Online Travel Agents Permanently Drop Booking Fees

I can't imagine anyone is surprised to see that the big online travel agents (Expedia, Travelocity, and Orbitz) have made their temporary booking fee cuts permanent. But now what?

Booking fees make up a pretty big chunk of revenue for the online travel agents, but the OTAs were apparently so concerned about losing customers that they've decided it's worth ditching the fees completely . . . or not. There are some exceptions here. As mentioned in a previous post, Orbitz is only removing the fees from bookings that are made on a single carrier. Travelocity is doing the same. That means that multi-carrier itineraries, which can't be booked directly on a single airline site, will still face fees with these two. Expedia, however, isn't putting on such a restriction.

But this isn't just flight booking fees. Expedia is also ditching cancellation and change fees for hotel, car rental and cruises as well as flights. Of course, if the airline or hotel charges a change fee, people will still pay that, but Expedia won't put additional fees on top. So this brings up the big question - how will they make money?

There will, of course, continue to be the backend commissions from airlines and hotels. On the hotel side, they also buy hotels at net rates and mark them up to make their profit. There will also be advertising revenue, but it looks like they've decided that the fee-based revenue is going to hurt their user numbers too much to be worth keeping. It will be interesting to see their financials after this change.