Expedias's profit drops as travelers book directly

This article is about the consequences of hotel applying the principles of revenue management to online travels agencies. For instance, here, Expedia has announced a net income loss of more than 60 millions for its third quarter.

The reasons for this loss are as follow

a- There is more and more competition among travel agencies. Therefore, customers have more and more possiblities to choose another agency than Expedia. However, this more of marketing matter for these actors within that market

b- Hotels and airline companies prefer to distribute their inventory themselves as they make more margin out of it. In other words, when there are a lot of bookings made, there is no reason for those firms to go through travel agencies to sell their rooms or airline seats. This also implies that they do not have to decrease the prices in order to attract more customers; hence their prfit margin goes up.

This article demonstrates that buying behaviors have changes but maybe not as much as we mught think. Even though a significant proportion of hotels customers do buy their rooms online through online travel agencies, there is still another significant part that still contacts the hotel directly to book.

This is very important in terms of revenue management. Offer a larger panel of prices will certainly increase hotel's occupancy, but the latter can also be fully booked through the hotel itself. Morality: before offering discounted prices, a hotel should anticipate beforehand as to how many bookings it can get directly.