Be Nice. Really Nice. All the time.

Madame BOOT speaks...
Article in the SMH about Qantas, fresh from its publicly humiliating failed PE bid, is planning to restructure by splitting the business into 4 distinct units. I'm so over the restructuring and the decentralising and the change management programs, really business strategy is a lot faster and simpler than that. Be nice to your customers. That's it. Just be nice.

For $10.5 billion you can rule the world part 2

In part 1 of "For $10.5 billion you can rule the world" I talked about the impact on the online trave industry of Google, Microsoft, Yahoo, AOL and WPP undertaking a combined $10.5 billion acquisition spree in online advertising. At the end of the post I reach out to online marketing guru Mike Potts of e-interactive to hear his thoughts. has sent through some comments in the new part 2 of this article here. As part 2 in this story here is what Mike has to say...

Google is the “superpower” and looks to remain that way in the mid-term at least. Looking at the online marketing results of my travel clients who are spreading marketing spend across a few important media, Google PPC wins hands down from an ROI perspective. Add to this the ease of managing the campaigns from both an agency and in-house perspective, and the ease of integration of Adwords into Google Analytics, and the combination is all but astonishing.

The major impact for all industries - travel included - is that it should bring more powerful marketing tools to the market for everyone to use.

Google seems to repeating patterns of old, and everyone else is just playing catch-up:

• Google Step 1 - build in-house solution, or acquire a bad one and release an “okay” product; and
  
• Google Step 2 - figure out what the market really needs and go and buy someone else to support that.

There a now three clear examples of this strategy at Google:

• Google video followed by the acquisition of Youtube (so far a pure media land-grab rather than tech acquisition perhaps)
• Acquisition of Urchin which became Google Analytics V1, following by the acquisition of MeasureMap which became the awesome Google Analytics V2 (or perhaps V1 squared)
• Google Adsense followed by the DoubleClick deal (or perhaps Adsense squared)

As far as Google is concerned it continues to make previously high end technology and media space available to many more smaller companies and I wouldn’t be surprised to see this repeated with DoubleClick’s ad serving and tracking technology. Imagine, for instance, that a small online travel agent could judge Adwords ROI or earn money from Adsense on the basis of ads SEEN (and not clicked) but where that user still made a purchase later (TV style). The “view based” advert ROI metric is well used by DoubeClick as a way of realizing value from ad campaigns.

On a practical level, my travel clients are desperately trying to find ways of finding new users for their sites (outside of Google), and these acquisitions should make entities like RealMedia and aQuantive (and their media placements/markets/technology) more readily available to smaller businesses. Lets hope the ROI’s lives up to Google levels.

Guest editors wanted - the BOOT is expanding

I am having a great time writing this blog. I hope you are enjoying reading it. I want to do more with the blog and have found the guest editor experience with Mike Potts to be a fantastic way to expand the BOOT message. I hope you agree. I want to take this to the next level and find other editors that know more about exciting markets like Germany, France, Italy, India, Japan, China...heck even Canada. So if you are a self appointed expert in the online travel markets in these or other exciting countries then I want to hear from you. Send me an email with a sample post about a incident in your market. Please adhere to the following:

• Posts no more than 500 words;
• Pick a snapshot story about your market - am not looking for a summary or history of the market to date, rather a piece of commentary on a current event;
• Send the post in the email with formatting and in an attachment with no formatting so that I can easily cut and post into blogger. If you want links included please put them in;
• Include a 20 word introduction on who you are. If possible include a link to your blog, profile, company, site or something on the web that can tell people more; and
  
• Be in it for the long haul. I am looking for people that want contribute regularly and help me grow the BOOT into a destination for insider information and commentary.
  

I can't guarantee that I will post your submission and if I do I can't guarantee it will be edit free. However if I do post I will praise you and link to you like you won't believe. There is no money involved but if you want to join me I look forward to your submission.

Travel blogs are the new Business Strategy 101

Along with his post on Expedia guest editor Michael Potts of e-interactive sent along another post for me to published. You will find it below. I am flattered by it and (as I am shy by nature) a little unsure of whether or not to publish. But this is a blog so I will publish and let you the readers decide. Here is what Mike had to say...

I went to see a potential new client today in Barcelona, a small but successful online travel company, Engrande. The guys at Engrande are smart and aggressively targeting a quickly developing online European market (selling low cost hotels, B&B's and hostels through city specific websites) - and use The Boot as one of their key points of market reference.

