Expedia�s new media-based pricing model demystified

November 21, 2007 | Hospitality Industry

In an online travel world, where travelers increasingly turn to OTAs for browsing but not necessarily for buying, Expedia introduces a hybrid economic model that blends transaction pricing with cost-per-click pricing, recognizing the media value of its travel network.

By Markus Busch

Historically, their relationship was a thorny one, with Intercontinental Hotel Group (IHG) pulling all its inventory from Expedia and Hotels.com in 2004, enforcing its new standards for Web distribution which covers various technology, trademark, price transparency and consumer issues.

But like the textbook suggest, every complaint is also an opportunity, and so over time Expedia�s Partner Services Group managed to get IHG back on board, with a new business model which they designed collaboratively - Expedia�s new media-based pricing model.

Here is what the new model encompasses:

The media pricing element is part of a dynamic, two-part economic model that blends transaction pricing with media pricing based on clicks on specific IHG properties in Expedia and Hotels.com search results.

When a customer clicks on a hotel in the Expedia or Hotels.com search results, they are taken to that individual hotel�s customized info-site that contains not only rates and availability and the ability to make a reservation, but also rich and deep content, such as traveler opinions, virtual tours and photos of the property.

IHG hotels will be shown just like all the other hotels on Exepdia, but the agreement differs from other partnerships in that the compensation structure accounts not only for the bookings IHG receives through Expedia, but also for the clicks on IHG properties in the hotel search results on Expedia and Hotels.com sites.

The new approach provides IHG with significant benefits from value-added media placement throughout the Expedia global travel marketplace, the most visited online network of travel websites in the world, in addition to the bookings they receive from Expedia.

Expedia says, the new model is currently only rolled out with IHG. That said, Expedia�s Partner Services Group says they are committed to explore how models like the new media-based pricing model might work for other specific partnerships (read biggest partners only). But chances are high, if proven successful, the model will not stay exclusive with IHG for a very long time, and will find its way also to partners of smaller size.

While not totally new, UK�s CheapFlights and CheapHotels sites had a pay-per-click model in place already years ago, Expedia�s new media-based pricing model is definitely an innovative answer to the new realities facing OTAs today, in that travelers increasingly use their sites as a place to shop but not necessarily to buy.

As such, the new model will not only be well received by hotel marketers looking for a stronger presence on Expedia�s travel network but also Wall Street - the other market, Expedia is active on - as a possible answer to the ever so popular supplier direct threat.

Markus Busch, is Editor/Publisher of Hotelmarketing.com and can be reached at markus.busch�at�hotelmarketing.com.