Expedia at odds with American Airlines

Things are heating up between American Airlines and Expedia.com.

In a nutshell, American Airlines wants to pull out of the booking websites and sell their seats through other channels that don’t charge high commissions. Expedia, with whom AA is still working, buried the American flights deep in the system so it’s harder for customers to find and book them.

It will be interesting to see how this turns out, because I see a lot of similarities to sentiments from hostels regarding booking engines.

I’m not sure how making the AA fares harder to find is supposed to help Expedia. I suppose they could be attempting to show American how their sales figures would look without their services. In my opinion they are just giving AA another reason not to renew their contract when it expires.

That sounds familiar. Hostels would also prefer to have their customers book directly with them and keep the 10% that the booking engines collect.

This echoes the sentiment of many hostels who feel that the booking engines' practice of listing hotels alongside (or above) hostels is misleading and unfair. Especially if the booking site will profit by hiding the lower fares in favor of the higher ones that pay higher percentages.

The article mentions Southwest Airlines as an example of an airline that is “doing fabulously” without selling their seats through Expedia, Orbitz, or any of the other booking sites. Perhaps they’ve been leading a revolution without even knowing it.

This could be a catastrophe for Expedia if other airlines decided to follow suit. While Expedia makes the process easier for travelers to find flights, they don’t actually have any inventory of their own to sell. The power is entirely in the hands of the airlines. Without the airlines’ cooperation Expedia would have no product to offer, and as a result no income. They need to play nice with the airlines or they could risk going under. Striking out against AA like this is a risky move that could raise concerns among other airlines and leave Expedia in the cold. The airlines can sell their seats on another booking site if they decide that they don’t like Expedia’s practices. The flights would still sell and their airlines would still make their money, but Expedia would suffer considerable losses. Even a short period without a product to sell could remove them from the market altogether.

The situation in the hostel industry is exactly the same. It will be very interesting to see how this story progresses.

The situation for hostels is definitely not the same, not even close. There are thousands of small hostels that can compete with the big hostels solely on how well they run their hostels and how the hostel is reviewed by their guests. How many small airlines could dominate a market in a short time based on user reviews only with very minimal investment in marketing?

While it is not a perfect system by any means it is a very level laying field, where quality service brings customers and bad service is recognized immediately and punitively. You cannot possibly compare the hostel and airline industries in this way.

The booking engines invest in SEO to a point far beyond the ability of a hostel to compete. There are relatively few airlines. They all have huge, mature conventional sales and marketing departments, huge SEO and web presences with large, penetrating alliances with co-providers and entrenched corporate kingdoms to satisfy. The vast majority of hostels are owner operated and as a result can be very nimble and "sniper" like in their marketing simply by doing a good job and understanding their market and their markets needs.

The booking engines have had a dramatic growth positive impact on this industry world wide. In the old days the Lonley Planet would have a few, generally way out of date, hostel listings for each city/region, the YHA/HI's had their network's and a few hostel guide books served our market. Things have changed. I cringe every time I hear people be-grudge the commssions that the booking engines take.

If hostels went in the direction of the airlines, hostels would have to have huge, costly SEO strategies and then large, well funded hostel companies could then dominate search results. Choice would evaporate and small hostel and the diversity they provide could disappear. I know people that run very good hostels that barely turn their computers or have any marketing knowledge. Yet they make money solely by getting bookings from the booking engines. They just read an email and keep track of their rooms. But they survive/thrive because they do an excellent job in their hostels provide exemplary service in unique environments and are independent. The backpackers immediately tell the next potential bookers what is going on at the hostel on a level playing field. If it's good they know, if it's bad they know for sure. The booking websites know this and have profited, but so have hostels and the hostel and the number of backpacker travelers has grown exponentially over the past 7 years Is it related? I think it is to some extent.

Yeah, the bookings engines make some money, in fact lots of money. Why does that matter? Good for them! Think about it. We don't write cheques to them! The bookers pay the fees and commissions to the booking agencies. Market pricing is based solely on the customers ability and desire to pay the price. Would bed prices come down if backpackers booked directly with hostels? I doubt it. In fact marketing costs, SEO costs, transaction costs would probably cause the prices to stay the same or go up. This is why the YHA/HI's are retrenching and closing in many markets. Their overhead is too high.

When a booker does find our homepage/site in the search results (thanks as well to booking engine seo) they do make a direct booking with us we have a booking engine on our page that rebates most of the commission and half the booking fee to us. The booking engine handles the transaction costs, provides awesome SEO, hard to cheat quality comparisons and even a guarantee.

There may be wistful, sentiments out there like "if only" or "what if", but I doubt if it is coming from switched on, small to mid size hostel owners. Due to the incredibly fragmented nature of the hostel business model, booking engines have served to act as a "uniter" that helps travelers and business owners to connect in an easily understood manner. How could that be replicated in any other manner? Guide books/web reviewers, blogger fiends, people such as the self appointed hostel (hostile?) experts out there reviewing hostels using a self created star system like how Fodors or Michelin does for hotels and restaurants? Tripadvisor?

The booking engines have secure data systems, cloud based storage systems, far reach across the world, language translation, quality comparisons, price comparisons etc etc. They always put hostels at the top of the city results when there are hotels and motels listed in a city and I have never seen higher priced properties featured ahead of lower priced ones (unless it was a paid featured listing but the review score and prices are always prominent for comparison to the non-featured properties)

This is very much not like the airline industry. How many airlines have started up as a result of Expedia, Travelocity, Orbitz etc. What persent of airline travelers even review? What percent review directly on the site that they booked on the day or next day after completing their journey? How many airlines lose bookings due to bad reviews the day a complaint takes place?

Southwest Airlines has always gone against the grain and their margins are much lower than the other major airlines. Online booking agencies did in fact hurt Southwest Airlines as consumers got a better choice of discount rates from one spot. I would hesitate to leap to a conclusion that they are "thriving" only due to their avoidance of booking engines. They also don't use travel agents either.

Without a doubt, hostels as a general rule have to get better at SEO and understanding the booking cycle. BUT... hostels, by the nature of our market demographic are leaders in the online world of customer reviews both in number and quality of reviews. As a result of booking websites hostels have incredible, worldwide balanced exposure on a relatively level laying field for our bricks and mortar facilities no less. Hostels are also faced daily, hourly with a customer base that uses the internet for 100% of their travel cycle. From research, booking, reviewing and payment in one location! Such a powerful business tool for direction correcting, quality management and direct marketing. At no up front or even reaction based costs.

How many hostels could exist without the booking websites? How many could exist today without a online quality/price comparison facility that handles secure transactions with the immediacy, trust and guarantees that stretch worldwide across all the properties and destinations in a travelers itinerary? Yes, the YHA/HI system can provide something like this, so do hostels all become YHA?HI's? Do the independents team up then like GOMIO? Do independent hostels create an advertising/listing service like BBH in NZ?

I just don't see it. It's pretty tenuous to say that the hostel and airline industies are similar from a sales and marketing stand point, like you have done. There are similiarities but not in the way you are suggesting.

As I have said in many other posts, I am very wary of some of the new initiatives that the booking agencies are coming up with. But, I am confident that they will never abandon hostels in favor of hotels.