In fact this shouldn't be surprising given the depth of great content that Tim writes. What was surprising was the fact that John Erceg, CEO, placed such significance on the content of a blog. It struck me like never before how educational and powerful a simple blog could be. There was a time when Business Week and The Harvard Business Review were THE points of reference, but this position certainly appears to be tenuous especially given the accessibility of such a lot of good content.

The article that John wanted to speak about is entitled "Lastminute.com speaks and I agree a lot, a little and not much (all at the same time)". His query related to where his organization fitted into the analysis of both The Boot and Lastminute.com CEO Ian McCraig. Clearly Engrande is not a "scale" operator, and doesn't fit with the idea of a "niche" business, the two areas of success mentioned by Ian. In fact Engrande seems to be a convincing argument that the "market specialists" detailed by Tim can experience considerable growth and success through smart search engine strategies and a clear product pitch.

Offline business publications, be afraid - very afraid!

Expedia Spain, too little too late or better late than never?

Expedia has announced its Spanish launch. Expedia went first to the UK and Germany but then slowed, entering France after its competitors form the early days (Lastminute and eBookers), taking a softly softly approaches to the rest of Europe. The strategy was successesful as a lot of money was thrown by the competition in smaller markets while Expedia proved itself a winner in the UK through focus. However the question remains whether they have been too cautious and waited too long for Spain. I asked Euro online travel expert, BOOT guest editor and honorary Spaniard Michael Potts of e-interactive to give us his thoughts. Here is what he had to say...

I'm a bit confused about this post, because I don't know whether to write either:

• The online travel market in Spain is buzzing, and at last the great bastion of online travel has come to this great country.or
• Nothing has really happened, except that Expedia has started pushing the PPC bid levels on Google and Yahoo up as they try desperately to deliver the volume and market share that their US bosses want to see.

So, why my confusion? Well:

I have been waiting for Expedia to launch here for 2 years - it means that the market is mature enough to support their demanding targets for success, and in other developing markets Expedia has been the explosive catalyst that made the entire online travel market go crazy.

BUT there are three reasons why Expedia will have to work harder in this market than they may think

1. Spain is different - the Spanish are more price sensitive than most Europeans and although they use the internet (a lot) to research travel, buying it online is a different thing entirely. Expedia is a lot of things but it is not cheap;
   
2. The "marketing" market is relatively mature in Spain - there doesn't appear to be a lot of partnership agreements, PPC undervalue, affiliates or cheap bus ads freely and easily available. These have traditionally been ways that Expedia has quickly gained traction in other new markets; and
   
3. Iberia.com, and some very mature OTA's already exist in this market - Iberia.com accounted for 70% of all online travel transactions in 2001 and is still a massive player in Spain. eDreams.es, Rumbo.es and Viajar.com all seem to have steady growth and market experience and hotel-only players Booking.com, HotelClub.com and RatesToGo.com are also strong here.

Clearly its not going to be plain sailing for Expedia. Whereas in Italy, for instance, they moved early, captured some great marketing agreements and set the bar for competitors to follow, they are too late to the party in Spain.

Good luck Expedia, Spain needs you, I'm just sorry it took so long.

Googles continued threat to the Online Travel Agencies

Guest Editor Post from Michael Potts of e-interactive

A few weeks ago Google announced that it was to launch a "pay-per-action" advertising medium through its adsense network. Reaction to the news by the search community has been surprisingly muted, perhaps because this strategy reaches into an online marketing realm that search engines have never been before - affiliate marketing.

For many years pay-per-action marketing (a form of online advertising where the advertiser pay only when an advert actually provides a sale, or other action), has been the nearly exclusive domain of affiliate marketing networks. Some private affiliate marketing networks do exist but the scale of these pales into insignificance against the large affiliate networks of players like Commission Junction and Tradedoubler. These networks have hundreds of thousands of publishers willing to take adverts and be paid on a cost per action basis. About 81% of advertisers use a sale as the “action” that they pay for.

