Orbitz will automatically send you a check IF AND ONLY IF another Orbitz customer purchases the same ticket you booked, and they do it for less money. If the price just goes down, but no one buys that ticket on Orbitz, you’re out of luck. No refund.

So when would you be more likely to win in the refund lottery? It would need to be a frequently purchased itinerary, so I’d be expecting it on major business routes like Washington-Chicago, San Francisco-New York, etc. Trying to get a price drop refund on that Bozeman, Montana to Fayetteville, North Carolina itinerary? Good luck with that.

So imagine my surprise — perhaps even comeuppance — when a pair of tickets I purchased on Orbitz on behalf of the in-laws ended up yielding a refund check. The proof is above (with the check numbers erased) and if you click the image, you’ll see the marketing language that’s on the stub, too. Oh, and it’s been cashed, so don’t try anything too clever, smart guy…

This dates back to a purchase made in late October. I bought two US Airways tickets from Providence, RI, to Charlotte, NC for dates in December. The price was an embarrassingly-cheap $117.90 per person, roundtrip, all taxes and fees included. (Fare war with JetBlue at the time, apparently.) But someone else somehow did even better a few days later, and booked the same exact itinerary for $97.90. So not only was there a refund — at all! — there was a refund of $20 per ticket on a stupidly-cheap fare.

About six weeks after the trip was completed, the check arrived. Cashed immediately.

I’m certainly glad that I got cash back from the trip, without doing anything. I’m grateful for that. But at the end of the day, it’s still not a real guarantee that you’ll always have the lowest-possible fare for a given flight. If someone books a lower fare on Travelocity, or directly from the airline, you’re not getting a check.

The stars aligned for me. I got lucky, plain and simple.

Related:
- Check in the mail: Orbitz refunds airfare price drops, but is it worthwhile?
- Orbitz Price Assurance re-examined: Real savings or gimmick?

My Orbitz adventure began with reading about Orbitz’s “courtesy cancellation policy” on its website. The site stated that one could cancel an airline reservation by 10:00 P.M. Central Time the following day and get a complete refund. The exceptions were paper tickets, tours, and “certain airlines.” I wrote to Orbitz customer service, and was told that “The two airlines that are an exception from the ‘Courtesy Cancellation’ option are Spirit Airlines and AirTran Airlines.” So, I felt safe booking Virgin America through Orbitz.

The day after my booking, I needed to cancel. I went to the reservation, but there was no “courtesy cancel” button. I then called Orbitz customer service, and got someone in the Philippines. Both the first person I spoke with, and the claimed supervisor, said that the courtesy cancel policy did not apply because there was no button allowing a courtesy cancel, therefore the policy did not apply. The simple logical assertion that somehow Orbitz was bound by its own website and its prior response to my email inquiry seemed to be over the head of the representative.
[...]

The rest of the saga is well worth reading, detailing the negotiations before court, the company’s refusal to clarify its policy online, and final judgment: Award to the plaintiff for a full refund, legal fees, and $500 for the trouble. Despite voting fully for the consumer in this case, small claims courts can’t force the company to change their policy or the content of the website.

There are a few surprises in this for me.

First, I’m actually surprised that Orbitz showed up in court. I’ve heard many cases of large travel companies just not showing up in small claims court, and accepting the judgment in absentia. (Lesson: Sue.)

Second, I was frankly surprised to hear that Orbitz even HAS a 24-hour cancellation policy for airline tickets. Airlines have been scaling these policies back for purchases on their own websites, so it’s surprising that Orbitz can afford that kind of generosity. (Admittedly, the booking fee, if applicable is not refundable. But Orbitz eliminated most booking fees for airline tickets a while ago, and didn’t bring it back.)

Third, I’m surprised that the company was so resistant to clarifying their policy on the website. Orbitz has been pitching itself as the friend of the little guy, and transparency should be a big part of that. But this policy is far from clear.

Having fine print is bad. Having invisible print is worse.

Orbitz would be wise to reconsider the vagaries of the policy. Having the 24 hours to cancel is a great way to encourage someone to click “buy” in the first place. But not knowing if you’re covered until you hit “purchase”? That’s not a guarantee. That’s a lottery.

