FOR IMMEDIATE RELEASE
Contact:
Lorraine Sileo
+1 860 350-4084 x130
lsileo@phocuswright.com
Booking Fees and the Bottom Line
PhoCusWright Launches Financial Edition With a Competitive Analysis of Online Travel Agencies
Sherman, Conn. USA, June 17, 2009—The booking fee promotional war among online travel agencies (OTAs) stole headlines earlier this spring and PhoCusWright, the travel industry research authority, had to wonder who would be left standing by year's end. After all, booking fees have been an important source of income for the Big 3 OTAs—Expedia, Travelocity and Orbitz—and now that they have dropped airline ticket fees and cut hotel fees, what could possibly replace that revenue stream? Especially now as travel demand is collapsing.
Does the Model Work Without Fees? Exploring the Financial Impact of the Fee Cuts on Online Travel Agencies analyzes the financial performance and the viability of each of the major OTAs. This report is the first in the newly launched PhoCusWright Research Subscription: Financial Edition and is available as a free download. Author Jake Fuller, senior research analyst, finance and analytics, finds results that are not particularly encouraging, especially for sites with heavy debt and a strong reliance on air. However, there are also signs that OTA volume has improved materially since launching the promotions: OTAs appear to have gained market share from supplier-direct Web sites now that there is pricing parity across the channel. Factoring share gains and higher volume into this analysis could possibly overcome some of the fee losses, and lead to a cheerier post-fee outlook for the OTAs. That is, if certain conditions exist. For example:
- Sacrificing the fee will hurt margin, but closing the pricing gap with supplier Web sites could be material—60% of shoppers cite price as the top criteria in selecting a site, and OTAs are currently losing over a third of their shoppers to lower-priced supplier sites and call centers (source: PhoCusWright's Consumer Travel Report Part One: Behavioral Trends).
- OTAs would have to increase ticket volume substantially to fully offset lost fees, and air bookings' share of OTA sales would have to increase from 32% in 2008 to 46-61%.
- OTAs would have to stay at pricing parity with suppliers. PhoCusWright's May 2009 survey of fully loaded retail ticket prices across 20 top city pairs shows OTAs at pricing parity with airline direct Web sites—a good sign they could gain share…but how long will it last?
By applying rigorous formulas to key financial metrics and variables in the OTA sector, PhoCusWright's analysis and projections set the stage for 2010 as OTAs continue to battle it out for headlines, traffic, and, most importantly, market share.
Coinciding with the launch of PhoCusWright's Financial Edition, the full report, Does the Model Work Without Fees? Exploring the Financial Impact of the Fee Cuts on Online Travel Agencies, is available for free download.
About The PhoCusWright Research Subscription: Financial Edition
The PhoCusWright Research Subscription: Financial Edition provides executives and investors clear, actionable analysis of travel finance. Led by PhoCusWright's senior research analyst, finance and analytics, Jake Fuller, the subscription applies rigorous formulas and models to the underlying data and metrics of travel (demand, supply, revenue, etc) to provide concise forecasts and insight into the econometrics of travel and hospitality.
About PhoCusWright Inc.
PhoCusWright is the travel industry research authority on how travelers, suppliers and intermediaries connect. Independent, rigorous and unbiased, PhoCusWright fosters smart strategic planning and tactical decision-making.
PhoCusWright delivers qualitative and quantitative research on the evolving dynamics that influence travel, tourism and hospitality distribution. Our marketplace intelligence is the industry standard for segmentation, sizing, forecasting, trends, analysis and consumer travel planning behavior. Every day around the world, senior executives, marketers, strategists and research professionals from all segments of the industry value chain use PhoCusWright research for competitive advantage.
To complement its primary research in North America, Europe and Asia, PhoCusWright produces several high-profile conferences in the U.S. and Germany, and partners with conferences in the U.K., China and Singapore. Industry leaders and company analysts bring this intelligence to life debating issues, sharing ideas and defining the ever-evolving reality of travel commerce.
The company is headquartered in the United States, with offices in Germany and India.
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© 2009 PhoCusWright Inc., Sherman, CT USA
+1 860 350-4084 www.phocuswright.com
