End of an era: AMR Corporation to shift from Sabre to Hewlett-Packard

[Posted by Henry Harteveldt]

In October 1959, American Airlines (AA) and IBM created the precursor to eCommerce with an electronically based inventory and reservations system. This system grew into what we now know as Sabre, the first airline computerized reservation system. Once owned by American Airlines, AMR (AA’s parent) spun off Sabre in 2000. Sabre Holdings is not only the one of the largest travel technology firms, but one of the largest private-sector transaction processing systems in the world, regardless of industry

AMR and Sabre are so intertwined that it’s hard to imagine one without the other -- kind of like "Cher" and "farewell tour.". And yet on August 26, 2009, AMR called off the central part of its Sabre relationship, announcing it would sign a letter of intent with

Hewlett-Packard

(HP) to develop a new, “next-generation” Passenger Services System (PSS) called Jetstream. Jetstream will take over many of the functions that AMR currently runs on Sabre.

As outlined by Monte Ford, American’s CIO, Jetstream will allow AMR to “meet the customer where the customer wants to be met." Among the applications that Jetstream will run, for both American and its regional airline affiliate American Eagle, are:

• Reservations
• Airport departure control system (DCS)
• Baggage service
• Scheduling
• Pricing/faring
• Revenue management

Jetstream’s benefits include

• Being based on “open source” applications. Jetstream will make use of service oriented architecture (SOA) and, as feasible, cloud computing. This means lower development costs and faster time to market.
• Jetstream will be developed in a modular manner. This "building block" approach will enable faster implementation, give AMR the ability to sunset legacy systems or applications as new Jetstream modules are introduced (helps AMR reduce operating costs), and allow AMR to pace its capital expenditures – a not-insignificant factor, considering that Jetstream will probably cost AMR several hundred million dollars to develop. A modular product benefits HP, too, since it can offer the whole system or just components to other airline clients.
• Providing AMR with a more “customer centric” perspective, rather than the traditional airline/travel industry approach, which is based on individual passenger name records (PNRs). This will provide AMR with what Mr. Ford called a “single view of the truth” for planning, marketing, and operational decision-making, from front-line employees up to corporate execs. Jetstream will provide AMR with a single, consolidated gateway to the operational, business, and archival data it needs to make well-informed decisions. AMR, already a sophisticated data user, will have the ability to be better at what it does. Currently, most airlines have to pull data from multiple systems and databases. Consolidating and aligning the data will provide greater clarity and consistency of the information.
• The ability to interface across the AA enterprise, including all of its channels: Call centers, Web sites, kiosks – even the new handheld devices AA employees are testing at Boston Logan International Airport.

Jetstream makes HP a major airline IT player

HP is no stranger to travel technology systems. Its NonStop servers power airline systems including, perhaps ironically, Sabre’s fare shopping engine. HP and AMR are no strangers to one another, either – the two have been working together for 10 years.

Still, there’s no question that what helped HP clinch this deal was its May 2008 acquisition of EDS (which closed August 26, 2008). Why? EDS owns an airline reservations system, SHARES, and has been developing the framework of a new PSS – no doubt the foundation for what will become Jetstream. EDS also has a strong coterie of airline industry technology professionals in its ranks. All of this clearly added to HP’s strengths by providing useful domain expertise and additional insight into the complex nature of airline reservations, sales, and service technology systems. Jetstream catapults HP to the forefront of travel technology providers, providing a formidable new competitor to the traditional travel IT leaders, including Accenture (which owns the Navitaire reservations system), Amadeus, IBM, ITA Software, SITA, Travelport GDS and, of course, Sabre.

By the way, Sabre’s not totally out of the AMR technology picture. Mr. Ford stated in his August 26, 2009 press call that AMR would continue to work with Sabre for flight operations and similar other types of applications. However, because EDS/HP manages aspects of Sabre data centers, you know there’s some awkwardness there. Also, what’s not yet been decided – or at least publicly disclosed – is the fate of AMR’s Tulsa data center.

