Hotels had to reckon with Expedia before it acquired Travelocity and proposed the same for Orbitz. If it’s able to enhance its negotiating power, Expedia could reinforce the notion that online travel agencies offer lower lodging rates than traditional managed travel sources.
In a Feb. 13 research note, Oppenheimer analyst Manish Hemrajani wrote that Expedia’s “Hulk-esque proportions in the U.S. travel landscape” make it an “indispensable” channel with “immense clout in rate negotiations with the hoteliers.”
Atmosphere Research Group’s Henry Harteveldt pointed out that Expedia could also try to generate better commissions for itself or add-ons for users like free WiFi and breakfast.
Not everyone assumes Expedia’s acquisitions give it more leverage in the U.S. market.
Marc Casto of Casto Travel doubts the Orbitz acquisition will further pressure hotel rates. He said that “presumes Expedia hasn’t already extracted more than its pound of flesh from hotel companies.”
Other sources agreed that hotel companies won’t change strategies much, at least not the larger chains. Strong demand prevails in the market. The same may go for large travel management companies.
“The real pressure will be on small and midsize agencies, both corporate and online,” said Steve Reynolds, CEO of hotel shopping tool TripBam. “Consumers follow the rates.”
“I suspect that the lowest-hanging business fruit for Expedia is to get that unmanaged or lightly managed small business client to behave more like a leisure customer,” said Bill Carroll, a clinical professor of marketing at Cornell University’s School of Hotel Administration. “They’d stick to their knitting, casting that net to bring in the small business segment.”
If You Can’t Beat ’Em
Some may agonize over competing against an even bigger Expedia. Gant Travel Management is trying to harness its sway.
Gant president Patrick Linnihan said he’s been expecting Expedia to “play a much larger role in the corporate travel segment, especially in the SME market.” He sees that role as the source of cheaper, prepaid hotel rates that appeal to some travel programs, much as nonrefundable airfares do.
Gant had been offering prepaid hotel rates to its small and medium sized clients before joining the Expedia Affiliate Network in 2013. Now, EAN is the main source and Gant is planning a pilot for its larger clients this spring.
Other travel management professionals also see value in the open market. Norm Rose of Travel Tech Consulting suggested OTAs may supplant TMCs as a source of hotel content, supplementing whatever corporations can negotiate on their own. “There’s so much friction in the market for finding lower rates,” he said. “With how big Expedia and Priceline have become, it’s probably better to incorporate them in your program unless you have tremendous volume to leverage.”
Some agency executives said many of their SME clients are fine with hotel bookings leaking out of the managed program to sites like Expedia. Traveler choice on lodging tends to be more personal than for air travel or car rental.
But how applicable to business travel, in-program or otherwise, are the lowest rates available from Expedia and other OTAs? They’re typically nonrefundable and can come with other restrictions. This is one reason why a corporate TMC leader said his agency is in the Expedia Affiliates Network but doesn’t really use it: “Working into the proper processes has proven a pain in the butt for not much gain.”
Gant’s Linnihan argued “it’s a myth” that all Expedia rates are nonrefundable or very restrictive. Though they may not always be analogous to what a corporate traveler can get through a managed program, EAN rates often include Wi-Fi and breakfast.
“Expedia has been increasing its focus — and so has Priceline, and same with Orbitz — on rates that you pay at check-out, and in some cases they offer some degree of flexibility to cancel,” said Harteveldt. “Even some of the prepaid rates now may offer more flexibility in terms of modification and cancellation within certain parameters.”
Linnihan said prepaid rates can be cheaper than negotiated corporate rates and are particularly attractive in a client’s less-frequented destinations. Though EAN offers other types of rates, Gant uses only the prepaid ones. Of course, when rates are nonrefundable, they work better for trips that are unlikely to change. “For the right form of travel, it’s the path to the most value,” Linnihan said. “Travel managers are smart enough to know where the Expedia rate is right for their travelers and when it doesn’t make sense for us to offer it.”
To access the EAN rates, Gant agents use software from BookingBuilder Technologies that is connected to Expedia with an application programming interface. The process for now works only with agent assistance. Back-office and reporting needs require agents to store the booking information in the global distribution system with passive segments, which come at a small cost to the TMC. Gant earns commissions on the bookings and charges service fees to clients.
Several other distributors have signed up with EAN, including Sabre, Hipmunk and GetGoing. French corporate booking and expense firm Traveldoo, owned by Expedia’s Egencia, also participates. Overall, EAN has compiled 7,500 participants around the world — including other OTAs, airlines, rail companies and other travel suppliers. Its hotel inventory encompasses 173,000 properties. EAN claimed it doled out $630 million in commissions during the past three years.