Orbitz Follows Rivals, Drops Booking Fees with a Twist

(MoneyWatch)  I figured it was only a matter of time before Orbitz followed Expedia, Travelocity, and Priceline and dropped their booking fees for air travel. It's finally happened, but they did it with a twist. This doesn't apply to all itineraries, and while it may be a smart financial move, it could have customer service consequences.

Priceline started this battle ages ago by permanently (or as permanent as you can get) dropping booking fees for air travel. This made them competitive with the airlines' own websites and it gave them a leg up on the big three - Orbitz, Travelocity, and Expedia. Last month, Travelocity and Expedia dropped their fees for travel booked through the end of May, but Orbitz held out, probably waiting to see what kind of impact this would actually have on their bookings.

Now, Orbitz has caved, but the bottom of the release announcing they were matching Travelocity and Expedia's promotion had an interesting caveat.

Valid for round-trip or one-way flights through May 31, 2009. Excludes multi-carrier itineraries and flights originating outside the U.S., Canada, Mexico and the Caribbean.

Ah, they've excluded multi-carrier itineraries. Why would they do that? Because airlines can't offer those itineraries fee free. Sure, if it's one airline one way and another airline the other, you can book two individual one way tickets on different sites, but that's a real pain. You also wouldn't really piece those options together without a central site to show you that the options existed.

Orbitz must realize that this is a product that can demand a premium, and even though Expedia and Travelocity waived fees on all itineraries, they thought they'd hold out and try to keep some fee revenue filling their coffers. This tells me that they were seeing some erosion of their bookings while they held out, but they're being very cautious regarding how they match here.

It's a risky strategy from a customer perspective, because people may end up with a surprise if they don't read the fine print (which they won't). Still, Orbitz is trying to claw at as much revenue as it can right now. Losing fee revenue is a big hit, so Orbitz is probably smart for being cautious with this move. I'm not sure I see them being able to hold out for long, but it's worth a shot.