Forrester’s take

What AMR and HP are about to commence upon is the technology equivalent to a team of doctors simultaneously doing a brain transplant, heart transplant, and extensive corrective surgery. The systems that AMR will move to Jetstream literally represent the brains and heart of the airline. This is not an undertaking for the weak and squeamish. It’s a gutsy, but smart move for AMR to make. Mind you, that's not a reflection of Sabre. Sabre, HP, and Amadeus, which was another contender for the contract are each excellent technology providers. We commend AMR for recognizing it has to make the investment in this new technology solution to be a smarter, better, more agile competitor. Given that all airlines fly the same aircraft, tend to serve the same markets, offer fairly similar products and charge about the same, technology is an increasingly important competitive tool

Finally, the Jetstream announcement includes a nice piece of airline geek trivia: “Jetstream” was the name TWA applied to its Lockheed L-1649A Starliners (one of the last versions of the elegant Lockheed Constellation). TWA’s assets, of course, were acquired by AMR in 2001. What goes around...

So what do you think of AMR's decision? Did it come as a surprise? And did you expect HP to be the winning partner? I'd enjoy learning your thoughts

As always, thanks for your time.

How can travel companies benefit more from user generated content?

[Posted by Henry Harteveldt]

Hello again.

I'm wrapping up my report on why travelers post their ratings and reviews. This was the winning topic that we asked our eBusiness blog readers to vote on. Thanks again to those of you who voted.

The good news is that travelers are more likely to post content like ratings, reviews, and pictures on travel Web sites to share good news with their fellow travelers, rather than bad news. I hope that's because more travelers interact with travel firms that exceed their expectations, rather than travelers having low expectations and simply pleased that nothing went wrong. The reality is likely a mix of both.

If you're a travel eBusiness or marketing professional, I'd sincerely value your opinions about user generated content (UGC) -- primarily ratings and reviews -- for one simple reason. I want to be sure that we write the most useful possible report. Among the questions we'd appreciate your input on are:

• What does your organization do to mine the massive amount of user generated content (UGC) about your brand, destination, or sector of the industry? Do you feel the investment of time and money is worth it? Why?
• If you don't allow UGC on your Web sites, why is that? Budget, technology -- the fear of someone saying something negative?
• Are you using UGC as part of your customer service or product/training improvement programs? How? What benefits have you seen?
• Is ROI a factor in your decision making? Why or why not?
• What potential benefits from UGC do see as being more, or less, useful to your organization and its objectives, and why?

I'd enjoy learning your thoughts. They'll help make the recommendations we offer that much more relevant to you.

As always, thanks for your time.

Henry

Travel social media: What vendors do you like?

  [Posted by Henry Harteveldt]

Hi everyone,

A couple of weeks ago, we asked you to vote for what you'd like us to write on for our next travel eBusiness research report. The winning topic was "Why travelers write ratings and reviews." I'm working on that now -- which leads me to today's post.

For those of you who allow travelers to post ratings, write reviews, or share other content, what vendors would you suggest I talk to? What makes them special? We certainly do our own research on this. My colleague Jeremiah Owyang, for example, published a report earlier this year analyzing the nine leading community platform providers.

As I research my report, I certainly want to make sure we explore all options. If there's a company you think I should call, simply post your suggestion(s). You'll make me happier than chocolate if you are able to provide a contact at the vendor as well.

As always, thanks for your time and suggestions.

Henry

Hotel professionals: Your thoughts about 2010 can get you free Forrester research

[Posted by Henry Harteveldt]

Hello again.

The global hotel industry is battling some tough times. To get a better idea of the industry's outlook for 2010 and the role you see distribution playing in your efforts, we're inviting hotel professionals to take a quick (10 minute) online survey. In exchange, we'll send you a complimentary summary of our findings after we complete gathering the data.

Who's eligible?

