If you listened to Delta's Q1 earnings call this morning, you heard some interesting commentary on the future of distribution according to Delta.
DL management echoed American's CEO's suggestion on their call last week that the time would come when OTAs and agents would pay the airlines for their content. Interesting how the airlines can have these "open" discussions in their earnings calls, isn't it? We've been following the commentary over on Dennis Schaal's blog but this was too rich to pass up without a few thoughts of our own!
Of note, DL stated that "TMCs have an important role to play" and seemed to imply that their main target was the OTAs particularly when DL described the "value we provide vs. others" online. Maybe so, Orbitz's Price Assurance which offers consumers a refund when fares decline seems like a pretty good value. The same can be said for the multitude of air+hotel packaging options that the OTAs provide to consumers. And many consumers would also vote Orbitz's TLC in-route support to be far superior to many airline's offerings. And multiple airlines? Try booking a multi-carrier trip on Delta.com or Continental.com. OTAs are all about offering consumers choices and comparison opportunities - things they do quite well.
More interesting, however, was the suggestion that "OTAs should pay for [airline] content the way they do for hotels" Hmmmm. Obviously, someone at Delta has not taken a quick look at hotel distribution costs - nor drivers of OTA profitability. Newsflash: OTAs don't make any money selling airline tickets! They make it selling hotels. And they don't pay hotels - quite the opposite. Can you imagine the horror if someone at Delta knew that many chains are paying Expedia/Travelocity/Orbitz in the mid-teens for distribution? And what of independent hotels? Considerably more.
And finally, DL mentioned that Delta.com was driving ~ 37-38% of Delta's revenues - great news indeed. But they also estimated that the OTAs were providing in the area of 30% of Delta's revenues - wow is all we can say on that one.