Expedia Acquires Orbitz: Implications for Consumers

Expedia Acquires Orbitz: Implications for Consumers

Founder Rich Maradik gives the consumer perspective on the Expedia acquisition of Orbitz in his interview with NPR here

Let’s think through the Expedia purchase of Orbitz from the hotel-consumer relationship perspective.

With Expedia and Priceline purchasing most other significant OTA and metasearch brands, consolidation is about efficiently winning customer relationships, beating both hotels and other intermediaries to the consumer “share of mind” and “share of wallet.”

Now, there are so many intermediaries that come between suppliers, like hotels, and the consumer:

  • OTAs
  • User Generated Review sites like TripAdvisor
  • Search platforms like Google and Yahoo
  • Airlines and credit card companies
  • Traditional Travel Agencies
  • Retailers like Costco and Sam’s Club
  • Amazon (now getting into travel, too)

What could this mean to hotel rates

With every one of these intermediaries taking fees from the revenue consumers spend on hotels – more bookings going through intermediaries means less profit for hotels. But it does not necessarily mean better deals for consumers, thanks to rate parity agreements.

For the consumer, the change in ownership may ultimately be transparent. But as market consolidation continues, it could open the door for new innovative solutions and consumer applications, providing more options to engage with hotel suppliers.

Hotels can’t compete with the OTA big spending

So far, OTAs have done a better job marketing and branding than hotels themselves. Not necessarily better in execution, but by sheer expenditure alone.

In 2014, Priceline and Expedia spent $5.8-$6.0 billion on sales and marketing – this is 35 – 40% of their revenue! Add in the approximate $500 million that Orbitz spends per year on marketing and advertising, and that amounts to $6.5 billion in marketing expenditures from big OTAs in 2014 alone. This spending far exceeds the marketing spend of major hotel chains.

That buying power is pushing the average hotel brand and much more so independents further down the online marketing food chain. See for yourself when you do a Google search for a hotel – the top spots returned for both paid and even organic search are third party results.

OTA consolidation ultimately makes the distribution landscape for hotels more complex because it means OTAs can continue to be more effective and efficient in connecting to consumers.

What’s next for hotels to drive direct bookings

The balance of OTA and direct bookings is a delicate balance for most hoteliers – always with the goal of growing the connection between guests and the hotel website. With the continued growth of the OTA consumer acquisition machine, hotels must be more creative and strategic with how they connect to customers, win share versus their hotel competitors, price and allocate inventory and relate to intermediaries themselves.

That means a break from formulaic online hotel marketing with blanket PPC campaigns and banner ads to smarter, targeted strategies that engage active consumers with intent to travel. New strategies like geo-targeting based on future consumer demand and persona-driven content marketing can help hotels engage the right consumers and direct traffic to their own websites.

We have to see how details unfold to see what the real impact will be on consumers and how they engage with hotels – directly and indirectly. Time will tell.