Travel Weeklys Technology E-letter: Dec. 15, 2004

INTERCONTINENTAL HOTELS GROUP has a very special relationship with Travelocity. learned that Travelocity charges consumers lower service fees when they book merchant inventory from IHG brands than for any other chain or property. It seems that IHG demanded that third-party Web sites break out their taxes and service fees for consumers -- but only if those service fees push the total charge to consumers higher than booking a room on the IHG Web site. So, Travelocity still takes a service fee on IHG bookings and bundles the disclosure in taxes and fees, but it charges consumers less in service fees for IHG bookings than it does for non-IHG properties. That arrangement is fine with IHG, which recently certified another distributor, Travelweb, now wholly owned by Priceline. Priceline and Travelweb are considering how to disclose their taxes and fees, with IHG-endorsed options including breaking out the charges in a confirmation email or a pop-up at the time of booking. Travelocity, meanwhile, doesnt plan to market the idea to consumers that when the room rates are equal, they will pay less for IHG brands on

TIERED PRICING TWEAKS: Now that Amadeus re-upped and introduced a tiered pricing formula for airlines in 2005, following the launch of its first Value-Based Pricing plan in 2004, Sabre, Galileo and Worldspan will soon introduce their own plans. One analyst, Jerry Galant of Huberman Financial, believes Amadeus competitors eventually will settle on modified forms of tiered pricing. Galant, who formerly was a finance director at Sabre, also believes that GDSs may package tiered pricing with preferential screen displays. For example, a GDS might display Lufthansa flights above KLM flights on destinations where they compete like Chicago to Istanbul via Frankfurt for Lufthansa, or Amsterdam via KLM, Galant said. Who said GDS booking fees arent interesting?

REGARDING AMADEUS new plan, the Madrid-headquartered companys basic formula pegs the airline booking fee to the point of sale, and whether flights are short-haul or long-haul, international or domestic. For the still-regulated markets of Europe, the Middle East and Africa, Amadeus added a Web fare program called the Full Content Option. However, Amadeus -- the global leading GDS in revenue and bookings in 2003 -- declined to offer a general low-fare distribution program for airlines in North America. Instead, Amadeus, which owns, negotiated individual full-content pacts with Continental, Northwest, US Airways, Delta and United. An agreement with American is said to be close.

JETBLUE said it will pull out of Sabre at the end of this year, citing the costs of the GDS, the early success of the airlines new corporate booking tool and the growing number of alternatives for distribution. The decision comes even as another low-cost carrier, Independence Air, took the opposite stance. Independence just joined Sabre -- the third GDS it has joined since Nov. 1 -- after altering its original plan to rely solely on direct bookings.

SABRE, meanwhile, agreed to acquire SynXis, a hotel distributor and technology company, for $40 million in cash. The transaction, which is expected to close in first-quarter 2005, gives Sabre a presence throughout the hotel distribution chain, from point-of-sale to travel agents and consumers. McLean, Va.-headquartered SynXis, which will retain its brand, has relationships with 6,000 properties, covering reservation management, technology and distribution services. SynXis distributes through Sabre and other GDSs, as well as more than 1,200 Web sites, Sabre said.

ONE HOTEL BUSINESS that Sabre will not pursue any longer is its merchant hotel program, Sabre Exclusives, which the company quietly dropped at the end of October. The merchant hotel program, which gave Sabre access to net rates for agents, never gained traction because agents were wary of prepayment and other restrictions, said Scott Brodows, vice president of car and hotel distribution. At a panel discussion at the Hotel Electronic Distribution Network Association conference in Los Angeles, Brodows mused, Why is it that customers will accept prepayment for air and not hotels?


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