• You must work for a hotel organziation. We're seeking participants at the corporate or brand level, at a property, or at a management company. For this study, we're not able to accept participants from third-party intermediaries, or from other industry sectors like airlines, GDSs, rental car agencies, etc. That's why we're asking you to contact us (info below), rather than posting a link from here to take the survey.
• Your role must include a meaningful amount of responsibility for or involvement in your hotel's:
  • eBusiness/eCommerce
  • Distribution
  • Sales/marketing
  • Revenue management
  • Owners, GMs, and hotel managers are also welcome to participate

The larger the base of respondents, the more useful the research will be to everyone. I sincerely hope you'll participate. There's no obligation beyond taking the survey. All survey responses will be aggregated. We keep your responses confidential, and we don't share or use your email address for any commercial activities.

To participate, please email me: hharteveldt (at) forrester dot com. Sorry for that funky way of presenting my email address; I'm just trying to avoid the email spam bots.

As always, thanks for your time.

Henry

Angry Online Travelers Consider Abandoning The Web

Hello again everyone.

Our most recent research report, "Using Digital Channels To Calm Angry Travelers," has been getting a lot of attention.

To put it mildly, travelers are so angry with poor online travel experiences they're approaching a breaking point.

Check out the steady decline in the number of US online leisure travelers who enjoy using the Web to plan and book trips, and who feel that travel Web sites effectively present choices and trade-offs to them. These are critically important given the tepid economy and the increasingly complex way consumers are forced to buy travel. And now, notice how we see a small, but meaningful, increase in the number of people considering using offline travel agencies.

 

I've been asked a lot of questions about this report -- who's to blame? How could this happen? What will happen? Does this mean that online travel dead?

Let's start with the last question: Online travel is certainly not dead. However, if travelers' frustrations are not correctly addressed, it's future becomes increasingly uncertain and potentially less valuable -- and thus less useful and profitable.

So, who is to blame? All of us. End-user companies, mostly the online travel agencies and suppliers, for failing to push themselves, and their technology partners, to innovate, and for failing to ask their customers the right questions when researching their online experiences (or ignoring what your customers tell you). Technology firms, including both travel industry specialists and general tech providers, for failing to demand more of themselves, and for failing to educate and, yes, push their clients to consider new processes. eCommerce integrators and interactive marketing design firms have contributed to this problem as well.

How did this happen? Simple -- we got fat and happy. Online travel kept growing thanks to the organic growth of online travelers, spurred by the growth of broadband connectivity, and pricing structures and fees designed to push consumers to the Web. US online leisure travel spending grew from approximately $28 billion in 2002 to nearly $84 billion last year. Too many travel organizations failed to adequately invest when times were better. Now, many have had to trim eCommerce budgets as their organizations curtail spending due to the recession. We fiddled while Rome burned. Meanwhile, the traveler stewed.

So what will happen? Either incumbent providers get their act together -- now -- or else they lose in the future to smarter, more creative competitors. Among the firms we think understand what travelers want are InsideTrip.com, TravelMuse.com, Uptake.com, Kayak.com, Travelzoo.com, Bing.com's travel search, and Imagini.net, parent of Youniverse.com and provider to Hotel.com's UK visually-based booking engine. Air Canada also wins for how easy they make it for travelers to understand product choices and trade-offs, and for its effective online merchandising. By no means is this list exhaustive, but note who you don't see on it:.major travel agencies, airlines (except for Air Canada), hotel chains, cruise lines -- you get the idea. And guess what? Those firms rely on major travel tech firms, general tech providers, and eCommerce Integrators and design firms. Cause and effect? Or unlucky coincidence?

So, what do you think? Where do you see the opportunities or road blocks? How much of the challenge is due to front-end limitations, and how much is due to challenges posed by back-end or middleware? If you're an end-user company, do your technology partners understand your challenges? If you're a tech provider, do your clients listen -- and act -- on your recommendations? Let's open a dialog and see if we can't solve all the problems of the world. First one to do that buys drinks for the rest of us.

As always, thank for your time.

Henry

What travel eBusiness research topics would help you be most successful?

Hi everyone.

