US OTAs square up on fees as D-Day looms

June 1 is decision day for the major US-based online travel agencies because their temporary promotions, in which they axed booking fees for flights, will end.

That is, unless Expedia, Travelocity and Orbitz extend their fee-less flight promotions or make them permanent.

Here is the background. Priceline eliminated booking fees for flights a year ago and saw its US market share for air soar, while Expedia’s air bookings stagnated.

So, Expedia eliminated fees in March as a way to recoup some of the lost share, and to go after Orbitz, which was very dependent on the flight fees. Orbitz and Travelocity eventually matched Priceline and Expedia on the flight fees.

Then, in late April, Orbitz decided to lower the consumer fees it collects on hotel bookings, a move that causes Expedia the most pain among the OTAs. Expedia matched Orbitz on the lower hotel fees, and Expedia recently reported the air and hotel-fee trims appear to be costing it about $6 million per month.

Now, as the June 1 deadline approaches, Orbitz says it might extend the air and hotel-fee beyond the cutoff date because it has trimmed marketing spend, become more cost-conscious, cut $40 million from its operations, and is seeing incremental bookings of holiday packages.

I interpreted that Orbitz statement as a message to Expedia: We can play hardball, too. Resurrect the air-booking fees, we’ll match them, and perhaps we’ll restore higher hotel-booking fees, as well.

So, by June 1, observers will look to see what actions the OTAs take on their expiring promotions. Many believe that the axed air-fees will become permanent. The stakes are high. Otherwise, as Forrester Research analyst Henry Harteveldt put it, the US OTAs face a potential revenue death spiral.

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