Monday, March 12, 2007

Expedia tries to save its supply line by opening Expedia Spain

Guest Editor Post from Michael Potts of e-interactive

Expedia have told some of their travel suppliers in Spain that they are to launch in April or May this year. My thought about this future event has always been “great, they will grow the Spanish online travel market and make a good return for themselves” (see an article I wrote for Megustaelturismo here). However I now think there is another primary reason that Expedia are opening Spain – to make sure that they still have a supply of hotels in the months and years to come.

Why is this the case?

1. Expedia has lost huge ground in market share to their local European competitors over the last 18 months. and Venere are selling particularly well, and local Spanish OTA’s are becoming more valuable distribution for hotels as the Spanish start to buy online themselves

2. Expedia are viewed by many hotels and chains in Spain as a very expensive way of only attracting English and German guests

3. Expedia’s commission rates are extremely high (normally 25%) compared with most others at 15% ( for instance, who are now bigger in sales for hotels across most of Spain than Expedia). Already we are seeing long negotiations between the chains and Expedia for supply deals, with NH in particular having disappeared from Expedia’s listing (try and find availability on any Expedia site!)

Without opening their supply chain to the growing demand for domestic online travel, Expedia were increasing likely to lose many of the mid-sized chains and even independent hotels whose share of market is dominant. It will be interesting to watch this development and see how the hoteliers, and those buying travel online in Spain, react to

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