The state’s argument rests on the distribution model of the big agencies. When you book a $150 room with a hotel directly, the rate you reserve is the top-line number the hotel receives. Taxes are calculated on the basis of that $150 price, and submitted to governments accordingly. When you book with an Orbitz, Expedia, Travelocity, Priceline, or Hotwire, you may be paying one price, but the agency is paying another. So you may pay $150, but a Travelocity may be paying $100 to the hotel and keeping $50 in profit. For such reservations, the hotel submits taxes based on the $100 wholesale price. State and local governments argue that they should be receiving the taxes based on the retail rate, not the wholesale. So a thousand lawsuits bloom.

When I visited Orbitz headquarters in Chicago at the end of September, I asked Brian Hoyt, the company’s Vice President of Corporate Communications & Government Affairs, about this legal trend. Hoyt replied that the premise of these suits was fundamentally wrong: The lawsuits presumed that the agency was the hotelier, when in fact they were just the middleman, adding a convenience charge to the booking that they negotiated for their customers. “Orbitz is no more a hotelier than Ticketmaster is a baseball team.”

But the state of Florida has just upgraded Orbitz to the big leagues.

I’ve been sympathetic to the agencies on this front since I first posted about it in May. But the agencies aren’t doing themselves any favors: The problem for Orbitz and their peers is exacerbated by the fact that the agencies don’t break out their prices in a transparent manner. The $150 rate in the example above doesn’t show up as $100 plus $50 in fees. It shows up as $150.

Further, the agencies tack on extra “taxes & fees” (reduced recently, admittedly, but still there) without explaining the breakdown. Since the margins on hotel bookings are fat, and the taxes are based on the lower wholesale rate, there’s some room for profit in those fees, too. (It’s much like the “handling” in “shipping and handling” charges.)

The Florida case is a huge deal for the agencies, and the consumers who book there. Just the Orlando and Miami bookings alone would hurt the companies’ bottom line.

Let’s assume for the moment that the agencies lose this battle, regardless of the merits of the argument. One strategy would be to lobby for a federal solution, in which a national legal standard for tax collection is determined and applied federally. Another strategy would be to reform the ways in which agencies quote hotel rates.

Look at the these two current examples of hotel rate and tax quotation:

Expedia:

Orbitz:

Same hotel, same dates. First off, note the slight variation between the agencies. The difference may be due to variation in negotiated rates, or in fees. But you won’t ever know, because the agencies aren’t telling you what you’re actually buying.

I can understand the why the agencies want to keep their real rates quient. But since the prices aren’t broken out, it’s possible for states like Florida to launch lawsuits. If the agencies can’t get a federal solution, they may need to start quoting the wholesale rates plus the fees.

And if these lawsuits lead to greater price transparency, that’s going to be a huge change.

In particular, I’m referring to two of the online agency’s features, which it hopes will set it apart from the online competition. First, destination specialists — customer service reps trained to answer questions about the most popular vacation destinations. A caller (or online chatter) might be interested in, say, Cancun, and have questions about different hotels. The destination specialist (who may or may not be an Orbitz employee) should be able to answer some of those questions.

Second, there’s a suite of post-purchase follow-up services that Orbitz promises, under the umbrella of the “OrbitzTLC” label. Sure, it includes the automated “your flight is delayed” e-mails that the airlines offer, but what makes it interesting is the human element: Like a travel agent who would make arrangements for you when things went awry, Orbitz promises to work to rebook you when your flights are canceled or delayed. And going beyond the Main Street travel agent’s limits, a group of former air traffic controllers watches live ATC data to see where the problems arise. A team of former airline employees calls the airlines to proactively negotiate rebookings on your behalf, breaking out the legal mumbo jumbo from the contracts of carriage.

What makes both services interesting to me is the merger of higher-touch human contact with online shopping. But none of this is new. Destination specialists were rolled out at the company in 2008, and TLC has been around even longer. And the concepts behind both aren’t new at all — they’re at the very heart of what travel agencies used to earn their money doing: providing a service that extended beyond the booking of tickets.

I admit that I only considered any of this after a recent visit to Orbitz headquarters in Chicago, in the company of other travel bloggers. (Full disclosure: The flight and hotel were on Orbitz’ dime.) But most of the participants in the meeting — all people who watch the travel space closely — were unaware of the extent to which these services existed. Several of us honestly thought that OrbitzTLC was just the generic flight alerts to your phone or e-mail. That tells me that Orbitz hasn’t promoted these services clearly or effectively.

