“Online hotel distribution landscape is still very immature”

Orbitz Worldwide, Inc. says it has witnessed a significant increase in the volume of air tickets booked on its US sites since the removal of flight booking fees.

Published: 11 May 2009

Orbitz Worldwide, Inc. says it has witnessed a significant increase in the volume of air tickets booked on its US sites since the removal of flight booking fees.

“Specifically, we have seen an increase in year-on-year air ticket growth rates of over 15 percentage points,” said Barney Harford, president and CEO of the company.

In early April, the company had announced `Fly Fee Free’ promotion, removing booking fees on most flights booked by May 31 on Orbitz and CheapTickets. In mid-April, Orbitz announced its Hotel Fee Cut promotion drastically cutting booking fees on all of its hotels around the world for rooms booked by July 15th. It has also came up with Orbitz Hotel Price Assurance.

Harford, during the company’s first quarter earnings call (posted on Seeking Alpha), said, “We believe that building out our hotel offering is the most important long-term strategic initiative for the company. This is an initiative that will take time, investment and commitment. But we believe the effort is worth it.”

“The global hotel market is huge. Yet the online hotel distribution landscape is still very immature. It is still very complicated for consumers to compare all the different options. There is still so much to be done to make things better for customers,” he said.

“We recognise that we are currently under indexed in the hotel compared to some of our competitors. However, we have strong travel brands around the world that generate over $10 billion in consumer demand over the last 12 months. We have scale at the level of customer demand and have the opportunity to close the gap by focusing on initiatives that make it easier for those customers to book hotel,” said Harford.

“It is remarkable that it’s 2009 the online travel industry is been around for over 10 years. Yet now consumers still have to click, click through and select their hotel before knowing how it’s going to cost.”

Healthy growth next year

Whilst the online hotel market in 2009 is expected to be impacted by economic pressures it will still increase in value. But it is expected to record the lowest actual growth rate in the review period – an annual growth of 3.7 percent, according to EyeforTravel Research’s North America Online Travel Report 2009.

“By 2010, we do however expect growth to return to a very healthy level of 14.8 percent and growth of the online hotel market is expected to be maintained above 13 percent for the following two years at least,” says Amy Scarth, Head of Research at EyeforTravel.

In 2008, about 44 percent of the hotel market was online and 56 percent offline. This is a noticeable jump from the 21 percent online level in 2002.

In 2010, according the report, the online/offline gap is expected to close completely and online channels are projected to overtake offline channels in value terms. Growth for online expenditure has actually been over double offline rates. This trend is expected to continue and by 2012, it is projected that 57 percent of the hotel market will be online (US$65,331 million), leaving 43 percent of hotel expenditure offline (US$49,367 million).

It is evident that online channels are increasingly important for North American travel consumers and a vital part of any hotel distribution strategy targeting this market. Nevertheless, maintaining the efficiency of offline channels is also going to remain important for the foreseeable future.

The growing success of the hotel sector online is reflected in its share of the total online travel market in North America. In 2008, online expenditure for hotel products accounted for almost a third of the North American online travel market.

EyeforTravel Research’s North America Online Travel Report 2009

For more info, contact:
Amy Scarth
+44(0)207 3757545
or info@eyefortravelresearch.com

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