News for the Hospitality Executive
|The Boston Globe Sensible Traveler column
By Bruce Mohl, The Boston Globe
Oct. 3, 2004 - The president of Expedia.com, the online travel agency, says consumers don't need a one-stop shop for travel.
What consumers want in a travel website, said Steven McArthur, is a large selection of air and hotel offerings at competitive prices.
"No retailer is a one-stop shop," he said. "It isn't necessary for us to have 100 percent of the brands available in a given market."
He is right about retailers, but most consumers don't view travel agents as retailers. Consumers hire travel agents as their representatives to search the best deals from all the options out there. To the extent that certain options are off limits, I believe the travel agent becomes less effective.
Discount airlines like Southwest and JetBlue already shun the big online travel agencies, and now Expedia and its sister company, Hotels.com, are about to lose access to the largest hotel company in the world.
InterContinental Hotels Group, which operates chains under the Holiday Inn, Crowne Plaza, and InterContinental names, is preparing to pull nearly all its 3,500 hotels off the two websites because they refuse to comply with business guidelines it issued last spring. The split is scheduled to take place Nov. 15.
Among other things, InterContinental's guidelines require websites to break out their tax and service charges, rather than lumping them together in a way that makes it impossible for consumers to know how much of each they are paying.
McArthur said consumers don't care how much they pay in taxes and how much they pay in fees. All they care about, he says, is how much they pay overall and whether that overall rate is competitive.
"If there was any evidence that consumers cared about this, we would take it more seriously," McArthur said. "This is a red herring. ... This is not a consumer issue. This is a competitive issue."
McArthur contended InterContinental abruptly halted negotiations with Expedia and announced it was pulling its rooms off the website because it wants to steer more consumers to its own website. He said most hotel chains have provisions in their contracts prohibiting Expedia from breaking out their taxes and fees.
"InterContinental's position is the outlier in the industry," he said.
Tom Seddon, a senior vice president with InterContinental, said it is true that he would like to cut out middlemen as much as possible and steer consumers directly to InterContinental's own website. But he claimed that was not the motivation behind the company's guidelines.
Seddon said InterContinental believes consumers should know exactly what they are paying and what they are paying for. Most travel websites purchase rooms at a wholesale rate and sell them to customers at a higher, retail rate. The websites collect occupancy and sales taxes from their customers based on the lower wholesale rate and then tack on service fees for handling the transaction. The taxes and fees are lumped together, making it impossible to know how much of each is being charged.
Seddon said the travel websites are free to charge whatever they want, but he says they should give their customers (who are ultimately InterContinental's customers) a detailed breakdown of the charges.
"It really is a point of principle for us," he said.
Of the three leading online travel agencies, only Travelocity has agreed to abide by InterContinental's guidelines. Negotiations with Orbitz are ongoing.
Officials at Travelocity haven't changed the way taxes and fees are presented on their website yet, but a spokesman said they will be shown separately soon.
"We will be fully compliant with InterContinental Hotel Group shortly," said spokesman Al Comeaux.
Bruce Mohl can be reached at firstname.lastname@example.org.
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