Travel Web Sites Try Waiving Fees

Travelocity says the suspension of booking fees has helped it gain market share. The new policy may persist to help Web travel agents compete with airline sites

By Joshua Freed, Associated Press

Airline booking fees charged by Travelocity, Orbitz (OWW), and Expedia (EXPE)—generally around $7 per transaction—are on hold through May. That's giving travelers who had avoided those sites a reason to reconsider booking a trip with those online travel agencies.

In April, Expedia (the biggest online travel agent) was the first to waive the booking fee, followed by Travelocity. Orbitz also suspended airline booking fees on tickets bought through May 31. (PCLN) had already dropped airline booking fees almost two years earlier.

That eliminates the big advantage held by airline Web sites, said Forrester Research (FORR) travel analyst Henry H. Harteveldt. "The airline booking processes are not necessarily any better than what you will get on a travel agency's site," he said. "So I think that frankly the airlines have now been caught with their e-business pants down, because they have failed to really innovate in their planning and booking processes."

Temporary Fee Waivers

Airlines have aimed to get customers to book directly on their Web sites with frequent-flier bonus miles for booking directly, and guarantees that fares elsewhere will be no lower than those offered directly by the airline. Southwest Airlines (LUV) didn't offer tickets on the travel sites at all.

The travel Web sites aren't saying what they'll do about the fees after May 31. They've taken pains to call the waiver temporary. Expedia "is constantly evaluating the approach that will deliver the greatest value to its customers and to its business, and for now, booking fees will be waived on all flights booked on between now and May 31, 2009," spokeswoman Arie Dekker said.

Travelocity believes the absence of airline fees has helped it grab more market share, said Tracey Weber, president of Travelocity North America. The privately held company didn't provide any hard numbers on what has happened since it began waiving booking fees. "We are absolutely not sure how booking fees will play into future promotions, but we're looking at all different options," Weber said.

Orbitz Worldwide declined to talk about the fee waiver, citing the quiet period ahead of reporting its results. But on Apr. 22, Orbitz upped the ante, saying it will cut booking fees on all of its hotels for rooms reserved by July 15.

Airline Advantages

Airfare expert Terry Trippler said that there are still advantages to booking flights directly with an airline, including the chance for bonus frequent-flier miles for using its Web site. If something goes wrong on the trip, it can be easier to deal directly with the airline, as well, he said. For complicated trips (such as those with multiple legs or multiple hotel stays) he advises using a flesh-and-blood travel agent.

Priceline eliminated booking fees in 2007, but it was alone for almost two years. It's easy to see why. Booking fees account for 10% of profits at Expedia and an estimated 60% of operating profits at Orbitz, according to Citi Investment Research analyst Mark S. Mahaney. He assumes that Expedia's elimination of the booking fees will be permanent.

Harteveldt at Forrester said that's likely, depending on whether the lack of fees is successful in luring travelers back to the online travel agencies. "I think it'll be very hard for them to reinstate these booking fees, having taken them away," he said. "Because the consumer is not stupid."

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