In 2008, when Orbitz first introduced their Price Assurance program — their policy that provides refunds when another Orbitz customer buys the exact same ticket as you — I was skeptical. As I wrote then:
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.
All the attention has been on the Continental-United merger, but that’s not the only M&A action in the travel space. To wit:
- Hertz made an offer to buy Dollar/Thrifty for $41/share. Avis subsequently signaled interest in making a higher bid. Bottom line: The car rental market is about to shrink.
- Google is reportedly in talks to buy ITA Software, which provides much of the functionality for sites like Orbitz, Kayak, TripAdvisor Flights, and others. You can’t just google a ticket today, but you may do so soon.
The battle for Dollar/Thrifty between Hertz and Avis is largely about consolidation and elimination of the competition (much like the “Continited” merger). At the same time, buying Dollar/Thrifty would give Hertz or Avis a larger presence in the comparatively “downmarket” leisure travel segment.
The speculated deal for ITA Software is perhaps more interesting. What will Google do if it gains the technology and software engineering human resources to run better fare searches? Will they offer a search-of-searches, pushing traffic to airlines and online travel agencies, but putting Kayak and their metasearch ilk out of business? Will Google challenge Expedia, Orbitz, Travelocity, et al. themselves and build a Google travel agency? Will Google continue to sell the powerful ITA engine (which ITA lets anyone test drive on their beta site — login as guest) or will they let contracts expire and keep the technology for itself? Plenty of theories, but no answers.
So in the past week, the competitive landscapes for flying, driving, and booking travel have all potentially changed, with minimal visible benefits to the consumer. After all, less competition breeds higher prices.
All we’re missing is a hotel deal and a cruise line merger, and we’ll be all set. (The week is young.)
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.
Municipalities across the country have been suing the online travel agencies, charging them with cheating the local governments out of lodging taxes. Agencies responded by keeping hotels in those cities out of searches. Until now, it’s been primarily smaller cities like Columbus, Georgia. But last week, the state of Florida got in the game, suing Expedia and Orbitz, claiming that the agencies failed to pay the full amount of taxes owed.
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:
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.
Small travel agencies historically laid claim to area-specific expertise and hands-on customer service. Then the online travel agencies came around and made mincemeat of them. Now, having played a big part in the slaughter, Orbitz is trying to bring some of the old-school features of a small, personalized travel agent to the 21st century and the online customer base.
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.
Back in April, Orbitz rolled back its hotel booking fees, in the face of some smashmouth competition between the online travel agencies. At the time, Orbitz promised that the hotel fee cuts would last until July 15. But no: They’ve been extended.
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.
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.