apps developed earlier this year, users can also use the TripAdvisor metasearch tool for flights on the handset, with search results and existing filters included and direct links to airline websites for booking.

The Ovi Maps integration sees TripAdvisor content and markers placed as patch within the existing handset mapping tools. Parent company Expedia recently extended its tool to have hotel product automatically featured on the Ovi system.

NB: App images from AllAboutSymbian.

Pressure is coming at Google from some of its biggest advertisers demanding that it plays fair when finally unveiling how it will use the $700 million acquisition of ITA Software.

Expedia CEO Dara Khosrowshahi told analysts during the company’s Q2 2010 earnings call late yesterday that the Google-ITA Software deal could have “very significant consequences” on the sector.

Highlighting Google’s “considerable market power”, Khosrowshahi said one of the main areas which Expedia will be monitoring is whether the search giant favours its own content and results over those of existing advertising partners, “whether it’s algorithmic, inside their system or hard coded”.

The extent to which such activity takes place would be a problem for Expedia, Khosrowshahi said.

“The way we’ve seen them operating in general has been fair, but we think they’d be wise not to kind of favor their own internal products over external products and create an unfair playing field.”

Despite the concerns, Expedia was in “good shape” to handle the likely impact of the deal, with Khosrowshahi acknowledging that executives at Google have “done the right thing” and will build “a great product”.

Meanwhile, questions emerged during the call over whether Expedia would be willing to expand its Best Fare Search product as a result of the Google-ITA deal so third parties could tap into its data, rather than remain customers of ITA.

Expedia’s chief financial officer Michael Adler said the ten-year-old BFS pricing system is competitive with any of the other pricing products in the marketplace (such as those from the GDSs and others highlighted in Google new travel ecosystem).

Adler admitted Expedia may talk to some potential partners or airlines about using BFS but hinted the product had been built as an “in-house solution” and a fair amount of work would be required to commercialise it for third parties.

He added:

“At this point, it’s not something that we know whether we want to invest in, put time in and whether, frankly, it’s practical. But we’ll see.

“We’re very happy, especially with Google buying ITA, that we’ve got the BFS team and makes us worry a bit less about what the potential consequences of that transaction could be, at least for us.”

NB: Earnings transcript available at SeekingAlpha.

Yet more distribution for TripAdvisor on leading UK travel websites as Directline Holidays joins the likes of Thomas Cook and Thomson by integrating hotel reviews.

Directline claims the move is in response to customer requests for “impartial hotel reviews and ratings” on the site.

The integration is along similar lines to white label partnerships between the user review giant and other travel ecommerce and content sites.

Each hotel page carries TripAdvisor’s overall rating and the five most recent reviews for a hotel property.

User provided pictures of the property are also included alongside a breakdown of key areas such as room, service, value and cleanliness.

Directline’s move to join the party comes after Thomas Cook performed a strategic u-turn in February 2010 and also placed TripAdvisor reviews into its hotel pages, less than two years after extolling the virtues of its own review system developed through BazaarVoice.

Thomson integrated TripAdvisor reviews in September 2007.

With so much being written on the topics of travel inspiration and how travel search is evolving, I’ve come to the conclusion that the differences are really much less than what makes them similar.

Indeed, both are primarily focussed on influencing the undecided purchaser of travel content.

• Fish: “…you’re not a cat!”
• Cat:  “I am indeed a cat, and this, indeed, is a hat.”

Taking the lead from Dr Suess, my strong belief is that a difference of opinion in nomenclature is immaterial for the purpose understanding what it takes to win in this space.

In the early days of online travel a lot of effort was put into improving the shopping function for travelers who knew exactly when and where they wanted to travel. Displaying availability and price on the one page was a major step forward, but one that today we all take for granted.

Then the calendar display was added, and travelers were also shown the lowest price one or two days either side of their preferred date of travel.

Over time the calendar has grown to a month or more, and therefore the shopping experience has improved for those travelers willing to show some flexibility; but at its heart search has still required a known destination and an approximate known date of travel.

This is now changing, and changing in a major way.

The second thing that is changing is that travel inspiration is not far behind mobile, and maybe even close to social when we are talking 2010 buzz words.

A lot of airlines and other travel suppliers plus intermediaries are spending serious time and money trying to make their websites more appealing to the undecided holiday maker.

