Tuesday, May 5, 2009

Orbitz Extends Price Assurance to Hotels in Latest Chapter of OTA Battle Royale

This morning, Orbitz extended its Price Assurance program to hotels booked through the site. Price Assurance offers consumers a cash rebate if the hotel stay is booked by another Orbitz customer for the exact same dates and room category. This is true innovation from an OTA - no one else has a similar product save start-up Yapta.com

Orbitz claims the program has been highly effective on the air side in driving customers over the purchase hump. Clearly, Orbitz is expecting similar results on the hotel side, particularly when coupled with the hotel fee cuts promotion which is also underway.

Of note, there is a catch. Another consumer must actually book the exact same stay - if the hotel drops rates but no one else books the exact same stay (same check-in, check-out, room class etc) you are out of luck.

Price Assurance for hotels is likely to be far less costly for Orbitz than the similar version offered for air. Assuming a hotel drops the underlying net or merchant rate, (depending on Orbitz's contract) they may be able to rebook at the lower net rate and simply pass the difference back to the consumer. Even if the hotel does not allow a rebook, Orbitz can still probably pay a significant portion of the cash rebate back to the consumer out of the gross margin associated with that stay. On the air side, Orbitz is simply paying out cold hard cash - there is little, if any, chance to go back to the airlines and rebook at the lower price and, alas, there is very little gross margin on air...

1 comment:

  1. Maybe this is about Expedia's getting better insight into international markets, where Amadeus is the leader. I believe the Amadeus GDS powers some of Expedia's international points of sale. That could be part of it.