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Goldman Sachs: Investment Trends in Online Travel – I need your (controversial) thoughts!

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On Tuesday, I had been invited back to speak alongside Homeaway and Starwood at the Goldman Sachs Technology & Internet Conference about trends in online travel.

I wanted to solicit your thoughts on three topics. With your help, perhaps we can spice up the discussion:

  1. Which start-ups will get the capital they need to survive?
  2. Who will benefit during the long slow travel recovery over the next 2-3 years?
  3. Mobile and social media are the rage in travel, but is anyone going to generate revenue from it?

First look into your crystal ball: Who is going public? Which of the start-ups is going to get the capital they need to survive?

How do you think 2010 will play out for the online travel players looking to go public? Travelport has already postponed their IPO. How about Homeaway (fresh off their Super Bowl ad) and Kayak (rebounding nicely from airfare fee cuts and with their own NFL ads)? And let’s not forget Sabre. Which of them will have successful IPOs?

The myriad of travel start-ups that need follow-up capital to survive (e.g. Nileguide, Travelmuse, Yapta) will surely be grateful for the inevitable positive trickledown effect if there are successful travel IPOs. A number of start-ups have already had to shutter (Professional Travel Guide) or cut back (Oyster, Tripology). Which start-ups will fail, which will get the capital they need to survive and grow?

Remember Elliott’s ‘Field of Dreams’ post? Here is Compete.com on which of the start-ups are getting and holding customer mindshare.

What a difference a year can make! At last year’s Goldman Sachs conference, we still had OTA fees to book flights. And Expedia was close to its 52 week low of $6.3 (now trading in the mid-20s) and Orbitz was close to its 52 week low of $1.2 (now trading in the $6-7 range). I’m hopeful for the online travel sector. But I want your opinion!

Please take a second look into your crystal ball: who will be the winners and losers as consumer and business travel slooooooooooooooooooooooowly bounces back?

Let’s put aside the extraordinary results from Priceline and strong results from Expedia. They are taking shares from suppliers, other channels and the other OTAs for a number of reasons. Yeah, they are kicking it. And will likely continue to.

Putting these two behemoths (and their subsidiaries – Booking.com, Hotels.com, TripAdvisor) aside – who else will win and lose from the slow, painful recovery?

First, some hard data: some (almost) good news on the Hotel RevPAR front. {Note: Hotel RevPAR is a key metric in the hotel industry that measures the amount of revenue that hotels generate from the rooms they have available. The equation for RevPAR is occupancy (% of time available rooms are filled) X revenue per available room.}

Why only ‘almost’ good news? Because this graph from Piper Jaffrey and Smith Travel Research tells us that RevPAR is declining more slowly. In October of 2009, RevPAR declined 14% from 2008 and in November RevPAR declined 12%. And in December, RevPAR only declined 8%. Now, ‘declining more slowly’ is not the same as growing, but… it’s better than shrinking at an increasing rate.

So, let’s assume we are on our way back. And let’s assume, as it did after 1992 and 2001, that it takes about 2 years to get back to where we were before the dips.

Which online travel companies will survive and which will thrive during this slow recovery – and why?

Some winners may well be those from the ‘old’ school evolving their business (e.g. Lonely Planet’s digital content sales growing 40-50% annually – including direct sales via the iPhone), start-ups evolving old proven models (e.g. Getaroom, Bloomspot and Groupon), or companies cracking international markets.

Final look into your crystal ball: mobile and social media are all the rage, and online travel is no exception. But how does it translate into economic benefit? The TripAdvisor Media Group (owned by Expedia) will generate north of $400 million in 2010 revenue is no small part because of their dominant position in hotel reviews. No one is generating bookings from mobile. So, who in online travel is going to be able to generate material, quantifiable benefits from mobile or social media?

Please don’t hold back! Unlike Jeff Boyd (Priceline) and Dara Khosrowshahi (Expedia), I don’t get invited to the Goldman Sachs conference to speak because I run billion dollar online travel companies that dominate the sector. I’m assuming I get invited because I’m an opinionated SOB. So help me out :-)

If you would rather share your opinions in private, please feel to email me at yen (at) uptake.com

If you have data and factoids to support your opinions, that would be a welcome bonus!

Bring it on!


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