At the same time, many independent companies are also trying to carve out a meaningful role for themselves by being the destination site to influence the undecideds – those leisure travelers yet to commit to a destination.

But are these two really that different? Once the calendar gets to a certain size thereby eliminating the need to commence the search by inputting dates of travel, and especially once the requirement to start a search with a fixed destination is removed, then we have moved into a new realm of open ended search that is continually refined by the user. If the old search was iterative (start, stop, go back to start again), the new search is more of a sifting process.

When you think about it, how do we generally reach conclusions in any matter of uncertainty?

We typically start by gathering a set of known facts, asking around to supplement this information, and then we sift through all the information discarding pieces along the way until we reach a decision that we consider appropriate – travel technology is now starting to replicate this process.

If what I have written above is correct, then it stands to reason that reinventing travel search along these lines cannot be separated from the current quest to own travel inspiration.

If search and inspiration as categories are being condensed, where is the big outstanding question? In my opinion, the question yet to be answered is this:

Does the search component of travel inspiration require more technological muscle and grunt, or is it social over science and personal contacts over proprietary cache?

Or to put it another way, is technology in and of itself, the entire answer for inspiration?

To illustrate the point, I’ll use two very different approaches launched recently by major players in travel who have both come at the search part of inspiration from different corners.

The first example, and one that launched in May, is Kayak Explore. Rather than rely on using the TripAdvisor approach (detailed below), they have gone for a more technology driven solution that turns search upside down by obliterating the need to have a destination in mind prior to commencing the shopping.

By loading more data into the browser, and incorporating the use of sliders into the user interface, the intention is to create a kind of playground or sand box where the results are continually narrowed down until seeking inspiration leads to action, hopefully an intent to purchase.

TripAdvisor recently launched Trip Friends using the Social Graph from Facebook. This definitely uses a more social approach to search, as it relies partly on what Bob Offutt from PhoCusWright described to me previously as “the wisdom of crowds”.

If I start my travel search with a totally clean slate and then whittle down the options based on the experiences of my friends, then my inspiration is coming from trusted sources and I am much less reliant on marketing from suppliers or advice from less trusted sources.

I have put Kayak and TripAdvisor in different camps trying to answer the same question – where should I travel to next? But there may be a third option.

More similar to the TripAdvisor approach, but taking the wisdom of crowds one step further, it is the approach that retail sites such as Amazon have been using for years.

The cues to buy are coming not from people I personally know, but from people who the system has determined have similar tastes to me based on past purchase behaviour.

Or my search history on the site. Or any one of the increasing number of data points I have left behind in my history of online activity.

Adding this layer on top of some of the powerful computing platforms being built to support non destination driven search could be a very compelling combination. And if travel inspiration is anything like online retail, then a profitable combination also.

Using the Inspiration Footprint Matrix that was first introduced in a previous Tnooz post, I’ve plotted how the initiatives described above have potentially moved the location of TripAdvisor and Kayak insofar as it pertains to their role in travel inspiration.

When this matrix was first published there were a couple of good comments questioning the axis, amongst other things.

Based on this feedback I removed OTAs from the chart as this was way too broad, but I’ve stuck with the original axis.

Price may have merit as one of the axis as you could split inspiration websites offering high priced items versus those at the lower end, but often a trip comprises of a combination of higher priced items (the flight) with some lower priced items (transfers) so I’m not convinced this would hold up as travel search expands to cover a wider range of travel related needs.

I could write a lot more, but at this point a debate amongst readers would be much more interesting; not just on the Travel Inspiration Matrix, but also on the overall question of whether travel inspiration and new travel search are becoming almost synonymous – or are they totally different concepts that should remain separate.

Also, will the travel inspiration site of the future be more technology driven or social, and if the latter, then what will be the relative importance of friends versus strangers with similar tastes and habits when it comes to guiding purchase?

So many questions still to be answered before this topic is put to rest!

UPDATE: New York Governor David Paterson late Friday signed the bill into law restricting some vacation rentals in New York City.

HomeAway co-founder Carl Shepherd says “sources on the ground” indicate that New York Governor David Paterson plans to veto a bill that would bar vacation rentals in New York City for durations of less than 30 days.

“I’m hoping that’s true,” says Shepherd, HomeAway’s  chief strategy and development officer.

The bill, S6873, was delivered to the governor July 13 and he has 10 days to veto or sign it, which means a decision should be imminent.

