More
OTA angst
Analysis of a new Expedia model has owners crying foul and brands scrambling to offer the proper response .
By Jeff Weinstein , editor in chief
While one major hotel owner calls the impact of Expedia ’ s new Traveler Preference Program “ a tempest in a teapot ,” the new retail model that allows guests to pay the hotel at checkout — as opposed to pre-paying Expedia — has caused a bit of a stir among owners , operators and franchisors .
A white paper authored by Michelle Russo and Ryan McCarthy of asset-management firm HotelAVE , Providence , Rhode Island , claims owners could lose US $ 2.1 billion in hotel real estate value as a result of Expedia ’ s new program — unless concessions are made by Expedia , brands and managers . Not surprisingly , Expedia has taken issue with the white paper , and management companies are looking closely at the model to see if changes are required .
HotelAVE suggests the new model increases the cost to a hotel to acquire the same business and the entire burden of this added cost falls on ownership while Expedia , the hotel brands and management companies benefit from the change . The authors say the
Expedia ’ s Traveler Preference Program allows guests to pay the hotel at checkout , as opposed to pre-paying Expedia .
new program will cost hotel owners up to an additional US $ 4 for every US $ 100 that goes through Expedia under the new retail model .
HotelAVE ’ s conclusions are based on its data that suggests for the 62 % of hotels that currently use the Expedia credit card program to expedite the collection of payment , the new program will cost hotel owners an additional US $ 2.24 . Of this , US $ 0.44 will be shifted from Expedia to owners by way of additional credit-card fees . This calculation is based on a hotel paying credit-card fees on 80 % of the rate net of Expedia commission , whereas hotels will now pay credit-card fees on 100 % of the rate . The remaining US $ 1.80 will be remitted to operators and brands . Based on its research , the white paper contends Expedia benefits by reducing its annual expenses by roughly US $ 50 million , while management companies and brands will benefit from increased fees by US $ 81 million . “ A lower Expedia commission structure , more consistent with brickand-mortar travel agents and / or manager and brand fee concessions , would make this transition cost neutral ,” the white paper states .
For this analysis , HotelAVE assumes 70 % of Expedia U . S . hotel room revenue could be affected by the Traveler Preference Program . This excludes Advance Purchase , Packages and Opaque , which will remain in the Merchant model , and transactions already in the Retail model . Of the revenue that could potentially be affected , HotelAVE assumes 90 % will switch from the Merchant model to the
10 HOTELS December 2012 www . hotelsmag . com