The Quiet Online Travel Booking Struggle

You are probably not aware, but the online travel agency giants (Expedia, Orbitz, Travelocity, etc.) are in a bit of a struggle with, really, the hand that feeds them. San Jose’s MercuryNews.com has an article about the quiet struggle for market share that online travel agencies are having with direct online booking with hotels like Hilton, Radisson, or Days Inn.

Early in the years of online travel booking, hotels didn’t really have the online capacity and systems to offer direct online hotel reservations. They either didn’t want to invest in it or just figured bookings through online travel agencies was good enough. That, obviously, lead to the notion that the best rates came with online agencies like Expedia. In exchange for the savings, travelers would have a harder time canceling their rooms since they paid up front.

Well, in the recent years, the hotel chains have wizened up a little bit and are trying to cut out the unneeded middlemen, since managing a booking site is a small price to pay in exchange for the potential profits.

So chains are offering the cheapest rates possible, and have begun offering gift certificates if you can find a lower rate. From the article.

“If a customer who reserves with Hilton finds a lower rate for the same stay at another Web site in the next 24 hours, for example, Hilton will match the rate and throw in either a $50 gift check or a $50 discount. Marriott and Starwood Hotels also offer rate guarantees.”

So they’re getting pretty serious about cutting out the online travel agents. Direct online hotel bookings have already grown to hold a 55% market share, compared to 50% in 2004.
Online Travel Agencies Respond

Needless to say, the middlemen will not give up easily. Their desire to hold a portion of the $25 billion online travel booking market is pretty large. So what are they doing?

Travelocity and Expedia now offer “A customer who finds a lower rate on an identical reservation within 24 hours of booking can get a refund of the difference and $50 off a future travel purchase. ” New point systems have also kept customers loyal by offering future discounts.

Orbitz is focusing on stepping up the customer services and intangibles that come along with hotel booking.

What I think?

Well, it was only a matter of time until the hotel chains climbed on the backs of the online travel agencies and used their momentum to start their own booking services. It’s only natural for them to grab a decent market share, but online travel agencies are by no means doomed.

They still have their customer service, glamor, reputation, eye candy, name recognition, and travel packages. Those who don’t want to mess with a bunch of different online accounts or booking will still love to book everything in one place.

Also, this is great for budget travelers. So now we got Expedia / Orbitz, real travel agents, and direct hotel chains all competing for our services. Economics 101: More sellers = better prices.