Expedia Billboard Effect: Cornell agrees that it is real

Expedia and other OTAs have long touted what has become known in the industry as "the billboard effect" whereby they have claimed that positioning on their sites generates not only bookings through the OTA but also a halo effect on the hotels' own sites by generating brand awareness. Non-loyal consumers start many of their searches at an OTA to gain a perspective on the options available, relative costs and positioning of the hotels in a given market against one another. Then, they often check other sites to compare pricing - usually including the website of the hotel they are interested in.

Personally, I saw strong evidence of the billboard effect while I was at Starwood and Expedia has long claimed that for every booking generated on Expedia, another booking is generated on the hotel's own website.

In a new whitepaper, Cornell assistant professor Chris Anderson has measured the billboard effect with a several branded and unbranded hotels. The results are striking, particularly for the independent hotel in the test.

For the study, Prof. Anderson worked with Expedia and JHM Hotels, an ownership group with hotels under the Starwood, Marriott, Hyatt and Hilton flags to cycle specific hotels on and off of Expedia over a three month period. That is, the hotel was listed at the top of the search results when the hotel was participating on Expedia and and removed altogether from search results listings when the hotel was dark on Expedia. By the conclusion of the study, each hotel was listed on Expedia for 40 days and dark for 40 days.

The results are below:

According to the study, the hotels saw a boost in reservations ranging from 7.5% to as much as 26% for the inde hotel when they were listed on Expedia vs. when they were dark.

Prof. Anderson suggests that the branded hotels may not have seen as large of a boost because when consumers go the brand websites they are presented with other "in-chain" hotels, e.g they are searching for a Marriott but upon arriving at marriott.com they are presented not only with the Marriott they saw on Expedia but also a Courtyard where they may actually end up booking.

We'd like to see an expanded test at some point with some slightly different parameters. For example, what happens if the hotel isn't listed at the top of the search results on Expedia? Could the brand numbers be further refined if the test was conducted in markets without sister hotels nearby? What would the results look like for resort hotels? How did the booking curves differ? And the cancellation rates? Could leveraging the billboard effect actually be cheaper than buying google key words? And of, course, what do the bottom line ROIs look like after all distribution costs are taken into account. Those questions may be ripe for another study - any of you OTAs or chains reading ready to sign up? Lets talk....

Orbitz new homepage - where's the love? TLC no more?

This morning Orbitz rolled out a new home page - gone are the jarring deep blues and oranges of the old site. Many of the changes are subtle but overall, it has a much cleaner look and feel. The site has also gained some heft with a new wider display - all the rage these days.

Most surprising is the total removal of the Orbitz TLC branding. TLC has been at the heart of the Orbitz brand for years and has been featured in all kinds of commercials and goodness knows how many airline in-flight magazines (no doubt where it was often viewed by someone who was on delayed flight that didn't book with Orbitz!)

We actually viewed TLC as a differentiator in the otherwise commoditized airline ticketing space - something that Orbitz had that even the airlines themselves couldn't match. But with Orbitz pushing hard on hotels, maybe it was decided that TLC needed to take a back seat. TLC isn't even listed under "Why book on Orbitz" on the home page. (TLC is still there, just reached from a rather boring link titled "Traveler Update")

Speaking of hotels, Orbitz is also taking an interesting approach with the chain hotels with direct link-offs to branded landing pages right off the home page - the first we've seen such prominent placement of Marriott, Starwood and the like on an OTA home page.

We also just noticed that hotel search results also have a new "sponsored listing" area at the top of each sort. Similar to Expedia's Google-esq listings, clicking on this advertisement brings you to a landing page for the specific hotel. Oddly, clicking on the ad brings you to a different landing page than clicking on the hotel in the regular sort order.
But what about that (new?) interstitial page between clicking on a hotel and getting to the booking page? Hmmmmm

Kayak Opens Up Search Data to Everyone

Our friends over at hotelmarketing.com are reporting that Kayak has opened up their logs to the rest of us to see how and what people are searching for and on. We can't tell how recent this development is since Kayak doesn't seem to blog anymore (last posting was back in May!) and they haven't issued a press release since May either but we don't remember seeing it before now.

