Wednesday, February 17, 2010

Orbitz For Travel Agents Pays 10% Commissions

Orbitz has launched a new platform for traditional travel agents which enables them to book stand-alone hotel rooms as well as vacation packages. This matches (for hotel only anyway) agentaccess, a program which has offered to the agency community for some time.

The Orbitz for Agents platform offers a 10% commission to agents on stand-alone hotel bookings and 4% on packages which include air and hotel or car and hotel.

And, in an effort to sign up agents, the first 500 agents to register will be paid 12% commissions.

So now we have Orbitz, partially owned by Travelport, pushing agents to book outside of the GDS. And Orbitz is offering a strong economic incentive (at least for the 1st 500 agents) to do so. But will agents abandon their beloved green screens in large numbers? I doubt it - but plenty of small, independent agents may be interested.

And what of suppliers? It gives you some clue as to the level of margins Orbitz (and are able to extract from hotels if they are able to not only match the industry standard 10% rate but still cover the other costs associated with the merchant model (e.g. credit card fees, fraud, customer care etc) which are normally borne by hoteliers under the agency model.

And it is a good move for Orbitz. Orbitz has a choice to drive incremental bookings - they can pay an agency 10% or Google. Stands to reason they already pay Google enough so this is an interesting way of lowering reliance on paid search.

Orbitz does allow for agents to add their own service fees - could this be the distribution model of the future in the hotel industry much as it has become the standard for airlines? Wait and see..


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  2. Tom, with regard to your comment about Travelport owning part of Orbitz and creating an incentive to book outside of the GDS, doesn't a GDS underlie Orbitz? Don't they use Apollo/Galileo or Worldspan for bookings? If that's the case, then the segment fee is still being paid, but its via an Orbitz booking not an XYZ Travel booking.

  3. Greg, Great question. The vast majority of Orbitz hotel bookings are merchant model sales which flow over Pegasus, not Worldspan or Galileo. And a goodly number are sent to the hotels via extranet/fax - net/net very little hotel inventory is sold through the GDS on Orbitz. Only published or retail sales (which are tiny and not included in this program) flow over Galileo. Expedia/ uses extensive direct connects to the hotel PMS or CRS.
    As for air, Orbitz pioneered direct connects with airlines - all of the US major airlines do not connect with Orbitz via a GDS. Obviously, this is not the case for Expedia, Priceline, Hotwire and Travelocity.
    But the new Orbitz product is targeted at selling hotels and packages so air is a small factor regardless
    Further, it is a philosophical issue for the GDSs - they are generally loath to encourage anything outside of the GDS environment for obvious reasons.

  4. Tom, thanks for the excellent explanation. Is the Pegasus conduit similar to the GDS, in that the hotelier is charged the equivalent of segment/booking fee, a flat rate, or some other pricing model?