Oh Henry !

Dreaded SDC (Second day of conference) update from CASMA.

Energy is definitely lower for the SDC, but we’ve only seen a handful of conferences that’s figured out how to keep momentum going into the second day. Today, Henry Harteveldt gave a keynote speech, and while he was mostly a Debbie Downer in his message, he does have a great message.

One sentence summary: "We are going through a second coming of the Great Depression and airlines must fundamentally change how they look at distribution and embrace Merchandising" .

- Henry (having heard him speak a ton - we think are close enough to be on a first-name basis now) believes that its time to stop looking at “Distribution”, but look at airline industry as an opportunity for “Merchandising” and capitalize on consumer emotion during the selling process.

- Money Quote: “Distribution is passive while Merchandising is active”. It’s the difference between shopping at Wal-Mart (cram the store with products at a low price) vs. shopping at the Apple Store (every detail from spacing to lighting to the shelve color is carefully considered for the shopping experience). The key is to somehow bring emotion into the shopping equation. This is a huge, fundamental shift to selling.

- Example: Many people feel that the check-in / security process is painful, but if you can offer products like United’s Premiere Line (you get to go thru security with the elite fliers) – they will gladly pay.

- "Times are tuff all over" and it’s really the rich people’s fault the airlines are hurting. Families making over $100,000 a year make up about 30% of the population – but they make up 45% of all travelers. However, they are nervous and just not using their money to travel on grand vacations.

Overall, you can tell that CASMA really scaled it down this year. They usually have some pretty fancy off-site event, but this year they simply had a band and dinner in the ballroom. That’s not a bad thing at all given the economic times. However, the best news of the entire conference was the announcement of their next conference location:

VEGA$ BABY!!!!

Can’t wait.

CASMA Dallas - Howdy !

Hello from Dallas where we are covering the CASMA conference for our loyal readers. The conference is definitely a big step up from the last one in New Zealand – both in terms of content and participation. Still down from the good ol' days, but we think you will see attendance down across the board throughout this entire year.

The conference started off pretty strong, with a panel of airlines talking about Merchandising and Ancillary Revenues. And the best part was that they actually had good hard facts ! Or, as they say in Big D, "Yee Haw!"

- Mark Mees of Air Canada stated that 47% of all passengers buy up from the Tango fare class to Tango-Plus class or higher. He didn’t specify the breakdown between Leisure or Business passengers, but that’s still good info.

- A very interesting set of numbers is that Air Canada generated over $245 Million in Ancillary Revenue in 2008. However, AC also allows a passenger to "opt out" of certain services to get a lower price ($5 off if you don’t check a bag, $3 off if you don’t want any miles, etc). Mees stated that passengers opted out to the tune of approximately $500K. When compared to $245 million – that’s not too bad, and they surely earn some goodwill for allowing their customers this simple choice.

- Jim Young of Frontier actually broke down the upsell-rate by channel. 38% of Frontier.com online customers buy up to a higher class; 50% of travelers buy up when they book through Frontier's call center, and only 5% buy up via the Travel Agent channel. The main issue is that travel agents (especially OTA's) are so focused on Low Fare Search that the higher classes are always at the bottom and the customer never sees them.

- This is fascinating to FMV since it means that Frontier actually invested money to redesign their Call Center interface so that 1) their agents can see all of the fares classes, and 2) the call center agents can now convey that information to the traveler. We’ve always thought that airlines, who have a ton of information about the passenger, could definitely increase revenues with just a little amount of extra data for their agents, and this is great confirmation. It may also mean that a call center agent w/ personality persents a better pitch than a static GUI.

- Priceless moment of the day – Sabre challanged Frontier if this means Frontier.com now had higher yields than the GDS channel. Jim Young answered with a clear “Yes”. The look of dejection from the GDS was pretty priceless.

Finally - it’s clear that there is a lot of angst around how airline shopping will be done in the near future with the expansion of bundled fares and attributes. How do you accurately compare a fare class with free bags vs. a fare class with priority seating and a window seat? We think the first site that can do that well with instantly gain massive share with full airline backing.