There's no shortage of research topics on which I could write. But rather than make the decision unilaterally, I thought it would be more productive -- and fun -- to shake up the a bit.

I'd like you to tell me what research would be most useful for you. Our job as Forrester analysts is to help make you more successful everyday, but you know your needs best.

So here's the deal. The topics are all around my coverage space - travel eBusiness, distribution, and marketing (sorry, no voting on who looked best on a red carpet somewhere). You can vote here. We'll leave the poll open through 5 PM US Eastern Daylight Time next Wednesday, August 5. We'll tally the results and announce the winning topic by next Friday. I expect the report will be published sometime in August. And don't be surprised if we use this blog (or my Twitter feed) to get your thoughts on some aspects of the report, as well.

After all, success is best when it's shared.

Thanks for your time.

Henry

Better eBusiness May Have Helped Hotels Avoid A Truly Lousy 1H09

Wow, once you get into this blogging thing, it's hard to stop...

I am a fan of Travel Weekly, a truly comprehensive travel industry publication. I've been reading Travel Weekly for the million or so years I've been in the travel industry and am sincerely impressed with how its editor, Arnie Weissman, continues to take the publication in new and exciting directions.

The July 30 issue of TravelWeekly.com has an article by Jeri Clausing regarding hotel industry performance for the first-half of 2009 from Smith Travel Research (STR), a leading hotel industry research firm. STR's data clarifies the enormous financial impact the recession is taking on hotels::

• The average hotel occupancy rate declined 10.9% compared to the first half of 2008, to 54.6%
• The average daily rate (ADR) paid by a guest fell 8.7% from the first-half of 2008, to $98.66
• On average, hotels' revenue per available room (revPAR), a key profitability metric, declined 18.7% compared to the first-half of 2008. Bobby Bowers, senior vice president of operations at STR, describes the decline as "by far the largest first-half decline ever recorded by Smith Travel Research."

There's more, but it's pretty bleak. I don't want to lose you, so for all the gory details, read the Travel Weekly article and the STR announcement.

Anyway, this got me thinking (always risky): How could eBusiness have helped? True, nothing could have protected hotels from the massive economic mess we're all in. I do, however, believe that hotels made their own challenges worse. How? As an industry, hotels failed to use eBusiness as effectively as they could have -- and should have.

• Show me a hotel Web site that lets you shop based by a price point (e.g., ($100/night), price range ($100-$149/night), or total budget ($200 for 2 nights). If you don't think this is important, you're wrong -- terribly wrong. Our North American Technographics(R) Travel Online Study, Q1 2009, shows that 46% of US online leisure travelers say they allow their budgets to dictate where they go on a trip. If you call any major hotel' chains toll-free number, a property directly, or a travel agency, they could help you with any of these three requests. eBusiness channels and experiences must emulate, and ideally beat, their offline counterparts.
• Hotels don't do a good job of creating any emotional engagement. Not every trip can be a getaway to a glorious exotic destination for a relaxing vacation -- but just because a guest is going to a not-so-thrilling destination doesn't mean your Web site's planning and booking process has to be not-so-thrilling as well.

Two years ago, we wrote about how travel companies need to humanize their digital travel experiences by making them useful, usable, and desirable. Hotel Web sites may be useful, but they struggle with usable. Desirable is nowhere to be found -- maybe it's drowning its sorrows in the lobby lounge. By creating a sense of desire -- tapping into consumers emotions, for example -- you can attempt to separate the heart from the brain. The brain says "buy the lowest rate available." Desire gets the traveler to consider trading up -- something our research shows 34% of US online leisure hotel guests, and 41% of US online business guests, will consider if they view the premium as affordable.And don't forget, we live in a world of Bookers. Seventy-seven percent of US leisure hotels guests research and book at least some portion of their trips online, as do 68% of business guests.

