Thursday, April 14, 2011

Will Dropping Consumer Booking Fees Drive-Up Agent Commissions?

Earlier this year after axing consumer fees, US travel company Expedia launched a multi-million dollar marketing and advertising campaign in New Zealand and Australia that challenged their competitors that were charging flight and accommodation booking fees.

It's difficult to second-guess if  Expedia were able to get a sufficient hit from this campaign, however the US giant appears to have the resource to play a long-game. The "no fees" campaign had the simplistic message: "book with Expedia and put your money towards where it matters the most - your holiday." This would have hit a nerve with the travelling public as no-one likes to pay those pesky fees.

While Expedia are competing in a competitive and increasingly crowded environment, Australasia's largest Online Travel Agency (OTA), are hitting back with the line "...on a total cost basis, (Wotif) is cheaper in the majority of cases."

Like most OTAs, charge a 10 per cent agent commission to accommodation providers on room sales. also charges the consumer a flat credit card fee per reservation regardless of the number of nights booked and in New Zealand this is NZD$5.00.

While there may be pressure on OTAs to drop consumer fees, we should be mindful that any reduction in charges imposed on the end user is likely to put pressure on agent commissions charged to suppliers.

As an accommodation provider, we can see value in paying OTAs a 10 percent agent fee for performance, however we would not like to see a trend of this ceiling being raised.

We are keeping a wary eye on how this plays out...

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