The Gnome says "Me Too"

WAAYYY back at the end of 2007 – we did a blog post on Priceline announcing that they would be dropping their booking fees for airline tickets. At time we stated:

Don't look for other OTAs to match, because they've invested too much in pitching their service proposition to throw away that revenue stream. Unless Priceline is able to make up some ground in share of course, which may be unlikely, but actually could happen. Especially through savvy partnership with meta's.

Well, Priceline WAS able to make up some market share and it looks like the big boys have had enough. Expedia announced they would drop their booking fees last week, and today the Gnome has also joined the bandwagon. Actually, the Gnome plays marketing catch up in two aspects:

1) They counter the “No Booking Fee” move by Expedia and Priceline, and

2) They counter the “Orbitz Price Assurance” gimmick:

Travelocity also is expected to launch a long-term price guarantee of sorts on vacation packages, promising to refund a price difference, from $10 to $500, if a different Travelocity customer buys the same package for a cheaper price at a later date. The "PriceGuardian" program is similar to an offering competitor Orbitz.com makes on airline tickets called "Price Assurance."

This is well played since it ups the ante by throwing in the holy-grail of “Vacation Packages” as the teaser. So what's this all mean? Here's our takeaways:


- If you wanted to see the short term affects of the recent Meta-Search space growth with Trip Advisor and TZoo, here you go (on top of Yahoo getting out). It really ups the pressure on OTAs along with the incumbent meta's. We think it’s going to start to be a brawl because the entrance of these two is comparable to another Hotwire and Priceline entering the OTA Market.

- FMV starts the betting on March 23rd as the Over / Under for Orbitz to announce dropping their booking fee. They will take the weekend to look at how this affects their bookings, then they'll make a deck and discuss it, but they will eventually need to take action.

- FMV could never really figure out why travelers use OTA’s and pay the fee in the first place. Yes – some OTA’s do provide value and we understand that (especially for flights using different carriers not in the same alliance); but for simple, roundtrip flights, it’s always been a mystery. [Note: That's why the PCLN commercial showing NoFee breaking vases is so perfect].

- Finally, the Gnome's latest moves may also be a tacit admission that 1) the real money is basically in hotels and cars, thus 2) selling airline tickets is now simply a necessary cost of doing business and loss leader for other travel transactions.


In clsoing, back to that service mark, "Price Guardian". Really? That's all you've got? Hopefully no AIG-sized bonuses handed out for that creative gem. Unless they show him slugging it out with Shatner and NoFee in a commercial.

Farewell Farechase - HE GONE !

The meta-search space was starting to get really really crowded since travel-media heavyweights like TripAdvisor and Travelzoo started to crash the search party. However, it looks like field has been narrowed a bit as Yahoo! decided to scrap Farechase five years after they purchased it in 2004.

As reported by Travel Weekly (which is updated daily):

[The decision] coincides with two other developments. Carol Bartz replaced Jerry Yang as Yahoo CEO in January, and in late February Yahoo signed a new agreement that has Travelocity continuing its role as the primary booking engine for Yahoo Travel. In the past, Travelocity sparred with Yahoo over the prominent role that Yahoo gave FareChase on Yahoo Travel.

OK - this is basically the same old Hollywood story of Man - Wife - Mistress.

- Yahoo was pretty much married to Travelocity, but then met the alluring FareChase

- Five years of drama where Yahoo tried to juggle both

- Finally, Yahoo re-ups with a new Travelocity Agreement and realizes its never going to leave The Gnome so it's time to end it with FareChase.

The field is starting to rationalize itself a bit with Kayak / Sidestep as the heavy, Microsoft / Live Search / FareCast as the contender, Mobissimo as the falling star, and Trip Advisor and Travelzoo as the new guys.

FMV's predictions: 1) Mobissimo is the next to go thru a takeout, 2) Hybrids coming to a website near you as media plays try to go into the travel realm, and travel sites try their hand at media plays, and 3) OTA's have a problem, but Expedia may have the answer...