Expedia-IHG deal – the future for OTAs?

The quest by online travel agents to get more value from traffic and evolve from the traditional commission-based model is certainly making waves across the industry.


Expedia’s agreement with the InterContinental Hotels Group in November, announced with remarkable timing to coincide with chief executive Dara Khosrowshahi’s appearance at the PhoCusWright in Orlando, could be a landmark moment in the evolution of the OTA model.


The deal was conspicuous not only because it was the culmination of a three-year stalemate between the two parties, but also because it is Expedia’s first attempt at putting commercial terms around the marketing and visibility it gives suppliers – but how is it likely to evolve?


Expedia North America president Paul Brown says it would be offered to large global players who already invest a significant amount in online media.


The hope is to switch some of this spend to Expedia but the strategy leaves two questions.


Where does it leave other suppliers not in the club, and what about consumers?


According to some, the media pricing model and others like it are purely for commercial benefit and will see consumers being driven to the suppliers with the commercial terms.


TravelRepublic managing director Paul Furner believes smaller players will be priced out of exposure on the website. He also sees a conflict between the potential success of the media model and what consumers want. 


“The more successful that model is the more one-dimensional the site becomes and consumers will start to see through it,” he says.


Expedia vice-president destination and lodging services, EMEA, Murad Hajeebhoy, denies there would be any preferential treatment or rankings, which he insists are based on a number of factors including hotel type and popularity with customers.


“It is not about preferential ranking. If you are purely driven by revenue you would do it that way but hotels have to give value by the revenue they bring us as well as what consumers want to buy. It is about relevancy as well.”


Hajeebhoy also stresses that the ink is hardly dry on the deal and Expedia needs to “watch and learn”.


Nevertheless, the announcement has also sparked debate about the blurring between OTAs and price-comparison sites.


According to Dealchecker managing director Alex Saint there is still a fundamental difference between a price-comparison site and Expedia in terms of the direct traffic being delivered.


Saint says: “Expedia still has the desire to control the booking process and we, as a price-comparison site, give an independent view of the market and then pass the customers on.”


Cheapflights boss David Soskin is of a similar view and believes that although the Internet enables overlap across the online travel world, OTA’s will continue to make their money through shifting product.


“If at the edges they can make money out of media, then good for them, but they are not media companies and will not be perceived by consumers as being independent,” he adds.


Blog: Dara woos PhoCusWright event

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