• Few hotel Web sites provide the necessary context required to help travelers make well-informed decisions. Many lack useful content as well. I worked in luxury hotel marketing. To this day, I can't tell you which is better, a superior room or a deluxe room. Sadly, most hotel Web sites can't help you, either (some of the online agencies, like Expedia, actually do a better job of this). Pan Pacific Hotels does an excellent job with how it presents room information within an availability search. Unfortunately, most major chains' Web sites, including Accor, IHG, Hilton, Hyatt, Marriott, and Starwood, do not. Room descriptions lack critical details that allow a guest to make a well-informed decision, like room dimensions, details about the furnishings, and relevant, good-quality visual content.
• Poor post-purchase and on-property electronic communications. Yes, reservation confirmation emails arrive almost instantly. And, giving credit where due, many chains' confirmation emails (including Hilton, Hyatt, and Marriott) include links to both complimentary and fee-based hotel services. Too often, though, that's the only electronic communication the guest sees. Hotel execs tell us they often can't send any other email to guests if the reservation is made within a week of arrival, because properties lack the ability to operationally respond. As for guest communications during the stay, well, as they say in Brooklyn, fuhggedaboutit. Few, if any, major hotels take advantage of email or mobile communications to reach guests -- and their wallets -- while they're on property. Lots of great revenue-generating opportunities are missed as a result.

So how could eBusiness have helped hotels? Here are just a few:

• Web sites with useful tools, like budget-based shopping
• Better content and written descriptions
• Creating timelines from time-of-booking to check-out, and determining the most effective digital channels and marketing or promotional messages that would work to coax much-needed revenue from guests' tightly-guarded wallets.

Against the loss of business from key segments like meetings/conventions and corporate travel, nothing could have totally insulated the industry from all the turmoil. But by failing to push themselves to do more with eBusiness, to invest when times were better, to re-think property operations against the increasingly "wired" guest that hotels serve, hotels may have allowed their financial troubles to be worse than they should have been.

If you're a hotel executive, or if you work for a company that supports hotels through technology, please weigh in. I'd enjoy hearing from you.

Thanks for your time.

Henry

Delta announces smart upgrades to 2010 SkyMiles loyalty program

Delta Air Lines (DL) has announced a slate of upgrades to its SkyMiles loyalty program for 2010. The changes are being made as part of DL's merger with Northwest Airlines (NW). Delta tells Forrester that its remains on track to fully combine SkyMiles and the Northwest WorldPerks programs by October 2009.

As a result of the merger, it's believed that the Delta SkyMiles program may have more than 70 million members (net of duplications Between SkyMiles and WorldPerks), eclipsing the perennial category leader, American Airlines' AAdvantage, which has more than 60 million members.

Some of the best benefits of the new SkyMiles program will include:

• A 500-mile minimum on all flights and for all customers.

Forrester's take: This continues a current Delta benefit. However, it's still great news for frequent fliers in that Delta isn't taking this away. In early 2009, some airlines, including American Airlines (AA), Continental Airlines (CO) and United Airlines (UA), eliminated the 500-mile minimum mileage credit in favor of awarding the actual miles flown. Most of the airlines, including AA and UA, later reinstated the 500-mile credit, but only for elite-level members. I expect we will see most of Delta's key competitors reinstate their 500-mile minimum.

• 1 full "EQM" (Elite Qualifying Mile) and base mile on all fares regardless of booking channel

Forrester's take: This is very consumer-friendly. It also shows the impact of the recession. Delta could have decided that in 2010 it would move to restrict this benefit to bookings made through preferred channels, potentially excluding channels like online travel agencies (OTAs). Forrester's online leisure travel channel forecast shows that airline sites are estimated to capture about 70% of all leisure bookings, increasing to 77% by year-end 2013. But Delta isn't Southwest Airlines (WN) or JetBlue Airways (B6).Those carriers generate about 75% or more of their bookings through their own Web sites. Delta, in contrast, generates about half that volume via Delta.com. Plus, given some of the past squabbles that periodically erupted between NW and online agencies, and occasional spats between Delta and the OTAs as well, it's smart for Delta to offer this.

