Summary
-Removal of hotel "booking fees" may cause serious deterioration to OTA's Gross Margins
Analysis
Until now, while the "base" price of a hotel room on Orbitz, Travelocity and Expedia (and supplier sites) was usually the same, the OTAs often added additional fees into a murky line during the booking process labeled "taxes and fees." Consumers didnt pay much attention to these fees, assuming that they were not optional or a subject of competition. All that changed when Orbitz began breaking out the total all-in price on the first search results page - something even the hotel supplier sites don't currently do.
Expedia and Orbitz have effectively taken a hatchet to their margins. The difference could be substantial - as much as a 19-20% drop. Orbitz has claimed a $7 average savings (unclear if that is per night or per transaction but per night feels more realistic.) In round numbers, based on a $150 ADR and a 20% front-end margin, Expedia was making $30 on the front end and $7 on the backend (which, I think is VERY low as Expedia has been much more aggressive) then a substantial portion of both OTA's hotel margins have been "Fee Choped" to use PCLN's term.
