Wednesday, April 22, 2009

Next Round in the Online Travel Agency Fee Wars:: Orbitz Cuts Hotel Booking Fees

Orbitz fired off the latest salvo in the continuing war between the Online Travel Agents (OTAs) by removing the somewhat hidden booking fees that have pervaded the industry's merchant model. These booking fees have typically been included in the "second step" of the booking process after the consumer clicks on the rate at the hotel they wish to purchase. The fees have been bundled together with taxes in a single "taxes and fees" line without delineation to the consumer on which portion was/is taxes going to the government and which portion is fees going to the OTA.

This is a page right out of Priceline's play book but with a twist. PCLN eliminated the fees on non-opaque (meaning NOT name-your-own price reservations) several month ago under their "Fee Chop" moniker but only shows the "all-in" price when the consumer clicks to book. Orbitz, to their credit, is showing the full price, including taxes on the first page - something even does not do.

We sampled a room for tonight, Wednesday at the Hilton New York to see how the big OTAs and compared. As expected, every site we tested came back with the same initial price: $219. However, from there, prices diverged widely when the "all-in" price was compared: $253.71 $253.10 $253.76 $262.46 $287.83 $287.83

Remember, these are the fully-loaded prices off the same $219 base room rate. Wow! Quite a difference indeed.

Obviously, Travelocity, Expedia and are adding some significant revenues under the guise of "taxes and fees" - often more fees than taxes!

Orbitz is clearly looking to strike Expedia and Travelocity where it hurts in their most profitable segment - hotels. The question is, will consumers notice? After all, all of the OTAs have had these "hidden" fees for years - with few complaints from consumers. All of the competition has been on the first page - ensuring that the first rate consumers see for a hotel is competitive.

And this is yet another "temporary" promotion - only for bookings made between now and July 15th. Will it last longer? Priceline's Fee Chop certainly has.

And there is still that little cancellation fee that Orbitz dings consumers for. Priceline and even have long removed the $25 cancellation fee they imposed above any fees the hotel itself might have charged. The $25 cancel fee lives on at Orbitz, Travelocity and Expedia. Will this be the next frontier in the race to be the most "consumer friendly OTA?"


  1. Tom, yes the games have begun. Orbitz expects the other OTAs to match with booking fee cuts, but believes it needs to build its nonair revenue as a key to OWW's survival.

    By attempting to be the most consumer friendly OTA, with its new total cost hotel displays, Orbitz hopes this will help build its brand -- and expect a big marketing campaign to go with it.

    I, and others, though, have long argued that taxes and fees should not be lumped together. No transparency there.

    But, that would threaten the OTA merchant model.

    Still, it's a great move by Orbitz to show the total cost up-front.

    Let's see what the impact is, though, of the latest round in OTA price warfare.

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