• A 50% EQM and base mile bonus on fares booked in Delta's the three highest (most expensive) economy-class inventory classes: Y, B, and M fares

Forrester's take: This, too, continues an existing SkyMiles benefit. Again, it's smart for DL to maintain this, especially in this recession. A) Fewer people are buying business/first class tickets (IATA's most recent premium travel report, covering May 2009, shows a 23.6% year/year decline in international premium cabin passengers), making it more important to keep this benefit. B), Delta needs to give its passengers a reason to "trade up." While I don't think anyone in his or her right mind would buy these fares just to earn more SkyMiles points, this is one way Delta says "pay more, get more." It's nice, and it's smart - though for what you shell out at these price points, Delta should also toss in vouchers for its buy-on-board meal/snack offering as well.

• Premium security access, priority seats, priority boarding and waived baggage charges for everyone in the elite itinerary.

Forrester's take. Ding, ding, ding, we have a winner. If an elite SkyMiles member travels with family members or friends, all booked together in the same passenger name record (PNR) - airline-speak for reservations record - his/her companions all get the same courtesies. The preferred seating access and waived checked baggage fees will, no doubt, be among the most appreciated and useful benefits.

• Rollover MQM (Medallion Qualifying Miles). Delta will become the first airline to allow customers to permanently roll over any Medallion Qualification Miles (MQM) earned above a Medallion threshold at the end of the year, which will supplement their ability to earn status the following year.  This is a permanent feature and not a promotion and will take effect this year.

Forrester's take: Keep ringing that bell, we have another winner here. This one is fantastic.To start, we have the recession and the lack of any definitive time-frame for recovery. Business and leisure travel is down, as illustrated by the $257 million net loss Delta reported in its June 2009 quarter.Delta also faces growing competition from "low cost" carriers like AirTran Airways (FL), WN and B6, which are expanding their reach across more of DL's North American route network (WN, for example, recently entered New York LaGuardia, and will soon enter Boston Logan). Delta also faces an expanding Star Alliance - current SkyTeam partner CO leaves SkyTeam for Star October 24 How might this roll over program work? It's not unlike the "roll over minutes" program some mobile phone providers offer. Let's say a SkyMiles member earns 62,000 miles in a given calendar year. 50,000 miles qualifies the member for Gold SkyMiles status.  The member can thus roll over his or her "extra" 12,000 miles (62,000-50,000 for Gold) towards the following year's Medallion status qualification. That's smart, because it (again, theoretically) keeps the member flying DL and its SkyTeam alliance partners once they hit a threshold.

• A new fourth Medallion elite tier,.Diamond. A fourth Medallion level for flyers who earn 125,000 MQMs or fly 140 segments per calendar year that will offer the richest benefits of any airline elite tier.

Forrester's take. Another smart move. Several years ago, Delta reduced its Platinum-level qualification from 100,000 miles/year to the current 75,000 miles/year. It could have simply gone back to the "old" tiers, and moved Platinum back to 100,000 miles. That would create a bigger ruckus than Sherman's entry into Atlanta during, um, "that" war. Current Platinum's would have howled and insisted - rightly - that they be grandfathered through 2010. This gives Delta an out. The Diamond tier will recognize and reward Delta's "road warrior-est" of road warriors -- and, again in theory, keep some of members flying Delta and its SkyTeam partners for an extra 50,000 miles/year. Delta's tossing in a bunch of benefits, including complimentary access to Delta's network of SkyClub airport lounges. It also makes public a "whispered" program nicknamed "white envelope." Until now, Delat's fourth tier was not publicly communicated. Members only knew they qualified when they received their special "super elite" card in (allegedly) a white envelope. The Diamond-level program is potentially worth millions of incremental revenue dollars for Delta, so Wall Street should cheer this news as well.

• Fee-free ticketing. The three top Medallion tiers of the new SkyMiles program (Diamond, Platinum, and Gold) members will have ticketing fees waived for all bookings, regardless of channel, including phone and in-person. 

