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US travel agency fee cuts could become permanent

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Written by editor

CHICAGO – U.S. online travel agencies, hungry for business in an economic recession, may extend or make permanent the booking fee cuts and waivers they implemented this year on a promotional basis.

CHICAGO – U.S. online travel agencies, hungry for business in an economic recession, may extend or make permanent the booking fee cuts and waivers they implemented this year on a promotional basis.

The companies like Orbitz Worldwide and Expedia Inc suspended or reduced some of their booking fees recently to spur demand during the peak summer travel season.

The moves, which lag Priceline.com’s airline booking fee waiver by nearly two years, were intended to be temporary. But experts think they could become permanent as the agencies compete for customers. Industry leaders have hinted the same.

“The combination of measures that we’ve taken … certainly give us the flexibility to sustain the actions if we choose to do so,” Orbitz Chief Executive Barney Harford told Reuters last week, referring to cost cutting and revenue-generating steps.

Orbitz, Expedia and Travelocity waived airline booking fees as part of promotions that extend through May. Orbitz and Expedia also temporarily cut hotel booking fees.

Priceline eliminated fees for published-price airline bookings in 2007 and reduced fees for published-price hotel bookings in 2008. The fees were unchanged for Priceline’s name-your-own-price auction.

“Our competition has cut fees on a promotional basis this spring, and all are matching, resulting in a material hit to our competitors’ profitability,” Priceline CEO Jeffery Boyd said Monday on a conference call with analysts and reporters.

“If the fee reductions are made permanent by our competition, we expect a reduction over time in the domestic market share gains we have experienced,” he said.

Travel businesses are wrestling with an economic recession that has drained both leisure and business travel budgets. Online travel agencies hope they can boost demand with sales, fee waivers and price guarantees.

Of the three publicly traded online travel agencies — Expedia, Priceline and Orbitz — only Priceline saw bookings growth in the second quarter.

Morningstar analyst Warren Miller it is possible that the agencies may reinstate their fees slowly to avoid attracting attention.

“We’re not going to see big ad campaigns about the fees being reinstated,” Miller said. “They’re going to just kind of creep in there, and one day they’ll just be there.”

“They’re going to wait until they actually see the demand uptick before they reinstate them,” he said.