Road test: Expedia’s Rewards Program

by Grant Martin on


Expedia launched a reward program last month in a what might be an effort to recapture some of the market share that they’re slowly losing to the airlines and their respective websites. A spend-based program, users receive points in direct proportion to the amount of money that they spend on the site. Those points are earned in addition to any points earned from the airline, hotel or car rental that the user books and can be spent on either hotel or airline discounts.

Occasionally the site also offers points specials as well, incentivizing users to book particular hotels or packages for double or triple points. Currently, for example, users can earn double points by using their Mastercard for purchases.

Since the program is spend-based, the reward is directly based on the number of dollars that you spend on the travel, so the real value is based on which price points Expedia sets their rewards at. Currently, the travel agency offers discounts on either airline or hotel bookings, with direct airfare booked in the former case and a hotel coupon offered in the latter.

So how valuable are the points? Gadling Labs collected some baseline data for a few flights out of Chicago. Off the shelf, a ticket to Detroit from June 24-26 should cost about $200, while the Expedia Rewards Program bills 20,000 points. That’s $20,000 in booked travel in exchange for a $200 ticket — or a 1% return. Not so great compared to the 2-3% earned from a rewards credit card, but on top of another reward it’s not a bad deal.

Hotel rewards are earned on a sliding scale and come in the form of a coupon. For 3500 points ($3500 in direct spend) the user earns a $25 hotel reward card (or a 0.7% kickback) . On the opposite end of the spectrum, 50,000 points earn a $1,000 certificate (2%). It looks like high end hotel bookings might be the better reward — but that makes sense, since you’re going to be dumping a fatter stack of cash into the Expedia coffers — you should be rewarded.

But who is going to spend the requisite cash to get even the lowest level of rewards? $3500 is a lot to spend on travel, even over two or three years, and a family or casual traveler weighed down with everyday life and a dozen other rewards program is surely going to lose the Expedia Rewards Program in the noise.

It seems that the best fit for the program is for the high volume traveler or the travel agent. One who books tens of thousands of dollars on a corporate card and who can quietly reap the rewards on the side. For those people, making the quick change from the Amex booking engine to Expedia takes only a click, and over three or four months the rewards can really pay off. But for the rest of us common travelers, it’s probably best to stick with the direct bookings (and protections) of the direct airline websites.

Online travel company lawsuits heat up, cool off

by Chris Owen on

Going back more than 10 years, U.S. city and state governments have been suing online travel sites for underpaying general excise and hotel taxes. Now, lawsuits filed years ago are being heard and the story continues as mixed verdicts come in.

First, here’s the beef. Online travel companies purchase unused hotel room inventory and then sell those rooms to consumers at a marked-up price. The online travel company pays the hotel occupancy tax on the discounted rate that it purchased from hotels and not on the rate charged to its consumers.

Cities from Honolulu to Houston to Washington D.C say “that’s not right” and want the taxes actually charged to be paid.

Online travel companies like Expedia, Orbitz, Travelocity, Hotwire.com, Hotels.com, Priceline and others say “forget it, we’re not paying.”

Some lose, some win as the issue plays itself out.

In January, Houston, Texas lost it’s battle when a a Texas trial court judge dismissed the allegations. “These claims are not based on law, but on the greed of plaintiffs’ attorneys,” Andrew Weinstein, spokesperson for the Interactive Travel Services Association told the Southeast Texas Record.

It’s a sketchy claim at best and both sides have their share of supporters and valid points.

“If the city’s right, all that means is there’s been an under-collection of taxes, and the city can’t sue us for that,” said Frank Lowrey, an attorney representing the firms to Business Week. “They’re telling us to collect more taxes than we said we would collect.”

Similar lawsuits or complaints have been filed around the country by cities and states including in Oklahoma, Maryland, Texas, New York, Illinois, Pennsylvania and in the California cities of San Diego and San Francisco. While some of the complaints have been dismissed, several are still pending.

Is this just cities and states grasping at any possible income source, however bizzare it may sound? Maybe, but that’s nothing new either. Just last year Gadling reported on how the state of Tennessee wanted to tax complementary hotel breakfasts and before that we reported how taxes are becoming a larger part of travel expenses all the time as cities and states are pumping up their coffers at the expense of visitors.

