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Every Wednesday, Executive Editor and online travel rockstar Dennis Schaal will bring readers exclusive reporting and insight into the business of online travel and digital booking, and how this sector has an impact across the travel industry.
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This Week In Online Travel
Beyond the devastating human carnage, Covid-19 has obliterated the dreams — the visions — of untold numbers of online travel companies that earlier planned on making a variety of strategic moves. Online travel brands ended or downgraded many potential strategy changes out of necessity as they were forced to defund projects or had to send engineers and product leads packing.
Take Airbnb, which until earlier this year was enhancing its HotelTonight-driven hotel offerings to supplement the platform’s core apartments and vacation rentals business, and was looking to launch a transportation product, possibly flights. But now many of those bets are off the table.
Pre-Covid-19, Malaysia’s AirAsia, with its database of 55 million passengers, was engaged in a grand experiment — to become more online travel agency-like. It was going to compete with Traveloka and major online travel agencies in the region by adding competitors’ flights, hiring technology’s best and brightest, and Amazon-like, selling a variety of products and lifestyle services. Incumbents countered easier said than done.
Indeed, Accor tried to add independent hotels to its product choices, and dropped the experiment after two years. Southwest Airlines and Ryanair offer hotels and cars, but neither of these potential revenue streams hardly get a mention during earnings calls because they are insignificant.
Then there’s Booking Holdings’ plan to build the so-called connected trip, which boils down to a full-service offering, from ground transportation to restaurants. The secret sauce would be data learnings to address traveler preferences, and providing myriad payment options.
The connected trip strategy ran into obstacles even before the coronavirus pandemic. Booking.com outsourced much of its tours and activities’ inventory scaling to TUI’s Musement brand because Booking’s build-your-own strategy proved too difficult. Long focused on the lodging business, Booking.com and sister company Agoda were testing a variety of flight offerings, but hardly anyone is flying these days.
Stealing Market Share?
With many pet projects and strategic imperatives off the table, the name of the game in the travel business for now, and the next year or so, is survival — and momentum coming into a coronavirus recovery.
Having tapped private equity coffers to get through the crisis, Airbnb saw more than 1 million bookings for future stays on July 8, the first time that happened since early March. The prospect of Airbnb making a stock market debut in 2020 is back on the table.
We took a look at Moody’s credit ratings for four public travel companies for insight into which ones might be in the strongest or weakest positions. In terms of long-term ratings, the following chart shows Booking Holdings in the strongest position, followed consecutively by Expedia Group, Tripadvisor, and eDreams Odigeo, the Europe-based online travel agency for flights.
|Company||Long-Term Rating||Outlook||Cash and Equivalents|
|Booking Holdings||A3||Negative||> $11B|
|Expedia Group||Baa3||Negative||> $6B|
Moody’s considers Booking Holdings’ prospects several pegs above those of Expedia Group. An April 17 Moody’s credit opinion cited Booking’s “excellent liquidity” to navigate the coronavirus pandemic, and the wide gap in the two companies’ operating margins (35.6 for Booking versus 8.2 percent for Expedia) in 2019.
Interestingly, Moody’s assigned Tripadvisor a “stable” outlook compared with “negative” for the trio of other public travel companies we considered. Moody’s argued that Tripadvisor’s profit growth since 2017 and revenue stream diversity provides Tripadvisor with a “cushion” to get through the pandemic.
Tripadvisor stated on Friday that China’s Trip.com Group, in keeping with their November 2019 joint venture announcement, bought a 5.7 percent stake in Tripadvisor. TCOM CEO Jane Jie Sun took a seat on the Tripadvisor board.
Tripadvisor is the junior partner in the Tripadvisor China joint venture, which improves Tripadvisor’s very modest position in China.
There’s at least one sure bet about the aftermath of the coronavirus crisis: There will be a ton of consolidation. The Trip.com Group-Tripadvisor joint venture won’t necessarily turn into a merger, but it could happen one day.
The Amazon of Travel? Hardly. But Kayak quietly debuted three new verticals, including Kayak Essentials in partnership with Price.com. While hotels, flights and cars are usually on the menu at the Booking Holdings metasearch company, Kayak is now offering groceries, personal care and medicine, and home and fitness products, too. This stirs memories of Kayak’s sister company Priceline.com selling groceries and gasoline in its early days. Kayak also recently debuted Road Trips and Kayak@Home, which offers virtual tours and webinars.
Airbnb Versus Expedia in San Diego?
There’s a new short-term rental conflict looming between Airbnb and Expedia Group in San Diego. Airbnb seems poised to lead opposition to a precedent-setting memorandum of understanding between Expedia Group/Vrbo and a hotel union. In an email to hosts obtained by Skift, Airbnb pointed out that hosts are concerned that the tentative agreement restricts each owner or LLC to one license, mandates a two-night minimum when hosts aren’t present, and drastically reduces the number of rentals that would be on the market. A couple of years ago, Airbnb and Expedia united to oppose a prospective outright ban in San Diego, but now a clash between the two appears in the offing. Skift
Booking Holdings Fined for Pressure Selling
Hungarian regulatory authorities fined Booking Holdings around $8 million for a variety of allegedly anti-consumer practices, including pressure selling (“only one room left!”). The Hungarian Competition Authority also found that Booking used “misleading advertising” in purporting that cancellations were free when actually the cost was built into the room rate. Booking and other online travel agencies settled similar concerns in the UK in 2019, and recently in the European Union. Lexology
Skyscanner and Direct-Booking Hype
The UK’s Skyscanner has been working on facilitated bookings for several years, and recently started processing bookings on its site and app for Aeroflot and WestJet. There was much speculation when Trip.com Group acquired Skyscanner in 2016 that the Chinese online travel agency would transform Skyscanner into a booking site, and a vehicle for its international expansion. But progress has been cumbersome. These facilitated bookings, which are particularly appropriate on mobile, are somewhat of a yawn, and not a game-changer. Kayak, which pioneered the feature in 2011, took about 10 percent of its bookings directly on Kayak pre-pandemic, and is finding right now that the stronger trend is travelers seeking to book directly on airline and hotel websites. Skift
Is Booking.com’s Loyalty Program Really Genius?
Online travel agencies have been trying to crack the loyalty conundrum for years. One of the more under-the-radar plans is Booking.com’s Genius program. The promise is discounts of up to 15 percent at certain properties, upgrades, and free breakfasts. Genius has to compete with major hotel loyalty programs, but seems to be a better bet at participating independent hotels. Rival Hotels.com has long had a loyalty program, which can be more straightforward and wide-reaching. The Points Guy
Tripadvisor Sheds Media Brands
Tripadvisor has big hopes that it can double-down as a business-to-business media company, offering a variety of sponsored listings to hotels and restaurants, but also generating revenue from non-endemic advertisers. Given the relatively new strategic priority, it might appear curious that Tripadvisor recently sold eight of its media brands, ranging from Oyster.com to Airfarewatchdog and Smarter Travel. A lot of the reasoning has to do with focusing on business-to-business advertising products on Tripadvisor-branded sites. Skift
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