Pay Now or Pay Later: A New Choice at Priceline - And the Next OTA Battleground?

Priceline.com has begun including "pay-at-checkout" inventory alongside traditional, "pay-in-advance" merchant model hotel inventory at select hotels. Priceline has developed a jazzy new logo and tagline: “Pay When You Stay” to highlight this option.

Users are then given the option of paying upfront or at time of booking when they click to select the hotel.

And this isn't a matter of simply including traditional agency inventory sourced via a Global Distribution System (GDS) such as Sabre or Travelport. This stroke of genius is actually the latest convergence of booking.com inventory with Priceline.com non-opaque (i.e. Travelweb) inventory.

Booking.com's rapidly expanding inventory base within North America now enables Priceline to offer multiple sources of inventory with multiple payment options for the same hotel. At the same time, as more hotels roll out, Priceline has removed one of the largest perceived negatives to booking with an OTA - upfront payment.

The gap between supplier.com and online travel agencies continues to close. First booking fees fall, then change and cancel penalties disappear and now this latest game-changer.

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 hotels.com 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 Hotels.com) 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..

January US Airline Agency Sales off 25% - demand plumets faster than airlines can remove capacity

The Airlines Reporting Corporation (ARC) has posted January US travel agency sales and the numbers are, in a word, shocking.

A bit of background first. ARC is a company owned by the major US airlines that facilitates payments between the airlines and all travel agencies (including OTAs such as Expedia et al). If a ticket was bought at a travel agency in the US, the revenues flow through ARC. Airlines' sales outside the US, as well as their own airline.com (e.g. delta.com, aa.com etc) revenues do not flow through ARC. Roughly 50% of US airline revenue is handled by ARC and it skews heavily towards business travelers.

The raw data is here but year over year, actual ticket sales numbers plunged by nearly 25% while revenues plunged by an even greater amount - nearly 27%. This is one of the first indicators we have of what is to come for the airlines now that the holidays are over and the true recession has set in. Most analysts have pegged capacity reductions at around 10% year over year - revealing a great chasm is opening between demand and capacity.

Indeed, the carriers' worst fears are being realized - demand is falling faster than they can reduce capacity. Things were not supposed to work out this way.

These declines are also telling for the Global Distribution Systems (GDSs) . Galileo, Worldspan (both owned by Travelport), Sabre and Amadeus are no doubt seeing similar declines in airline segments as nearly all of ARC's revenue is delivered by the GDSs. With their heavy debt loads from their privatizations, things may get interesting quickly for Sabre and Travelport.