“The governor is currently reviewing the legislation and soliciting input from stakeholders on both sides of the issue,” a spokesperson for the governor said this afternoon.

The legislation has provoked an outcry among vacation-rental owners, online vacation rental sellers and travel industry figures.

Here’s a YouTube video from a New York City Hall rally July 21 in opposition to the bill, which was passed by the New York State Legislature.

Shepherd says HomeAway offers 875 vacation rental listings from New York City property owners and backs their efforts to ensure that Paterson doesn’t sign the bill. He urged anyone opposed to the bill to contact the governor’s office immediately.

Shepherd says the bill would be precedent-setting because it would be the first time that a state enacts legislation that limits property rights in one city.

Shepherd says HomeAway has been sharing and receiving information about the issue with “friendly competitors,” although he declined to specify which ones.

Along those lines, TripAdvisor founder and CEO Stephen Kaufer sent a letter to Paterson urging him to veto the bill because “this legislation goes too far and threatens to shutter legitimate, trustworthy businesses.”

“For a significant and growing number of tourists who vacation in New York each year, vacation rental properties offer a cost-effective way to visit the city,” Kaufer wrote. “As the nation strives to overcome the worst economic downturn in decades, families need to make every dollar count and not everyone who wishes to enjoy New York’s attractions can afford some of the more expensive accommodation options. These travelers and their families depend on vacation rental properties, and their owners, to offer affordable alternatives, especially for travelers who wish to extend their stay by a week or more.”

Travel guidbook publisher Arthur Frommer, too, blogged in opposition to the bill, arguing “the bill, in effect, would erect a barrier to staying in the city and the state, removing low-cost accommodations from the choices offered to tourists.”

The stated purpose of the bill is to bar property owners from keeping New York City dwellings off the housing market by renting them out to vacationers.

There have been accusations that the hotel lobby is behind the bill as a way to clamp down on competition from vacation-rental owners.

The issue is not limited to New York City.

Paris, too, is cracking down on apartment rentals of less than a year, according to The New York Times.

It’s hardly surprising, but the data are in regarding precisely how the Deepwater Horizon-BP oil spill has impacted TripAdvisor page views — and presumably travelers’ vacation plans.

The U.S. Travel Association commissioned an Oxford Economics study,  Potential Impact of the Gulf Oil Spill on Tourism,  which found that “the potential impact of the Deepwater Horizon oil spill could cost U.S. coastal economies $22.7 billion over a period of three years.”

As part of the study, Oxford Economics looked at two TripAdvisor charts depicting page-view numbers in the affected region.

The oil spill began April 20 and the first chart below “shows the percentage drop in the share of TripAdvisor U.S. page views for various destinations for the 20 days leading up to May 20 and to July 18 compared to the same 20-day period one year earlier,” the study says. “The effect of the oil spill on interest in the region is striking and in most cases has only increased over time.”

So, in the 20 days leading up to July 18, represented by the orange line, page views for destinations in Gulf Shores, Ala., Pensacola and Destin, Fla., for example, continue to nosedive while page views to Daytona Beach and West Palm Beach, Fla., two areas unaffected by the spill, increased compared with the same period a year earlier.

“This decline in searches represents a leading indicator of booking as fewer travelers are planning trips to the region,” the study says. “Consumers searched 52 percent less for Pensacola, Fla. in July, 65 percent less for Gulf Shores, Ala., and 48 percent less for Destin, Fla.”

And, here’s another TripAdvisor view showing the destinations’ percentage change in share of U.S. page views.

The Oxford Economics study points out that the above TripAdvisor data show that the spill’s effects are adversely impacting destinations untouched by tarballs or oil sheen.

“For example,” the study says, “the Outer Banks has been consistently negative [for oil] since the crisis began, as has much of the Florida Gulf coast, even though oil has only been spotted in the state’s panhandle region. Also, it is noteworthy that the east coast of Florida has experienced increases in interest, possibly as an alternate destination.”

The U.S. Travel Association proposed to the Obama administration that BP contribute a $500 million marketing fund “to share accurate information on the oil spill and attract visitors to the region.”

The Oxford Economics study estimated that such a marketing fund could reduce the impact to area economies by about one-third, or $7.5 billion.

With page views down for the region as a whole, it’s possible Expedia Inc., which owns TripAdvisor, could provide more information on the oil spill’s economic impact on travel booking and advertising revenue when it releases its second quarter financial results July 29.