Airlines increase price, reduce seats, reduce resale chanels

When things are going bad, airlines and hotels want every website possible to be selling their wares.  Reduced price – no problem, at least some income is being earned. Remember when a plane leaves the gate, or the sun rises, that airline seat, or bed-night either did or didn’t earn something.

Airline seats and hotel rooms are sort of the ultimemate perishable goods.

Over in the USA – there has been constant tension between airlines and hotel chains, and travel re-sale websites (or Online Travel Agencies [OTA’s] in the jargon of the industry) like Orbitz, Expedia etc. Sometimes they are in love, when they can’t get rid of inventory, and sometimes divorced, when demand is strong, and the discounts OTA’s offer eats in to airline and hotel companies profits.

At the dawn of OTA’s it became a way for hotels to get rid of inventory they couldn’t shift – but when the OTA’s became successful, they started cutting into non-discounted sales.

Now when things are going well – especially in the airline business where in the USA capacity has been reduced, while demand is increasing – planes are traveling filled to 87% of capacity – which is basically full.  So now the turf wares have begun. Airlines don’t need the OTA’s to discount, so some have decided they don’t need OTA’s.

The war has become particularly nasty between American Airlines and Orbitz who are suing, each other, one claiming the other is trying to control airline ticket distribution.

Under the current system, airlines pay a middleman to list their seat availability, and distribute this information to travel agencies – including OTA’s. The idea is to cut out the middle man, so that airlines primarily market their own inventory.

This is affecting the OTA’s especially since they leverage airline ticket buys by adding hotels and care rentals.

Now if this is not enough, add in a deal between ITA (Travel software company) and Google (see The Googalisation of Travel), which could list travel results – airline, hotel and car rental deals – as part of search results, and you have an almost perfect dark storm for the OTA’s such as Travelocity (or zuji in   Australia, Orbitz, and Expedia.

The other complexity is the aggregators (Kayak, Momondo, TripIt) which sort through hundreds of travel sites to find you the best deal – getting a referral fee. Will this development favour them?  Will airlines and hotel operators prefer to pay the referral fee rather than the commission?

I think it will be a case of wait and see.

Main scource: BNET