Expedia is tweaking the model to stay ahead of the game, says Alex Bainbridge

Two unrelated news items about Expedia have hit the news this past week.

First we had the announcement that they are opening up hotel inventory to offline travel agents.

Expedia’s second announcement disclosed that, in addition to existing advertising, they are going to carry Google Adwords on their site.

Are these unrelated and just happened to hit the news in the same week – or is this a sign that something deeper is taking place?

Are Expedia trying to turn the super tanker?

The three business models for an OTA are the consumer transactional model (money made from selling product to travellers), the media model (ask suppliers to pay for advertising in return for web traffic) and the infrastructure model.

The infrastructure model is distinguished from the pure transactional model in that an additional business entity is involved who maintains the consumer relationship.

Are Expedia signalling that the pure-play transactional model for OTAs is dying?

Biting at the feet of large OTAs are new media powerhouses in online travel.

These companies don’t require all the complex systems for handling product sales – but instead focus on selling advertising (such as PPC) to suppliers.

These media focussed online travel companies have much greater flexibility in how they create their websites. Instead of pitching product to consumers they create tools and maintain UGC content such as reviews, destination tips etc.

They don’t have to care if this content doesn’t promote product directly – if it captures travellers at the start of their research phase – they can sell this valuable traffic to companies who do want to sell product.

Likewise moving towards the infrastructure model is a significant change.

Expedia in the past have had some troubles with suppliers removing product from their system.

If Expedia can become part of the background IT infrastructure by acting as a link between suppliers and travel agents this will make it harder for suppliers to cut Expedia’s supply.

Probably a wise move from this perspective and should be seen as a defensive move.

Expedia seem to be tweaking their business model in order to stay ahead in the game. They are now flying a kite with all three business models.

Depending upon which one keeps flying will determine not just their direction but the direction of other leading pure-play transactional model OTAs.

One to keep an eye on.

Alex Bainbridge is managing director of Travel UCD

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