Those who lay claim to jobs as lawmakers may not have the oldest profession in the world but sometimes they sure act like it.

Flickr photo by Love My Tours

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Judge blocks Sabre, gives American Airlines a break

by Tom Johansmeyer on

I guess it would make sense for American Airlines to turn to litigation. After all, this approach worked well against Orbitz.

Here’s the situation: the battle between airlines and online travel agencies escalated from the beginning of November – with American’s announcement that it would pull out of Orbitz – through the new year. The latest move was by global distribution system Sabre, which has made it more difficult for American’s fares to be found. Along the way, Expedia dropped American in a defensive move, and Delta pulled out of three smaller booking sites: CheapOair, OneTravel and BookIt.

The decision by Sabre to “demote” American Airlines had obvious business implications for the carrier, which is likely why it sought relief in the courts. As a result of a hearing held yesterday, Sabre has been blocked from limiting the visibility of American Airline flights, but there’s clearly more to come.

In addition to making it more difficult for customers to find American’s flights, Sabre also increased the fees it charges American, which would lead to an annual cost of $157 million for the airline.

Sabre maintains that it was within its contractual rights, according to an Associated Press report, while American believes the move was anti-competitive.

Five reasons why you’re wrong about American Airlines and the booking battle

by Tom Johansmeyer on

Everyone seems to think this is about the passengers. It’s not. In true airline industry fashion, nobody cares about the customer.

Okay, now that I have your attention, an analyst note from Avondale Partners was sent to me last night. While most people don’t get excited about this sort of thing, I have to admit that I still do. Nerdy, maybe. Insightful … in this case, it definitely is.

The analyst note gets to the heart of the matter pretty quickly. What’s the deal with American Airlines and the online travel agencies (e.g., Orbitz and Expedia)? Well, here it is in five straightforward points:

1. It’s the economy, stupid: remember that saying? Well, it holds true here. According to Avondale Partners, many press accounts of the dispute “confuse the relationships of the players and miss the underlying economics driving the dispute.” Stop thinking about people and start thinking about how American can save up to $9 per ticket in fees.

2. American will lose before it wins: according to Avondale Partners, “AMR [the airline’s parent company] eventually prevails.” But, it’s going to take some time. Along the way, the analyst note explains, the airline will lose some of its online travel agency customers to its competitors. However, it continues, “should pick up the spilled traffic, given current loads.”3. Ultimately, it’s a break-even: AMR will wind up with the same amount of traffic it has now, Avondale believes, but it will come at lower net costs. Translation: for the same amount of passengers, American will make more money. For a business, that’s never a bad thing.

4. “I like to watch”: that seems to be what the other airlines are thinking. Avondale Partners believes they’ll jump on the bandwagon. As it is, Delta has already pulled out of three smaller online travel agencies – CheapOair, OneTravel and BookIt – though for slightly different reasons. When big, bold moves like this happen, you better believe that everybody’s thinking about it.

5. And, the folks with the most risk are …: it isn’t American Airlines, apparently. Rather, Avondale believes that Travelport and Sabre “have the most to lose,” though stock prices for online travel agencies, according to Avondale, “should continue to suffer from the press.” Translation: this won’t be fun for any of the parties involved for quite a while.

Here’s the full report:

Analyst Note From Avondale Partners Re AA Distribution, 1-6-11

American Airlines is talking to Expedia and Orbitz (about the WRONG stuff)

by Tom Johansmeyer on

American Airlines isn’t giving up. Despite having pulled out of Orbitz and been booted by Expedia, the company says it’s still talking to the two online travel agencies and is hopeful for a resolution. According to Dow Jones, these are “active discussions” and that American Airlines is “comfortable” with booking results.

Nonetheless, American is still betting on Direct Connect as its preferred way to distribute inventory. Dow Jones explains:

“Ultimately we will see all travel agency volume going through Direct Connect,” Garner said, referring to the American distribution system at the heart of its dispute with parts of the industry. That would include the GDS providers, whose contracts with American are due to expire later this year.

What makes this interesting is the fact that American isn’t backing away from its primary reason for pulling out of Orbitz … which triggered the defensive move by Expedia. So, the words strike me as vapid, since the major issue isn’t being addressed (at least not in public).

There is a rumor that Priceline has signed on for Direct Connect, but all involved are keeping their lips sealed.