Radio silent or not, the reports are pretty cool. You can do things like pull the most popular air search destinations trended out over time, check out upward and downward trends (which can get kind of silly due to small sample sizes) and more. Kayak also exposes the largest air search origins and destinations for a given city.

There is also something new called the "Kayak Travel Index" which is a blend of searched air and hotel prices to (and in) a specific city. Alas, they don't break it down to just air or hotel - which would provide some really interesting data for the marketplace and even corporate travel managers.

For hotels, kayak lists hotels by number of searches - cool stuff.

Check it all out here

or look at Boston specifically here

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...

OTA Slug Fest Continues: Expedia Removes Back-end Mark-ups Previously in "Taxes/Fees" to Match Orbitz

The OTA slug fest over booking fees continues today - Expedia has apparently (and quietly) stopped adding additional fees into the "taxes and fees" section as a result of Orbitz removing them yesterday. Expedia claimed to the press they would remain competitive and, indeed, they have.

Until now, while the "base" price of a hotel room on Orbitz, Travelocity and Expedia (and supplier sites) was usually the same, the OTAs often added additional fees into a murky line during the booking process labeled "taxes and fees." Consumers didnt pay much attention to these fees, assuming that they were not optional or a subject of competition. All that changed yesterday when Orbitz began breaking out the total all-in price on the first search results page - something even the hotel supplier sites don't currently do.

Yesterday, we shared the following price comparison which clearly showed the differences between the OTAs (and supplier sites) when the "all-in" price was compared:

Hilton.com $253.71
Orbitz.com $253.10
Priceline.com $253.76
Travelocity.com $262.46
Expedia.com $287.83
Hotels.com $287.83

Today, pricing seems to have equalized across the channels with Expedia coming in line with the competition. Consider the Paramount in New York for this Sunday night:

Paramount website $151.40
Orbitz.com $150.80
Expedia.com $150.07

(Note: Priceline was $299 and Travelocity was $160.33 showing the importance of shopping around - but that isn't the point here)

Or consider the same Hilton New York on Sunday, May 10th:

Hilton.com $162.31
Orbitz.com $161.94
Expedia.com $162.23

What is critical is that Expedia has effectively taken a hatchet to their margins. The difference could be as much as a 12 point drop in the Hilton example above. Clearly, Expedia is not about to cede share and is determined to remain competitive - the open question is what the effect will be on Expedia's hotel margins.

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 Hilton.com does not do.

We sampled a room for tonight, Wednesday at the Hilton New York to see how the big OTAs and Hilton.com 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:

Hilton.com $253.71
Orbitz.com $253.10
Priceline.com $253.76
Travelocity.com $262.46
Expedia.com $287.83
Hotels.com $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 Hotels.com 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 Hotels.com 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?"

Delta joins AA in Suggesting that OTAs and Travel Agents Should Pay for Content

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.

Marriott Rewards' new offer is great for consumers but shows how hard things have become in the resort market

Marriott's frequent stayer program, Marriott Rewards, just announced a stunning new offer whereby guests redeeming points for free nights at a slug of lavish Marriott resorts can get an additional free night without redeeming additional points. Members can burn the regular amount of points for a two night stay and take home a third night free. And this isn't being offered only on Sunday nights or at the Milwaukee Airport Marriott in January (no offense to Milwaukee) - its being offered all summer long at great hotels in Hawaii, Mexico, Costa Rica, Portugal and the UK among others.

Clearly, Marriott is having a hard time filling these resorts with typical summer leisure travelers. Group and meeting demand has also fallen precipitously at luxury resorts in particular - no company wants to be the next AIG hosting fancy getaways at fancy resorts. As such, Marriott is turning to their most valuable customers and offering them an additional incentive to come and stay at a Marriott.

For Marriott, this promotion enables them to reduce their Marriott Rewards points liability and stimulate some demand into these hotels - even guests staying for free still generally spend money on food and other hotel services (In fact, some studies have shown that guests staying on loyalty point rewards actually spend considerably more than guests who are paying for their rooms)

For travelers, as we've said before, this is yet another great reason to be burning hotel points and airline miles now - because you can! Demand is down and airlines and hotels are opening up frequent flyer/stayer award space. Don't look for seats on the Saturday before Christmas to Aruba but for less peak than peak of peak times, frequent flyer seats and rooms abound.