And let’s face it, the barriers to entry for other agencies aren’t insurmountable. Sure, there’s a recruiting and training expense that’s not negligible, but it’s manageable. It’s not like there’s an entire floor of a downtown Chicago office tower dedicated to these services. There’s nothing stopping a competitor from starting up a similar service. (Travelocity mentions “Proactive Contact” in their guarantees, but again, it’s not very clearly defined or well promoted.)

Orbitz would be wise to promote these services more aggressively, if they really believe these services are an important differentiator from other online (and offline) agencies.

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Orbitz was one of the last agencies to reduce its airline booking fees. Those fee cuts were set to resume on June 1. They didn’t. Until further notice, the fees are history.

It’s a brutal world and a nasty fight for market share, and agencies aren’t bringing the fees back. Expedia, Travelocity, Priceline, and Hotwire all eliminated their airline booking fees.

But other agencies haven’t reducing the hotel booking fees the way Orbitz has. Orbitz is trying to carve out a space as the site for hotel bookings.

On the one hand, they’ve got a better price than other agencies, so this gives Orbitz a competitive advantage that travelers would be wise to take advantage of.

But it simultaneously shows that Orbitz is hurting and needs to cut prices in order to generate business.

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Upgraded: Coffee on Southwest
Southwest Airlines is cranking out an improved brew on its flights. They are quick to remind customers that they’re still not charging a fee for the pleasure of arabica beans at 35,000 feet.

Downgraded: Coffee on Northwest
Back on the ground, a Northwest Airlines flight attendant charged with tending to an unaccompanied minor allegedly took an 8-year old to Starbucks. The flight attendant allegedly gave the girl a venti coffee loaded with cream and sugar, which made her sick. “I told her I was tired and she took me to Starbucks and said, ‘Go order a large coffee.’ She made me pay with my own money.” Why would anyone give an eight-year old, who is about to get into a plane, coffee? I wouldn’t have been surprised to hear that an airline employee had slipped the kid a Benadryl, frankly, but giving an 8-year old a giant coffee makes no sense. Northwest says the story “doesn’t match their records.”

Upgraded: Stories of irate passengers
Every time I think the latest story of a passenger gone wild on an aircraft is the winner, there’s a new story that takes the crown. And I quote: “A British woman allegedly had an in-flight meal of prescription drugs, wine and liquid soap — before trying to bite the crew of a London-bound jetliner. Galina Rusanova punched and kicked flight attendants on the Chicago-based United Airlines flight after downing two or three bottles of wine, prescription drugs and liquid soap from the jet’s lavatory, prosecutors said.”

Upgraded: Nonstops to see Yakov Smirnoff
Upgraded: Airline monopolies
Branson, Missouri! America’s low-rent Vegas! No, gambling or smut, but you can get Soviet Union jokes o’plenty! But this Ozark mecca of entertainment has-beens finally has its own airport. It apparently bears the distinction of being America’s first privately-owned airport with commercial service, and it was built without federal transportation funds. The flipside of this savings to the taxpayer: The airport can negotiate exclusivity on routes. If airlines have exclusive contracts for service for a delimited timeframe, “That’s a major incentive to an airline because they know they won’t have to duke it out over fares with anyone.” In English, we call that monopoly.

Orbitz will show the total of base rate, taxes, and fees on the search results page. (No word on mandatory charges like resort fees that hotels hide from searches.)

How much of a change is this? On the surface, this is a positive step toward greater price transparency. But is it really a big shift? Since hotel searches are geographically limited, taxes rise proportionally with base rates. Lower rates would, by definition, mean lower total prices. (This is unlike airfares, where base fares on two airlines may be the same, but the total prices may vary based on the number of stopovers or the airports involved.)

In terms of fees, the simultaneous reduction and integration of fees in results muddies things. Orbitz says they’re reducing hotel booking fees charged by the site, with a sunset clause that expires the reduction after July 15, 2009.

But who would notice? Since the fees aren’t itemized, it’s hard to see what the actual fee to Orbitz is. Customers may not care about whom they’re paying their fees to, but it’s not really transparent.

At first, I thought this would put pressure on Priceline, which claims to be “working hard to keep priceline’s hotel booking fees lower than Expedia, Travelocity, Orbitz, and even Hotels.com.” But if Orbitz fees aren’t broken out, then the real pressure is to show total cost up front.

As far as transparency is concerned, this is still a good move. Let’s hope these changes gain sway with others, and that they last beyond July 15.