Google’s move is significant for online travel space, not least because affiliate marketing is one of darlings of the major online travel brands. Additionally:

1. Google has MANY more publishers than any of the affiliate marketing networks. This means that now ANY online travel supplier has pay-per-action access (ZERO RISK ACCESS) to a vast array of publishers that simply weren't available before. In the past affiliate networks and affiliate marketing generally have tended to be solely the concern of larger travel suppliers like OTA's and hotel chains;
2. If this move affects the ability of affiliate marketing networks to continue to own this space, then it also means that the OTA’s are not going to have it all their own;
   
3. Smaller travel suppliers, like independent hotels, can now easily access an advertising medium that is charged in a more similar way as their traditional distribution - as a cost against each booking. There is no need to understand the advertising ROI based on a click through rate or cost per click; and
   
4. Google's (previously demonstrated) ability to optimize ad campaigns to maximize ad revenue means that this new product will most likely work well.

THE RESULT: For the independent travel supplier Google is looking like a simple to understand, zero risk advertising medium to rival the OTA's. For the OTA’s it likely means a more uphill playing field in the drive to attract targeted buyers to their websites

So does this signal a bigger move into online travel for Google? Probably not, no. There have been various rumours about Google product releases related to the online travel market, for instance in this blog in ZDnet, but the threat that this possesses has never really been taken seriously. For a start if Google did seriously go after this vertical with their own engine, content and supply they would risk seriously denting ad revenues from the OTA's.

However a move into the affiliate marketing space does pose a greater threat to OTA's as Google provides an even better distribution opportunity for travel suppliers desperate to avoid the high levels of commission payment to online distributors like Expedia (Expedia "normally" charges hoteliers 25% commission on the sale price for the right to place product there.) And once travel suppliers are all hooked on Google it really is time that the OTA's sat up and took some serious notice.

Either hotels and operators in Europe are still out to lunch on the Internet or the EC is

Guest Editor Post from Michael Potts of e-interactive

I noticed today that AFP put out an interesting press release on the back of the ITB 2007 Travel Fair held in Berlin earlier this month called “Internet becoming indispensable to European travel industry”. Related to the use of internet by European travel retailers, it mentions that the European Commission (no reference dates provided) has published data on the proportion of European travel suppliers and intermediaries providing the ability for customer to booking online.

According to the figures only 36% of tour operators provide online booking services, whilst 40% of package operators (the difference is subtle between these two, perhaps too subtle for the end consumer who wouldn’t notice a difference) and 62% of hotels allow booking online.

Only 36% of tour operators? Wow….! 38% of hotels don’t have a website? I’m in the right business it seems! I have tried to find the full version of this research and failed, however these numbers do feel incredibly low for a mature market.

Given that in the US, online travel revenue will exceed offline revenue in 2007 (PhoCusWright's U.S. Online Travel Overview, Sixth Edition, 2006), I would imagine that the percentage of suppliers and intermediaries providing online services is much higher. Is this a great opportunity for worldly wise 3^rd party sellers and OTA’s like Expedia to offer a web development service for these 1000’s of hotels? And is this why so many of these 3^rd parties are being allowed to advertise on European hotels brand names?

Taxes, we dont see no stinkin' taxes

Guest Editor Post from Michael Potts of e-interactive

A critical question is arising around the inclusion of taxes and services charges in online hotel commerce sites. The question is…should independent hotel websites hide taxes in favour of displaying a cheaper rate, or will this just make for annoyed customers?

Picture the scene: you walk into a clothes store, and quickly spot the perfect Friday night shirt. You look at the price – 19€ - perfect. You take it to the counter, the check-out guy/girl scans it, then says, “that’ll be 25€ please.” You look at the check-out guy/girl quizzically, smile and point at the price on the ticket, to which they answer, “oh, that is the tax-excluded price.” Personally I would either ask for the manager, or more likely walk out of the store in disgust.

I am used to a tax-included price in the store. I am not used to waiting until the last minute until the final price is presented to me. I am not, ever, going to buy a hotel stay at Booking.com for exactly this reason.

Booking.com doesn’t include a tax-included price in its website, even at the point where the customer is adding their credit card details to the page. In fact, Booking.com is not alone in this practice. Many hotel aggregators quote tax-exclusive prices, at least in the first step of the purchase process.

So then, back to the original question. How does the humble hotelier, hoping to get some 0% commission sales through their own website, price the stay, especially knowing that the same room is appearing on their distributors sites without tax included? Do they make me happy and provide a fully inclusive price, or accept that their wannabe customers are actually shopping around and finding (very unclear) tax-exclusive prices on their resellers websites?

Their appears to be two forces at work here. Legality and profit.

