Looking for opportunities to increase your travel affiliate sales with online travel agencies (OTAs)?   If yes, Expedia may have the ‘ticket’ to success.  Aiming to get more customers to book on its site, Expedia announced today that it was making permanent its recent promotion of waiving consumer booking fees on all online air tickets booked on its site, and upped the competitive ante against the other OTAs as well as airlines by also dropping change and cancellation fees on all hotel, car rental and cruise reservations.

In a move anticipated by many travel industry observers, eliminating these fees enables Expedia to match the prices found on the airline’s own websites.  By changing its services and fees policies, Expedia believes that more travel consumers will now book their travel on their site rather than using Expedia to do price comparisons and then clicking over to supplier’s site to complete their reservations.   How serious has the ‘look but no book’ problem been for Expedia (and its sister companies, Hotels.com, Hotwire.com, and TripAdvisor.com) – here’s a stat that sheds light on this endemic OTA problem: According to travel market research firm PhoCusWright, about 31% of people who spend time shopping with an OTA switch to the airline’s site to book.

Although Expedia admits that its March booking fees waiver was one of the reasons why its airline revenue dropped by 17 percent in its most recent quarter, according to Jake Fuller of Travel Wise Research LLC, since these no-booking-fee promotions began, Expedia and the other OTAs are converting more of the shoppers into buyers.

Expedia Inc recently implemented a similar promotional scheme for its Hotels.com subsidiary, with much success. According to entrepreneur and strategist Sramana Mitra, during the last several quarters “…in addition to improving search engine optimization, hotels.com also eliminated change and cancellation fees and lowered hotel booking fees.  As a result, hotels.com saw Q1 room nights soar 14% over the year.”  In a nutshell, Expedia’s move is a calculated bet: by eliminating fees, more shoppers will buy from Expedia, and their sizeable loss of service fee income will be offset by increased airline and other supplier commissions.

That’s where travel affiliates come in.  Travel affiliates have lots of customers, and these customers buy lots of travel products, including airline tickets.  Today, despite the obvious benefits of performance marketing, only a handful of U.S carriers distribute through the affiliate marketing channel.  Customers of travel affiliates are loyal, savvy and they look for value in the travel products and services they buy.  If the cost of an airline seat offered by an airline or an OTA is the same, then more and more travel consumers will opt to buy from the OTAs.

Here’s an overview of Expedia’s travel affiliate compensation program, which with the waiving of the air booking, hotel, car rental and cruise reservations change and cancellation fees, make Expedia’s program an enticing offering for both travel consumer and travel affiliate alike:

  • Airline transactions: $4 per transaction
  • Expedia Special Rate hotel transactions: 5.5% to 6% per transaction based on monthly Merchant hotel sales
  • Agency hotel transactions: 3% per transaction
  • Rental car transactions: 2% per transaction
  • Cruise transactions: $20 to $30 per transaction based on monthly Cruise sales
  • Vacation package transactions: 2.5% of vacation package
  • Destination Services/Activities transactions: 5% per transaction

Expedia’s new service structure provides an even more powerful inducement for travel affiliates to leverage their customers’ air travel purchases to their advantage.  By delivering these customers to Expedia (and we assume in short order, the other OTAs who’ll undoubtedly match Expedia’s program), travel affiliates can make money rather than lose the customer to an airline that eschews the travel affiliate channel.

TravelDividends applauds Expedia’s move and suggests that travel affiliates take advantage of this enhanced opportunity to generate incremental revenue.  Do you agree?  What has been your experience with OTAs to date? How has the online travel agency niche performed in your travel portfolio?  Do you think this new strategic move by Expedia will benefit your business or the travel affiliate industry in general?  What other initiatives would you like to see the OTAs take in support of the travel affiliate marketing channel?  TravelDividends is always interested in hearing the views of our readers…please share your comments with us.  As always, we appreciate your participation.

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