Expedia Group CEO Dara Khosrowshahi expects commissions to come down as the OTA looks to pass on lower fixed costs achieved through growth not only to shareholders but hotel partners.
Speaking at the International Hotel Investment Forum (IHIF) in Berlin last week, Khosrowshahi said Expedia has been lowering industry commissions over the last 10 years as its business grows.
“As we scale our fixed costs relative to demand, we want to make sure we pass on those economics not just to our shareholders but to our partners,” he said.
“We’ve been in the business for 20 years and we wouldn’t be without (our) partners… We don’t have thousands of people working in the field but we get to market the products of our partners and the partnership is growing.”
However, Khosrowshahi believed the industry must change its pricing structure, specifically unbundle its pricing the way airlines have unbundled airfare pricing, so prices won’t “differ wildly” when a customer books through a franchise, Expedia or Booking.com, etc, and so that the pricing would truly reflect its value.
“I think the premier issue as it relates to commissions and brands is the pricing structure of the industry. It really hasn’t adjusted to the realities of the new economics of distribution. Airlines are de-bundling their products – seat, check-in bag, food, etc – into basic economy fares that are much cheaper.”
While fixed costs are down, Expedia is faced with enormous costs of going from a web to a platform company. “The market is consolidating and demand is consolidating into larger and larger platforms. We’ve gone from web company to a platform company and we have to essentially take in every single piece of travel inventory in the world – hotels, air, cars – and offer it in any way consumers want, website, mobile, WeChat, voice.