Expedia offers to lower commissions – strings attached

Ranque: two ways of lowering commissions

Expedia is holding out an olive branch to hotels, offering to lower commissions for the roomnights it generates, on the condition they reinvest the savings on its technology, marketing and data offerings.

Cyril Ranque, president, Expedia Lodging Partner Services, makes a case that this is a “two-sided” solution for both lodging partners and Expedia: hotels will be stronger if they invest on, say, marketing campaigns or tools to optimise their operations, and stronger hotels are the backbone of the Expedia content.

Ranque: two ways of lowering commissions

“The sustainability of our business model depends on the richness of our supply from the consumer standpoint. If supply is diversified and is of high quality, consumers will come. So it is important for us to build an ecosystem that allows any type of partner (small independents or big global chains) to be successful on our marketplace. Equipping them with tools – such as Rev+ (revenue management tool), ALICE to optimise operations, etc, the list is long – is actually in our longterm interest,” he said.

Ranque is responding to TTG Asia’s question on whether Expedia will lower commissions as a result of lower fixed costs achieved through growth over the years. He said one way is through a flat margin reduction. Compared to when it started in the US with a 25 per cent margin, Ranque said margins are now lower and “quite diversified” depending on markets and other factors.

The other way is agreeing with partners that the base compensation is lower, but “they guarantee us they will spend the money (savings) on dynamic products (from Expedia), such as data marketing technology when they need the exposure to get the business, so we would be making the same average compensation”.

“It’s a longterm strategy, you don’t move that overnight, but that’s really our intention,” Ranque said.

With Expedia bookings growth being under threat from factors such as the rise of alternative accommodations, or Google’s advancements into travel booking, Expedia clearly wish it could be done overnight. All of its leadership team chanted ‘Better Together’ at last week’s Expedia Partner Conference, the idea being hotels feedback to Expedia what ails them, Expedia tailors the solutions, hotels become more efficient and effective, the consumer travel experience becomes better, the travel product becomes more attractive, more bookings will follow and everyone wins.

The pitch – as persistent and incessant as Christmas jingles at this time of the year – follows the launch of Expedia Powered Technology last August, which reflects Expedia’s recognition it needed to move beyond being just a distribution channel into business solutions.

Expedia Powered Technology includes solutions such as Partner Loyalty Enrolment, which enables hotels to enlist and sign up users from Expedia sites for their loyalty programmes; MICE Booking Technology, which automates the booking process for small and medium-sized meetings so hotels will have more time to work on the large ones; Rev+, a revenue management tool; and ALICE (which stands for A Life-Improving Customer Experience), a software it invested in early last year which allows hotels to solve their operational pain points.

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