Page 163 - Electronic Commerce

Chapter 3

In recent years, most airlines and auto rental companies have reduced the amount of
the commissions they pay travel agents. In some cases, they have stopped paying
commissions at all. Most cruise lines and hotels continue to pay commissions. And many
hotels sell blocks of rooms to travel agents who can then resell them as part of vacation
138
packages. Some airlines also sell blocks of seats to travel agents. Online travel sites have
much larger volume than traditional travel agencies and are thus able to buy larger blocks
of hotel rooms and airline seats.
Online travel sites have evolved to make money in various ways. They all collect any
commissions that are paid. And they buy and sell rooms and airline seats, but most of
them, including Travelocity, which was based on the Sabre computer system that
traditional travel agencies used to book flights and hotel rooms (Travelocity is owned by
Sabre), and Microsoft’s Expedia subsidiary, run advertising on their Web sites in a
combined advertising-fee revenue model. In 2001, a consortium of five major U.S. airlines
launched Orbitz, which became one of the most visited travel sites on the Web. The Orbitz
home page appears in Figure 3-4.

reserved

rights
All
LLC.
Orbitz,

2001–2011,

©
FIGURE 3-4 Orbitz home page
The online travel sites were able to disintermediate many traditional travel agencies.
By expanding rapidly online, they were able to negotiate better deals on hotel rooms and
airline seats that they purchased for resale. With their scale of operations and low cost per
transaction, they were able to continue operating profitably on the reduced airline ticket
commissions. These factors combined to hasten the end of the traditional travel agency.
Some smaller travel agencies have survived; these agencies most often specialize in
cruise vacations. Cruise lines still view travel agents as an important part of their selling

Copyright 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.