Expedia’s new bidding model: Some hotel experts remain skeptical [UPDATED]

Online travel-booking engines rarely change. So any wrinkle introduced by a company is bound to get a lot of close examination.

Witness the industry’s attention to Expedia Inc’s gradual debut of its Accelerator program, which allows hoteliers to — for a fee — bump up their visibility to a top page in a consumer’s search by city.

Accelerator is still in the process of rolling out, with the tool having become available for the majority of hoteliers in Q4 of 2015, said Amanda Graham, senior manager of industry relations at Expedia.* CORRECTED 4pmET: (Due to an editing error, the published version stated the wrong rollout time. Sorry.)

Adam Anderson, managing director of industry relations at Expedia, noted: “Hoteliers want more control over how they can draw visibility.”

Tnooz spoke with several hotel sector experts to find out what the significance of this functionality might be to the travel industry, some of whom declined to be quoted. The most common response was skepticism that this service would gain much traction.

“I don’t think the consumer’s going to notice and I wonder how many hoteliers are going to buy into this model,” said Greg Abbott, senior vice president of travel and hospitality at DataArt, a technology consulting and solution-design firm. Abbott clarified:

“Expedia and Priceline are now taking Google’s model and applying it to their own environment…. What it (also) reminds me of is all the old search engines. They used to populate based on paid advertising. Whoever paid the most got the highest ranking….

What happened to those models? They got killed by their own algorithm.”

Unlike the old Google model, paid-placement isn’t signaled in Expedia’s program. The company confirmed that visitors to the site won’t be showed any special messaging, a la “Promoted Hotel”, that might clue them into which hotels have sprung for this bid-for-placement option.

Expedia was eager to point out that a hotel cannot buy a premium spot. They must have earned it, which is something that should assure consumer confidence in the quality of the search rankings.

“There is no way a hotel (can go to the top) if its’ offer strength and quality score are low. If those are out of whack, involvement in the Accelerator program isn’t going to get them on page one,” said Anderson. “They can’t buy their way to the top. This is a small boost. The algorithm computes so it may bump them up ahead of their competitor.”

Factors include things like past customers’ feedback about their stay.

What’s important to know about Accelerator, experts said, is that there isn’t just a set cost: instead, hotels bid against each other for premier placement in search results. That makes things a bit unpredictable.

Expedia’s Graham said:

“Since market dynamics are constantly changing over time, and a number of factors influence sort order (primarily offer strength and quality score), we can’t guarantee a specific boost in sort position from using Accelerator.”

“We encourage our partners to use the Accelerator preview tool on our partner site to see their potential sort rank based on their selected additional margin (which is capped), destination, travel dates, and point of sale.”

Anderson explains it like this. Three tools already drive a hotel’s sort algorithm on Expedia: offer strength (quality of the deal and the number of rooms already booked, quality score (driven by the number of refunds) and compensation (this refers to the booking compensation and is the least important, he said).

“From a hotelier’s perspective, they care very deeply about their positioning in the marketplace,” said Anderson. “A hotel moving from the third page to the second page could have significant impact on their business.”

Abbott at DataArt conceded that top results are what gain bookings. “Nobody goes down to page seven when you’re looking for Berlin.” But he noted that hotels have to participate for it to work.

“We have to look at it from the bigger picture here,” said Max Starkov, president and CEO of HeBS Digital, a digital-marketing partner within the hospitality industry. “There is an industry pushback to lower commissions.”

Hotels pay as much as 25% commission to be on sites like Expedia, he said, while bigger brands and agencies such as American Express and Carlson Wagonlit Travel are able to negotiate even lower.

One industry consultant we spoke to thought that a lack of traction would keep the additional payment needed to drive higher placement to about a couple of percentage points, against the company’s hopes. (Bidding is capped at a maximum of 15%.)

As expected, Expedia didn’t reveal the dynamic program’s cost structure. But the company’s CEO was bullish on the program during TV interviews.

Would Accelerator drive hotels away from online-booking sites?

“Just imagine, for an independent hotel, you are already lost in the shuffle,” said Starkov, suggesting that these hotels have two options: to either take their money and leave the booking sites altogether or tack on even more fees, like with the Accelerator program. He added:

“Maybe you will get more business from Expedia, but at what cost? It’s an avenue for Expedia to make more money, period. It’s a very selfish one-sided program, period. They will not be listing the better hotels on top. From a consumer’s perspective, we’ll have hotels that do not deserve your attention and will be pushed in your face.”


An Expedia Inc spokesperson has asked Tnooz to share a response, which follows:

“Contrary to the impression left by your article, our hotel partners, particularly small hoteliers, are finding this a great revenue management tool for short period of time when they need demand.

