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The Expedia Traveler Preference (ETP) program, a new agency model that gives customers the choice of paying at the hotel upon checkout rather than paying Expedia upon booking, was a hot topic at the online travel agency’s annual partner conference in Las Vegas last week. Preliminary test results show that the program is increasing both volume and value of bookings and is attracting more international travelers. However, many hotel owners are concerned over commission rates, an increase in cancellations, and impact on their bottom line. During the conference, which drew more than 3,000 attendees, Dara Khosrowshahi, president and CEO of Expedia, responded to some of their most pressing concerns.
Question: Do you think the ETP program might lead to more cancellations if there is no financial commitment on the consumer end?
Answer: In general, we anticipate that cancellations for the agency model are going to be higher than cancellations for the merchant model. The merchant consumer is basically stating that they’re absolutely going to go because they’re willing to pay up front. The vast majority of hoteliers already work on an agency basis, especially on a direct basis.
Q: Is offering customers a choice to ‘pay now’ or ‘pay later’ a good thing?
A: We think ETP is going to provide you with a choice as to how you want to sell and retail to consumers. Having a retail agency rate and a discount advanced purchase, non-cancelable rate up against each other is to some extent is a better product for the consumer and has a better chance of converting.
Q: What is your response to hoteliers who are concerned about high commissions?
A: Of 100 consumers who come to our service probably every second, 95 of them aren’t booking. And we only charge hotels for the consumers who are actually booking over our service. You can bet that a very high percentage of these consumers [who leave Expedia’s site] will go to the hotel website and check it out themselves. You always have the opportunity to capture that consumer directly.
Q: Why do big brands pay less than independents?
A: The large brands, because they bring so much supply to us, get a discount over the commission levels that are available for independent hotels. We think it aligns our interest and it’s fair because they bring us such a significant base of hotels.
Q: Would you consider lowering commissions for smaller hotels?
A: We make sure we have the right, relevant commissions on a local basis. Every market is different. We typically don’t differentiate by size of hotel. To some extent we feel we’re giving smaller hotels exposure to an international marketplace that they normally wouldn’t have exposure to, which is quite expensive for us advertising to those marketplaces. But it’s certainly something to consider. Our commission levels five years from now are going to be different from where they are now and they are constantly changing based on the needs of every local market.
Q: What are your thoughts on rate parity?
A: We’re not necessarily wedded to rate parity. We’re going to follow essentially what our partners want to do and certainly what the regulators want to do. My instinct is that rates in general are going to become more fragmented as we go forward. Not only because of some of the regulatory issues but also because the consumer base is becoming so much more fragmented. There’s going to be a proliferation of rates out there and we don’t necessarily think that’s a bad thing.
READER COMMENTS
Thursday, December 13, 2012 by Tom
Expedia is giving the guest a choice of paying now or later. Expedia is telling the guest they have option of paying upon checkout. I think expedia needs to educate the guest that their cards will be charged or authorized to secure payment upon check-in. Expedia needs to do a better job of educating the guests on polices.
Thursday, December 13, 2012 by CP
Due to location of my hotel, we get lots of reservations from Booking.com. However 9 out 10 credit cards decline. These are local guests not wanting to commit to the reservation. How would expedia handle such situations.
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