Orbitz Worldwide returns flight-booking fees to CheapTickets to build hotel business
Orbitz Worldwide went along with most of the online travel agency pack and eliminated the bulk of its flight-booking fees for its US brands in 2009, but quietly brought them back on CheapTickets.com in September 2011, officials disclosed today.
Why? To build the hotel business at traditionally air-centric CheapTickets.
The CheapTickets air-booking fees, ranging from $6.99 to $10.99 per roundtrip, help fund a coupon program where consumers get 10% off hotel bookings after booking a flight.
“The typical result for an air plus hotel transaction with the additional hotel discount is greater savings for the consumer,” says Chris Chiames, Orbitz Worldwide spokesperson. “If there is a modest fee, it is more than offset by the hotel discount.”
“The results thus far is we are seeing solid growth in standalone room nights,” Chiames adds.
CheapTickets’ flight-booking fees also chip in toward other merchandising efforts, Orbitz Worldwide CEO Barney Harford said today during the company’s first quarter earnings call. Those initiatives include both online and offline marketing.
Orbitz Worldwide’s standalone air net revenue was relatively flat at $72.2 million during the first three months of the year as airfares rose and air volumes from the company’s US brands declined.
But, Harford took pains to point out that CheapTickets’ loss of airline ticket share in the first quarter was not the result of competitive pressure, but part of a “purposeful” strategy to add the flight-booking fee and boost its hotel business.
The re-introduction of air-booking fees at CheapTickets amounts to a significant about-face for Orbitz Worldwide, which eliminated the fees in 2009 following a bold move by Expedia to eliminate flight-booking fees.
At the time, many observers saw Expedia’s move as an existential threat to Orbitz, which was heavily reliant on fee revenue.
For the first quarter, Orbitz Worldwide narrowed its net loss to $6.5 million from $10.9 million in the red a year earlier.
Net revenue, bolstered by increased revenue from hotels and vacation packages and softened by declines in advertising and media, as well as a drop in travel insurance revenue, increased 3% to $189.8 million.
And gross bookings shot up 6% to $3.1 billion, propelled by increased volumes of vacation packages and hotels, higher average daily rates for hotels and higher airfares.
Hotel room nights grew 3%, up from a 2% decline a year earlier.
Meanwhile, Orbitz Worldwide projected that its net revenue would grow 4% to 8% for 2012.
And, CFO Russ Hammer tied that growth outlook to continued hotel room night gains and the expected implementation in the third quarter of Orbitz’s private label deal with American Express consumer travel.
Dennis Schaal was North American editor for Tnooz.