• by David Goetzl  @dgoetzl, December 3, 2009

A major growth opportunity for the Travel Channel comes in reducing its heavy load of direct response (DR) advertising, which accounts for a whopping 42% of all inventory, according to a new report.

Travel Channel -- which is becoming part of Scripps Networks Interactive (SNI) -- needs to wean itself off its heavy dependence on DR spots in order to boost CPMs, according to Wall Street's Bernstein Research.

(DR advertising, however, can in some instances bring higher rates, making it difficult for networks to turn the spots down.)

Still, attracting higher-paying, blue-chip advertisers may only come if Travel is able to boost its ratings and make itself a top-20 network, according to Bernstein.

So far this season, in the key 25-to-54 demographic, Travel Channel is averaging 266,000 viewers in prime time -- 36th-best among cable channels by one measure.

Bernstein estimates that Travel will post $120 million in ad sales this year, and projects growth to $159 million in 2013.

The network has been facing a headwind in travel-category advertisers cutting spending as people have had less disposable income -- a dynamic that could improve along with the economy.

Bernstein also suggested that revenues could improve once Scripps takes over sales for the network. Those duties are currently held by Discovery on behalf of network owner Cox Communications. Bernstein suggested that Discovery "is likely more focused on driving pricing on its wholly owned networks."

Discovery's contract with Cox expires in May 2010, but Scripps is likely to exercise an out clause once it grabs control of the network. Scripps has agreed to dole out about $1 billion in cash and debt for a 65% position in the channel, but the deal has not closed.

Bernstein said its analysts recently met with management at SNI, and the C-suiters expressed optimism about moving the network into the top 20 over time. Ratings at Travel are up 19% this season, providing them with momentum.

A boost could come once Scripps takes over programming the network. Bernstein said its "track record of driving ratings at both Food and HGTV bode well for Travel."

The Bernstein report expressed skepticism that SNI's move to rebrand the Fine Living Network as the Cooking Channel will be a game-changer. In regard to ad sales, it suggested "there may be a risk of ratings cannibalization at the Food Network."

Separately, Bernstein notes that since Cooking will compete with Food, the Tribune Co. will have an option to take a stake in Cooking. The arrangement is related to Tribune's 30% stake in the Food Network. Tribune, however, has filed for bankruptcy, and may not have the resources to make the investment.