Instead you went to Max Starkov, who grossly overstates the impact that Accelerator has on sort order, with statements like “From a consumer’s perspective, we’ll have hotels that do not deserve your attention and will be pushed in your face,” which, with even a little bit of experience with the tool, a user would know that this is not the case. 

Starkov’s comments ignore Expedia’s own explanations, quoted in the article, on how sort works. To repeat: more important factors drive sort more heavily than compensation.

Related to that point, the article omitted some key drivers that we shared with Tnooz:

–Offer Strength is the best way to perform well on Expedia, – it is determined by the quality of the deals on Expedia sites for the dates searched, levels of rooms actually booked on Expedia sites, and the number and level of review scores, all as compared to similarly situated hotels on Expedia sites.

–Quality Score reflects the quality of content provided to Expedia and our mutual customers; this includes things like ensuring the number of relocations or refunds are low and that travelers visiting Expedia see competitive rates and availability, compared to similarly situated hotels on Expedia sites.

–Last, and least important in the sort algorithm, is compensation, which is what hotels pay for a booking made in the Expedia Marketplace.  This is where tools like Accelerator come into play.”

Expedia, like any public company, is in a tough spot to maintain its high profitability, said Starkov. Only about five to six percent of visitors to Expedia, he claimed, end up booking on the site, and banner-advertising results are even less than that.

Is Accelerator different from Booking.com’s Preferred Hotels program, which gives hotels that pay commission a higher position and the Preferred Hotel Partner logo?

According to Booking.com’s website, these hotels must give a minimum allotment throughout the year and also meet performance criteria.

“What’s new is that Expedia now feels compelled to introduce this as a new revenue stream — and to reverse the lowering of commissions,” said Starkov.

The lack of signposting to consumers is another difference.

When asked if Booking.com’s Preferred Hotels program is similar to Accelerator, Expedia’s Graham declined to comment, citing a lack of familiarity with that program.

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Kristine Hansen

About the Writer :: Kristine Hansen

Kristine Hansen is an editorial guest contributor. She is based in Milwaukee, and has written for Travel + Leisure’s website, Intuit’s Small Business blog, and many in-flight magazines. Follow her on Twitter at @kristineahansen and on her personal site.



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  1. hhotelconsult

    It’s simple – this is not financially sustainable. It’s obvious. This is basically the Groupon margins. What you are going to get are hotels that have ZERO understanding of economics, and that don’t give a care in the world about their guest, their product, or hospitality…. and just give away the store and let Expedia manage the hotel as a management company. It is going to destroy expedia because hotels this stupid will ruin *Expedia’s* image as the reviews and guest sentiment will be deplorable.

  2. Trisna

    very well thought. I agree with Dustin. All company should make profit so we should look this case from 360 view.

  3. Dustin Warr

    Max Starkov is so biased against OTAs I wonder why he is still asked to comment on these topics. Everything he says has to be automatically dismissed given those biases. I would argue with him that not only are independent hotels NOT lost in the shuffle, but that OTAs give them an opportunity to compete with brands in a way they never had before. I just did an Expedia search of Seattle and the top 5 hotels were either independents or hotels under very small, boutique flags. Take the OTAs away and explain to me how an independent hotel now competes for online eyeballs with the likes of marriott.com, ihg.com, hilton.com, etc, given their brand recognition, marketing budgets and SEO. Indeed, independent hotels are the largest benefactors of the OTA model. To say it’s selfish and one-sided is just marketing nonsense. Expedia is a for-profit company so of course they are creating avenues to make money, just like Max does for HeBS. And just like Max, they are creating ways to give extra value to partners who are will to pay more for that value. It’s called win-win. It’s a pretty common tactic in the business world.

    An industry based on a dynamic pricing, revenue management strategy shouldn’t be surprised at all when a distribution partner decides to charge more money for their most valuable real estate. We can talk all day long about how we think for-profit OTAS “should” make all real estate placement based upon reviews and quality, etc, but at the end of the day they, just like every hotel, are for profit and have some inventory that is more valuable than other inventory and they are going to charge a premium for that which is more valuable. Saying an OTA should charge the same amount for all site real estate is like telling a hotel owner they should charge the same rate, no matter the room type, no matter the day of week, no matter the season. Customers prefer a room with a view and hotels charge more for it given it’s higher value. Why would you expect a website to charge the same rate for page 10 as they do for page 1 when page 1 has significantly more value? I remember when some airlines started charging more for window and aisle seats. At first it seemed greedy, perhaps. But in the end you have to admit…people hate middle seats! So then why is it unfair to charge customers more for a seat they value more? It’s not.

    And it’s not correct to assume the OTAs don’t, therefore, care about hotel quality and customer satisfaction. They know that putting good quality product on the top shelf makes good, long-term business sense. That won’t go away.


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