Forrester's take: This is, again, smart. Think about the amount of traveling Delta's top-tier members do -- these people fly 50,000 or more miles a year on Delta and its SkyMiles partners alone. . While Wi-Fi makes it increasingly likely that a road warrior will have the potential to get online to book a trip, there are going to be times when that's not practical. And though DL has a mobile-optimized version of Delta.com, its user experience isn't comparable to the "traditional" Delta.com. Plus, in this business environment, why make life more difficult for your best customers? It's unlikely that Delta will see skyrocketing call volume because of this, meaning the airline will also likely not see a significant increase in its costs. Plus, with the online travel agencies still offering fee-free airline tickets, Delta retains a channel advantage for its best customers. It will be interesting to see how other airlines respond.

• Unlimited complimentary upgrades on Award-travel tickets.

Forrester's take: Surely you don't expect us to object? This is a great member benefit. The concern I have, as an analyst, is that it may inhibit some SkyMiles members from requesting premium-cabin awards in hopes of getting a free upgrade. Airlines carry their frequent flier mileage balances as liabilities on their books, so the more miles that are burned, the better for the airline. However, since the upgrades are based on available seats, I suspect those who really want to sit in the pointy end of the plane will redeem the miles to do so.

• No co-pay on any upgrade award

Forrester's take: More smartness. AA, CO, and UA either charge, or have said they will charge, their loyalty program members fees to redeem miles to upgrade to the next class-of-service on all but their most expensive Economy-class fares (the airlines may exempt some of their elites from these fees). Hellloooo, these are supposedly "loyalty programs." How does an airline create and sustain loyalty when it charges a fee along with miles for an upgrade? Those type of fees are classic examples of traditional (read: bad) airline management thinking (I can say that, having worked for several major airlines earlier in my career). Forrester has researched the free-fall of traveler's brand loyalty. As airlines examine how to improve their business performance, they need to strike the right balance between generating revenue and creating programs that generate positive responses from travelers - rather than the usual venom.

There are other benefits to the new SkyMiles program, but we think these are the most important. We think Delta did more right than wrong with its changes, and believe it will serve the airline well as it navigates its way not only through the merger with Northwest, but this miserable recession as well.

By the way, if you're a SkyMiles member, Delta tells us you'll see these benefits phased in over the next 4-6 months. According to Delta, details about the program changes should be available online at www.delta.com/newskymiles.

What do you think - is Delta on the right track? How are you seeing customer loyalty change, and what initiatives have you seen -- or done -- to improve customer loyalty?

Travel Companies Should Look To ideeli.com As A Way To Invigorate Web Sales

 [Posted by Henry Harteveldt]

 

OK, the fact that I’m writing this blog post, and the fact I’m on Twitter (hharteveldt) is proof that an old dog can learn new tricks.

 

What inspired me to write this piece was when I received an email from an industry friend telling me he’d taken a job as a VP with ideeli.com. ideeli describes itself as an invitation only shopping Web site, offering “privileged access to sought-after products in fashion, home and beauty, as well as luxury lifestyle experiences.”

 

You can’t just join ideeli willy-nilly – you need to be invited. I think this is both practical and brilliant. It’s practical in that it allows ideeli to control the size of its customer base, which hopefully means that its members will have reasonably good chances of obtaining items of interest available on the site. And it’s brilliant because it creates the aura of exclusivity – we all want what we can’t have. Plus, ideeli sells a premium category – they call it 1st Row – which offers earlier access to all the goodies ideeli sells.

 

In a sense, ideeli isn’t a new idea. It, and its competitors, owe at least a teeny, tiny nod to the airline industry. In 1986, Eastern Airlines pioneered its “Weekender Club,” a fee-based membership program that extended weekly unpublished special fares out of key Eastern markets such as Baltimore, Boston, New York, Atlanta, and Miami where the airline had excess inventory. Other airlines, including TWA, implemented similar programs. In that pre-Internet era, the special offers were delivered by – get this – Western Union telegrams.

 

OK, so back to the 21st century. I think ideeli as a concept has some value to the travel industry and offers a way to invigorate travel eBusiness, especially in this tough commercial environment. Why? I’m so glad you asked.

