Travel Weekly's Technology E-letter: October 5, 2005

RISKY BUSINESS AT HILTON INTERNATIONAL: Hilton International, with its more than 400 properties and rights to the Hilton brand outside of the U.S., negotiates contract terms related to inventory risk based in part on whether Hilton and the distributor establish a direct-connect. When it issued distribution standards last year, the U.K.-based chain said contracts must ensure that Hilton and the distributor share room-allocation risk. However, that doesn't apply to distribution agreements that Hilton International announced last week with Expedia Inc. and Priceline Europe's Active Hotels because both distributors are building direct-connects to the hotel chain. A Hilton International spokesman said the direct-connects mean that Expedia Inc. and Active Hotels don't get room allocations, but simply access available inventory directly from the chain's property management system. In contrast, when distributors don't establish direct-connects with the chain, Hilton International negotiates terms on inventory risk that include penalties for returning unbooked rooms.  

ORBITZ AND WORLDSPAN traded $50 million civil suits in two Chicago courts last month, bringing to light their conflict over Orbitz's direct-connect Supplier Link program, where tickets are booked without GDS intervention through the airlines' internal reservations systems. Orbitz claims in a suit filed Sept. 16 that while renegotiating their contract, Worldspan concealed its objection to the way the Orbitz Web site intermingles flight information about direct-connect airlines with availability data about carriers booked through Worldspan. Worldspan has the exclusive GDS contract for, and claims that Orbitz stole its seat map data for direct-connect flights and improperly used Galileo availability data for non-direct-connect flights. Use of Worldspan GDS data in flight displays for direct-connect bookings transforms them into non-direct-connect bookings, for which Worldspan should be compensated, Worldspan contends. Orbitz also alleges that Worldspan hid the fact that it would not be giving Orbitz access to low cost airlines, including Independence Air. In addition, Orbitz alleges that it didnt know at the time the two parties extended their agreement to 2011 that Worldspan considered Orbitzs use of ITA Software, which has a GDS designator code, to be a violation of the agreement. Worldspan filed its suit three days later, claiming to be the victim of deception and abuse since August 2000, when its partnership with Orbitz began. Worldspan also alleged that Orbitz stole Worldspans data and illegally used ITA Software and Galileo. Despite the fact that the Worldspan-Orbitz agreement specifically prohibits Orbitz from using any [GDS] other than Worldspan to perform certain services, Orbitz has been using two other [GDSs] to perform the services at issue, the complaint states.

SABRE REDUCED its 2005 earnings forecast by about 4%, saying terrorist incidents in London and Egypt had a negative impact on the performance of recently acquired Sabres latest estimate for earnings per share is between $1.27 to $1.32, down five cents. The incidents in Egypt and London occurred in the peak travel months of July and August, Sabre noted.

TRX, the Atlanta-based technology company, completed an initial public offering (IPO) and its stock, TRXI, began trading on Nasdaq Sept. 27. In March 2001, the company withdrew an IPO, citing unfavorable market conditions, but the 2005 version came to fruition. The offer price, $9 per share, may have been disappointing to the company: The IPO originally was priced at $11 to $13 per share, but was trimmed to $9 to $11 per share before the stock's debut. The company offered 6.8 million shares, but only gets the proceeds from about half of those shares. That's because 3.4 million were sold by existing shareholders, including BCD Technology (which owns WorldTravel BTI), Hogg Robinson Holdings and Sabre, and TRX doesn't receive those proceeds. TRX, which provides transaction-processing and data integration services to the travel industry, and markets a corporate self-booking tool, Resx, plans to use the influx of funding for general corporate purposes. In 2004, more than half of TRX's revenue came from Expedia, where it performed transaction processing for Expedia's vacation package, corporate travel and cruise businesses.

A PHOCUSWRIGHT STUDY, Online Travel Shopping and Buying Behavior: Key European Markets, released in conjunction with the Sherman, Conn., company's conference in Paris last week, found that people who sometimes buy travel online in Germany and France are more likely to buy online and offline than online travel consumers in the U.K. For instance, according to the survey, 68% of online travel buyers in Germany also use other channels, including traditional travel agencies and tour operators, when purchasing travel. That compared to just 40% of online travel buyers in the U.K. One of the reasons that online travel buyers in the U.K. are more Web-centric than their counterparts in France and Germany is because of the high volume of airline tickets purchased online via U.K. low-cost carriers, which lifts Internet usage overall, PhoCusWright said. PhoCusWright pointed to buying behavior steeped in tradition with country-by-country variations in noting that 27% of French, 20% of German and 9% of U.K. online travel buyers also booked travel in person in the last year. The survey, conducted in conjunction with Greenfield Online, found that 8 out of 10 U.K. online travelers use the Internet as the main way they purchase travel. But e-commerce barriers and embedded habits make German and French travelers more likely to use offline methods, as well.


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