Going for Broke: The Online Travel Agency Showdown Heats Up

caroll_rheem.jpgCarroll Rheem, Phocus Wright's Director of Research, takes on this subject crisply and clearly in her March 20th FYI Bulletin Online:

"Some questioned Expedia's strategy when it threw down the gauntlet on March 11 by announcing a promotional fee cut for flights. Competitors were bound to respond, sparking a downward spiral cutting into their revenue margins.

There is no doubt that each of the big three (Expedia, Orbitz, Travelocity-or Exbitzity) will suffer a hit in air driven revenues as a result (Priceline had already eliminated airline fees in 2007). However, not all transactions are created equal. Air has always been a low margin product for online travel agencies (OTAs); hotel is what brings in profits.

Expedia saw an opportunity to grab share from competitors-taking the hit on air could potentially pay off in (or at least be softened by) increased hotel revenues-and hit a major competitor where it really hurts." 

MORE at http://www.phocuswright.com/library/fyi/593