Orbitz has followed suit and has temporarily ended the airfare booking fee, for tickets purchased through May 31, 2009. The fine print: “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.” Too bad about the multi-carrier itineraries. That’s something Orbitz excels at, so perhaps it makes sense that they still charge a premium for it. But still, too bad.

In their press release, they pitch that the combination of the newly-deleted fees and the Price Assurance program (analyzed here and here) makes them the online agency of choice. Assuming that the fares are the same at, say, Orbitz and Expedia, but the only difference was Orbitz’ Price Assurance program, then yes, I’d choose the no-fee Orbitz (even if I’m still a skeptic as to the real worth of Price Assurance).

But regardless: the clock is ticking. May 31 is the same expiration date as Travelocity and Expedia, which is not a huge window of opportunity.

But will they really bring fees back on June 1? I still maintain that, once you and your competitors let the genie out of the bottle, it’s hard to be the first to squeeze it back in. Priceline and Hotwire are unlikely to add the fee back in. Will Orbitz blink? Will Expedia? Travelocity?

I’m still betting that the no-fee environment will be extended. If one agency brings the fee back, expect a marketing blitz by competitors, touting the difference.

In the meantime, consumers benefit.

Both agencies are promising that the fees will be on hiatus until May 31, 2009. But bringing the charge back may be tough: Back in 2007, Priceline and Hotwire dropped their booking fees “temporarily,” and they still haven’t brought the fees back.

That leaves Orbitz as the lone holdout among the biggest U.S. travel agencies. So when will Orbitz, the biggest holdout, throw in the towel on fees?

Consumers should welcome the rollback of these add-on booking charges. But this episode shows how brutal the online travel marketplace is right now. If online travel agencies want to collect a surcharge, they’re going to have to get creative, and earn it. Simply offering price comparisons and a few online alerts — which are free elsewhere — won’t cut it. And Travelocity, Expedia, Priceline, and Hotwire have admitted that.

Sure, Orbitz may counterargue that they provide value-added with their price guarantee, but since that service is of relatively limited value, I wouldn’t pay a premium for it (though maybe it’s worth the $6.99+ gamble for someone else…)

Travelocity is even poking a stick in Orbitz’ eye by copying their “Price Assurance” model and bringing it to vacation packages under the name “PriceGuardian.” If someone else books the same package as you, and the price has dropped, you get a check for the difference. Yeah, good luck with that.

What we may see is a shift to voluntary fees for add-on services, much like the airlines are going a-la-carte themselves. Want a price-drop guarantee? Pay a few bucks up front. Want text message alerts? A few more bucks. That I could see happening. But the standard one-size-fits-all fee is history at the mainstream agencies.

Here’s what I wrote when it was rolled out:

Unlike Yapta, which tracks fare drops and alerts you when the published price goes down, Orbitz will automatically send you a check IF AND ONLY IF another Orbitz customer purchases the same ticket you booked, and they do it for less money. If the price just goes down, but no one buys that ticket on Orbitz, you’re out of luck. No refund.

So when would you be more likely to win in the refund lottery? It would need to be a frequently purchased itinerary, so I’d be expecting it on major business routes like Washington-Chicago, San Francisco-New York, etc. Trying to get a price drop refund on that Bozeman, Montana to Fayetteville, North Carolina itinerary? Good luck with that.

So were my hunches right, or wrong? I asked Orbitz what the numbers really look like. Here’s an update from their reps:

Orbitz has mailed refund checks to travelers on over 2,400 routes since June 2008. This information is based on flights purchased on Orbitz.com in instances where a customer has purchased an airline ticket, and a subsequent Orbitz customer purchases a ticket on the same flight at a lower price, automatically generating a refund.

Subsequently, Orbitz provided a spreadsheet with the top ten refunded routes from ten cities. (The document was labeled “top 20,” but there are 70 routes mentioned.)

As I predicted, the majority of routes are indeed major business routes between American cities. There are some quirky outliers, though. Atlanta to Liberia, Costa Rica; Chicago to Guadalajara, Mexico; Miami to Barranquilla, Colombia; New York to Paris. The major business routes remain king, though.

Have any of you bought a ticket on Orbitz and gotten a refund afterward? If so, hit the comments.

[UPDATE: In a followup, Orbitz has provided the top 20 routes that have generated refunds. The list of 70 routes originally posted represents the top ten refund routes for those particular departure cities. I'm appending the top 20 list as well. Thanks to Orbitz for sharing the data!]

See the complete list, as provided by Orbitz, below the jump…