 

Travel eBusiness is mature. Forrester’s 2008-2013 Online Travel Forecast estimates that by year-end 2009, we’ll have 68 million US leisure or unmanaged business travel Bookers (Bookers are travelers who go online at least once and month and both research and buy travel online). That’s an increase of only 2 million more people from year-end 2008. OK, yes, getting two million more online customers is great, but it’s a sliver of the net new number of online customers compared to even three years ago.

 

So anything that can be done to increase online travelers’ engagement with the channel is, as Martha Stewart would say, a good thing. Forward-thinking travel firms can adapt ideeli’s model for themselves, using it to:

• Drive traffic and volume to and through preferred channels. Travel sellers can use this type of a program offer to drive traffic through whatever channel they choose. This is particularly relevant for travel suppliers, such as airlines, hotels, and cruise lines, which can use a program like this to “right channel” customers through their own Web sites, versus those of third-party intermediaries (TPIs). Multi-channel TPIs can play this game as well, using it to drive traffic to Web sites and away from call centers.
• Develop or strengthen business partnerships. Travel suppliers can reach out to partners – for example, an airline, a hotel, and an entertainment company – to create distinctive experiences. TPIs could partner with their preferred suppliers to create distinct promotions or packages as well.
• Force behavior in a defined timeframe – AKA you snooze, you lose. Ideeli’s offers are limited – items are available for only a set time frame or until they sell out, whichever comes first. Members receive email alerts that alert them to when items will go on sale. Travel companies can send similar email or SMS text messages to program subscribers. Either they act, or someone else gets that fantastic deal.
• Test pricing. Ideeli operates in private: only its members know what’s for sale, and at what price (some items are even giveaways). Travel firms can use a program like this to experiment with destinations, products, and price points in a relatively private setting. Sure, a member can tweet or publish on her Facebook page about the great deal she just found, but that will be after the fact – and the offer may be over by then. It may also be possible to test slightly higher price points compared to what you’d have to advertise in a public promotion.

• Get around “full content” distribution requirements. Most airlines are contractually required to sell all publicly available fares, including so called “Web fares,” through global distribution systems (GDS) and travel agencies. GDSs can be valuable distribution partners, but not necessarily when low-margin distressed inventory is being sold. A private, membership-based program like this may be exempt from full-content requirements.

• Create, increase and sustain loyalty. Travel organizations constantly bemoan the lack of customer loyalty. In an industry that’s awash in a glut of choices and product, travelers – especially infrequent travelers – have little need to be loyal. A program like this may be able to engender loyalty to the company. And, while this can of course be linked to a travel seller’s loyalty program, it doesn’t have to be.

• Create artificial demand. ideeli’s “1st Row” premium access program is similar to having access to a “priority screening line” at an airport. 1st Row members get first crack at ideeli’s offers. 1st Row membership costs between $83.88 a year and $93.88 a year, depending on the subscription payment option the member chooses. Not only can travel sellers limit the number of memberships they sell to their club – thereby creating the desire to have something that another person can’t – but they can stimulate this further by offering a premium, fee-based tier which would also have a limited number of slots.

Travel companies – mostly airlines – have experimented with bits and pieces of what ideeli offers, but no one currently offers anything quite like ideeli. In 2000, Northwest Airlines introduced its NWA.com Club, an online-only fee-based club that offered access to unpublished offers. It was an idea ahead of its time, and the 9/11 terrorist attacks and following recession didn’t help. Continental Airlines has The Continental.com Club, which includes a soft-dollar “cash back” component and access to travel and merchandise offers. Southwest Airlines’ highly successful DING! downloadable desktop application provides free access to limited-time special Southwest fares. And of course we have two travel agencies operating in the US specializing in helping suppliers move excess inventory: Priceline.com, with its unique “name your own price” model, and Hotwire.com.

What do you think? I’d enjoy learning your perspectives – and, if you’ve been trying something like this, whether it’s met your expectations.

Thanks for your time.

Henry