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2. Using the figure above, draw channel of distribution diagrams for Expedia anc Priceline. What do you notice about the structure of each company?

2. Using the figure above, draw channel of distribution diagrams for Expedia anc Priceline. What do you notice about the structure of each company?

Understanding Business
Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Case Study - The Priceline Group and Expedia Inc. Since the late 1990s, travel distribution has seen a considerable shift from offline to online channels. Many entrepreneurs who were quick to recognise the potential of new technologies have since become major travel intermediaries. Priceline.com was originally set up in 1997 as a travel auction site where consumers offered a price and traders chose whether or not to accept it. In 1999 the company was offered for public sale and valued at US$12.9 billion. Since 2004, The Priceline Group has acquired several online travel retail sites: Booking.com (2005), agoda.com (2007), TravelJigsaw (now rentalcars.com; 2010), KAYAK (2013), OpenTable (2014), Rocketmiles (2015). In addition it acquired reservation- management technology companies that provide revenue and marketing solutions to hotels or restaurants that sell via Booking.com or OpenTable: PriceMatch and AS Digital (2015). The Priceline Group operates six brands, employs 18,500 staff and operates in 224 countries. In 2016 it handled US$68.1 billion in gross bookings (The Priceline Grou,p 2017). Figure: Channels of distribution in the tourism system SUPPLERS CAPACITY Transport operators Accommodation operators rooms/properties Aftraction Non-residential Cruise operators Sickets venues space companies cobins seats Va soles office or website Oen WHOLESALER vio GOS system TOUR &MICE OPERATOR ACENCY Via soles office or website CUSTOMER Both companies earn revenue via three business models: • Agency model: Suppliers determine the selling price for their available inventory and display it on the OTA's website(s). The customer makes a booking and details of the booking are made available to the supplier. On arrival the customer pays the supplier direct, and the supplier then pays the OTA the agreed rate of commission on the booking. Commission rates are typically between 10-30 per cent (Xotels, n.d.). • Merchant model: Suppliers negotiate a net rate with the OTA, who then adds their own mark up and determines the selling price. Capacity may be dynamically packaged with other travel components (e.g. flight, hotel or car rental). The customer pays the OTA at the time of booking, and the OTA pays the supplier at a time agreed in the contract. • Advertising model: Travel and non-travel advertisers display content on the OTA's websites to gain access to the OTA's viewers, and then pay the OTA for click throughs. The OTA's metasearch sites, KAYAK (Priceline) and Trivago (Expedia), earn referral fees from other travel companies when a customer clicks through from the OTA site to the advertiser's website. 2. Using the figure above, draw channel of distribution diagrams for Expedia anc Priceline. What do you notice about the structure of each company?
Transcribed Image Text:Case Study - The Priceline Group and Expedia Inc. Since the late 1990s, travel distribution has seen a considerable shift from offline to online channels. Many entrepreneurs who were quick to recognise the potential of new technologies have since become major travel intermediaries. Priceline.com was originally set up in 1997 as a travel auction site where consumers offered a price and traders chose whether or not to accept it. In 1999 the company was offered for public sale and valued at US$12.9 billion. Since 2004, The Priceline Group has acquired several online travel retail sites: Booking.com (2005), agoda.com (2007), TravelJigsaw (now rentalcars.com; 2010), KAYAK (2013), OpenTable (2014), Rocketmiles (2015). In addition it acquired reservation- management technology companies that provide revenue and marketing solutions to hotels or restaurants that sell via Booking.com or OpenTable: PriceMatch and AS Digital (2015). The Priceline Group operates six brands, employs 18,500 staff and operates in 224 countries. In 2016 it handled US$68.1 billion in gross bookings (The Priceline Grou,p 2017). Figure: Channels of distribution in the tourism system SUPPLERS CAPACITY Transport operators Accommodation operators rooms/properties Aftraction Non-residential Cruise operators Sickets venues space companies cobins seats Va soles office or website Oen WHOLESALER vio GOS system TOUR &MICE OPERATOR ACENCY Via soles office or website CUSTOMER Both companies earn revenue via three business models: • Agency model: Suppliers determine the selling price for their available inventory and display it on the OTA's website(s). The customer makes a booking and details of the booking are made available to the supplier. On arrival the customer pays the supplier direct, and the supplier then pays the OTA the agreed rate of commission on the booking. Commission rates are typically between 10-30 per cent (Xotels, n.d.). • Merchant model: Suppliers negotiate a net rate with the OTA, who then adds their own mark up and determines the selling price. Capacity may be dynamically packaged with other travel components (e.g. flight, hotel or car rental). The customer pays the OTA at the time of booking, and the OTA pays the supplier at a time agreed in the contract. • Advertising model: Travel and non-travel advertisers display content on the OTA's websites to gain access to the OTA's viewers, and then pay the OTA for click throughs. The OTA's metasearch sites, KAYAK (Priceline) and Trivago (Expedia), earn referral fees from other travel companies when a customer clicks through from the OTA site to the advertiser's website. 2. Using the figure above, draw channel of distribution diagrams for Expedia anc Priceline. What do you notice about the structure of each company?
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