Dealing with profit first, the decision appears to be a difficult one. Does our hotelier risk customer dissatisfaction after the purchase when they realize that the price has changed for the worse (and risk a cancellation perhaps), or risk not having that customer at all?

It might be that this issue is best answered by looking at how the hotel resellers are displaying prices and thus understanding better what the customer sees when they are shopping around. I did a little research and there appears to be three main ways of displaying prices:

• Taxes included every step of the way
• Taxes displayed in the total price during or after the first step, but not in the “per day” rates
• Taxes not even displayed at the point where the credit card is asked for.

The following is a list of the way that some of the popular travel sites display hotel prices

Site	Display on 1st results page	Full price quoted at point of credit card
Expedia.co.uk	Per day prices without taxes, total on results page taxes and charges included	Yes
Travelocity.co.uk	Tax included	Yes
Lastminute.com	Tax included	Yes
Booking.com	Prices without taxes	No
HRS	Prices without taxes	No prices on this page
Active Hotels	Tax included	Yes
Rates to Go	Prices without taxes	No

Three of the seven sites I looked at don’t even quote the final price payable on the page where the customer adds their credit card details. It looks like Booking.com, HRS and Ratestogo don’t really mind the negative feelings that could occur here. Perhaps then customers don’t have a negative feeling in this case.

For most hotel websites the fact is that if their rooms are displayed on any of the tax-exclusive sites then they might be better quoting tax-exclusive rates, at least initially. This would at least lead to a level playing field where comparison shoppers are concerned. It might increase conversion rates, and reduce distribution payments also. What is also clear is that pricing, regardless of the tax issue should be clear about what is included and what is not.

So what about legality? Legal or not, it appears that some large organizations with deep pockets are operating a tax-exclusive pricing policy. Perhaps then hotels shouldn’t be worried about the legality as long as far more visible websites are practising this.

UPDATE - Some nice friends and others have rightly pointed out that often the tax pricing situations I have described occur in countries where taxation is more difficult to deal with. My market of interest is Spain, and for Spain all the information written above is true. For other destinations it may not be. However, having worked for many years with the development side of online travel I have to mention that not correcting this problem is less because it is impossible to solve, but because a high enough priority has not been assigned to solve it. Let’s hope in time that common sense prevails and clear pricing practices are forced on all travel vendors.

Expedia tries to save its supply line by opening Expedia Spain

Guest Editor Post from Michael Potts of e-interactive

Expedia have told some of their travel suppliers in Spain that they are to launch Expedia.es in April or May this year. My thought about this future event has always been “great, they will grow the Spanish online travel market and make a good return for themselves” (see an article I wrote for Megustaelturismo here). However I now think there is another primary reason that Expedia are opening Spain – to make sure that they still have a supply of hotels in the months and years to come.

Why is this the case?

1. Expedia has lost huge ground in market share to their local European competitors over the last 18 months. Booking.com and Venere are selling particularly well, and local Spanish OTA’s are becoming more valuable distribution for hotels as the Spanish start to buy online themselves

2. Expedia are viewed by many hotels and chains in Spain as a very expensive way of only attracting English and German guests

3. Expedia’s commission rates are extremely high (normally 25%) compared with most others at 15% (Booking.com for instance, who are now bigger in sales for hotels across most of Spain than Expedia). Already we are seeing long negotiations between the chains and Expedia for supply deals, with NH in particular having disappeared from Expedia’s listing (try and find availability on any Expedia site!)

Without opening their supply chain to the growing demand for domestic online travel, Expedia were increasing likely to lose many of the mid-sized chains and even independent hotels whose share of market is dominant. It will be interesting to watch this development and see how the hoteliers, and those buying travel online in Spain, react to Expedia.es.

Bringing guest editors to the BOOT

I have decided to have a few guest writers join us every now and then on the BOOT - particularly looking at the European market. I have been looking back at the blog and realise that the longer I spend away from Europe the more I need to turn to people on the ground for insight on what it going on.

For the first in this series I wanted to do a post on Spain. It seems that Spain is the last frontier of the major European markets in online travel. Not to say that there is no online travel in Spain - far from it. Rather it is behind its more developed Continental friends and neighbours. So I asked my former work-mate, long term friend, SEM guru and honorary Spaniard Michael Potts of e-interactive to write a guest post every now and then on the European market with the kick-off post to look at Spain and Expedia threatened moves there. I hope this is the first of many from Mike and others.