Vacations Blog

I’m scratching my head here to find out exactly why Ryanair, Europe’s largest low fares airline, is duking it out with hotel booking giant Expedia. They’re not only in the middle of a verbal slanging match in the media, but the two of them have also landed up in court in a legal mess of claims and counterclaims.

Ryanair (Nasdaq: RYAAY) just announced that it has given 30 days notice to Expedia (Nasdaq: EXPE) that its hotel contract, which gave Expedia exclusive rights to sell hotel accommodation on Ryanair.com, will end following Expedia’s failure to honour payment terms. As things stand, the contract will be terminated on the 8th November 2008.

In a press statement, Ryanair’s Deputy CEO Michael Cawley, said that “Ryanair offered Expedia the unique opportunity to exclusively access its 58 million passengers through Europe’s largest travel website, Ryanair.com. Regrettably, Expedia has failed to honour key obligations under this agreement, in particular its payment terms, and our attempts in recent months to get Expedia to resolve these breaches, have failed so we now have no alternative but to give them notice. Should Expedia remedy its breach within the 30 day period, Ryanair will continue the partnership.”

In response, Dara Khosrowshahi, CEO of Expedia, Inc., says that “We are disappointed by the statement made by Ryanair earlier today, as we believe that Expedia has complied in every respect with the terms of our agreement with Ryanair, including all payment terms, and that Ryanair has failed to honor its obligations under that agreement. We have a long history of solid relationships with our partners and take our contractual obligations seriously; we expect our partners to do the same. We strongly believe that Ryanair does not have the right to terminate our agreement.”

The matters in dispute are the subject of legal proceedings that have been pending since May 2008 before the Commercial Court in London. On Friday, October 10, 2008 the Court gave directions to the parties for an orderly resolution of this dispute with a view to a trial of the claim and counterclaim in November 2009 if the matter is not settled before then.

The Ryanair press statement also says that Ryanair entered into the agreement with Travelscape LLC (the parent of Expedia) on the 21st March 2007.

Couple of points I’d like to note here. Firstly, that Bellevue, Wash. based Expedia Inc. is the parent of the Nevada based Travelscape, not the other way round. And secondly, that this problem probably has more to do with Ryanair than with Expedia. That’s because Expedia has similar agreements with many other airlines, including Air China, and the Denver based Frontier Airlines. And also with a huge number of other travel service providers other than airlines.

In fact, this Expedia contract is actually more a standard software – Expedia Private Label Worldwide Travel Exchange (WWTE) – which plugs itself into any website, offering the website’s visitors a choice to book flights, vacation packages, rental cars and Expedia’s list of hotel properties. It’s a simple enough process, like an affiliate program. Even Expedia uses WWTE to offer flight bookings from airlines like American Airlines and Virgin America on its own and its subsidiaries’ websites.

The point is that it’s not something which Expedia and Ryanair cooked up exclusively for their partnership. It’s the same arrangement (broadly speaking) that Expedia has with other airlines and travel service providers.

In the press statement announcing the termination, Ryanair’s Michael Cawley also adds that “We have already received approaches from a number of other hotel providers across Europe and expect to have a replacement partner up and running before the end of the year.”

In my opinion, the real issue here is that Ryanair wants more out of hotel sales from their website than what they’re getting now, and some European hotel provider must have offered them a bigger cut of the hotel booking pie.

Be that as it may, this ain’t over yet, and you can expect a lot more fireworks from both sides in the coming months.

Question: Why the new interest in online travel? Isn’t online travel “done”?

Based on the number of analyst and due diligence calls I received recently, it looks like there are a number of new travel sites looking to help consumers research and plan their trips. Is this the sign of a Web 2.0 Bubble in Travel?

My Answer: Yes and No. Online travel is only partially “done.”

After all, travel is the biggest e-commerce category at $91B. But, growth rates are slowing and price shopping and online bookings are increasingly concentrated at a few sites. Travel is partially “done” – for consumers who know what they want to book. There is little need for another travel offering of this type. The world doesn’t need another Expedia or Orbitz.

However, there remains a huge unaddressed consumer need–helping consumers decide what to book.

There is an increase in awareness of this unaddressed consumer need. When I ran Yahoo! Travel I saw clearly what consumers were searching for: information like things to do, places to stay, consumer advice, photos, locations, maps etc. Consumers have a lot of needs that are not being served by online travel agencies like Expedia or Travelocity. The “first click” doesn’t start at Expedia…it starts at Web search.

Want to address this need? Make sure you meet these three criteria.

Based on our travel experience and consumer research, we believe three key criteria need to be met to address this “what to book” problem:

1. Offer comprehensive information - offer one stop shopping of places to stay, things to do and detailed information (e.g. descriptions, photos, maps, location, reviews, etc.) Consumers should not have to sift through multiple sites to find relevant bits of information on possible places to stay and things to do.

2. Provide filters and personalization – enable consumers to search based on who they are traveling with and why they are traveling and don’t assume they already know where and when they want to go. Give them the filters they need to get relevant results.

3. Make word of mouth easily available – people prefer information & feedback from other people (reviews, blogs, ratings, etc.) Unfortunately, most sites that have reviews, blogs etc. still force their visitors to browse to find the most relevant feedback and do not yet analyze that word of mouth to make specific recommendations.

The travel site that meets these three criteria will become the “first click.” Why? Because once these three criteria are met the “what to book” decision can be made easily and travel planning can be a more enjoyable and efficient experience. It is quite simple for a consumer to then move into the booking & price comparing phase of trip planning.

That’s how we think about it. How about you?

OK, so we put our cards on the table. What are other innovators in travel thinking? What problem are they trying to solve? What opportunity is there to go after where “travel” is not done? Is there solid consumer need out there (and for what) or is everything getting just a bit too frothy for your taste?