Expedia Justifies Commissions, Rate Parity

High commissions, the expansion of Google into the travel space and rate parity are just a few issues concerning hoteliers who place their inventory on online travel agencies to meet their revenue goals.

Throughout Expedia’s Partner Conference last week in Las Vegas, leaders such as president and CEO Dara Khosrowshahi and chairman Barry Diller alleviated many of those fears by tackling the issues hoteliers care about most.

According to Mr Diller, the good news for the hotel industry is that Google will never have the technology or the manpower to become a true OTA competitor. “While I prefer they stay in their native business, we’ve been able to compete with them and I think we’ll be able to compete with them in the future,” he said.

There’s no doubt, Mr Khosrowshahi said, that sometimes hoteliers wish that consumers would act differently in their booking behaviors. “But in the end, you can’t fight consumer behavior,” he said. “Because of that, hoteliers should realise there is value in the OTAs. Sites such as Expedia provide customers with one-stop shopping to see what’s available in specific markets,” Mr Khosrowshahi said.

Expedia charges commissions for that service but “we only charge for the consumers that are actually booking from our service,” he said. “Out of 100 consumers that visit the site to glean information about hotels in a market, approximately 95 of them are not actually booking with Expedia.. Many of those travelers are instead going to the hotel’s website and booking direct.”

For managers of smaller, independent hotels who believe Expedia is charging an arm and a leg in commissions, Mr Khosrowshahi said the company’s executives feel those partners still are getting major value: “We feel we are giving them… exposure on an international level they wouldn’t have otherwise had exposure to.”

The issue of rate parity was a concept originally pushed by hoteliers, Mr Khosrowshahi said. “We have to respect what our (hotel) partners want.”

Expedia executives said they continually work to balance their partners’ needs with the OTA’s need to drive revenue, he said.

Several major hotel chains in Norway are cutting their ties with Internet giant Expedia and dropping out of Expedia’s hotel reservation service Their executives cite “sky-high commissions” and Expedia’s alleged demands that the hotels can’t offer any lower rates themselves on their own websites than what offers.

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