Case Study - The Priceline Group and Expedia Inc. Both companies earn revenue via three business models: Since the late 1990s, travel distribution has seen a considerable shift from offline to online channels. Many entrepreneurs who were quick to recognise the • 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. 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), Traveligsaw (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 Accommodtion Transport operalory seots openon rooms/peoperfes Arocton operolors Non resdental veruer spoce Ce compones cabins

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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The question is what Reflects upon the concepts learned?
Figure: Channels of distribution in the tourism system
SUPPUERS CAPACITY
Transport
operators
seats
Accommodation
operators
rooms/properties
Attraction
Non-residential
venues' space
Cruise
operators
fickets
companies
cabins
Via sales
office or
website
Often
via GDS
system
WHOLESALER
TOUR & MICE OPERATOR
AGENCY
Via soles office or website
CUSTOMER
Transcribed Image Text:Figure: Channels of distribution in the tourism system SUPPUERS CAPACITY Transport operators seats Accommodation operators rooms/properties Attraction Non-residential venues' space Cruise operators fickets companies cabins Via sales office or website Often via GDS system WHOLESALER TOUR & MICE OPERATOR AGENCY Via soles office or website CUSTOMER
Case Study - The Priceline Group and Expedia Inc.
Both companies earn revenue via three business models:
Since the late 1990s, travel distribution has seen a considerable shift from offline
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
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), Traveligsaw (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
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.
US$68.1 billion in gross bookings (The Priceline Grou,p 2017).
Figure: Channels of distribution in the tourism system
SUPPLERS CAPACITY
Transport
operators
seots
Accommodation
operolors
rooms/propertes
Atroction
operalors
ckets
Non-residentel
venuer spoce
Cruse
companes
cabins
Transcribed Image Text:Case Study - The Priceline Group and Expedia Inc. Both companies earn revenue via three business models: Since the late 1990s, travel distribution has seen a considerable shift from offline 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 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), Traveligsaw (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 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. US$68.1 billion in gross bookings (The Priceline Grou,p 2017). Figure: Channels of distribution in the tourism system SUPPLERS CAPACITY Transport operators seots Accommodation operolors rooms/propertes Atroction operalors ckets Non-residentel venuer spoce Cruse companes cabins
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