Expedia 2015 Annual Report Download - page 12

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merchant transactions relate to hotel bookings. Under the agency model, we facilitate travel bookings and act as
the agent in the transaction, passing reservations booked by the traveler to the relevant travel provider. We
receive commissions or ticketing fees from the travel supplier and/or traveler.
We continue to see closer integration of the agency hotel product with our core merchant product through
our Expedia Traveler Preference (ETP) program by offering, for participating hotels, customers the choice of
whether to pay Expedia in advance under our merchant program (Expedia Collect) or pay at the hotel at the time
of the stay (Hotel Collect). Growth in our ETP program has generally resulted in reduced negotiated economics
to compensate for hotel supply partners absorbing expenses such as credit card fees and customer service costs,
and as we continue to expand the breadth and depth of our global hotel offering, we have made and expect to
continue to make adjustments to our economics in various geographies including changes based on local market
conditions. Based on these dynamics, we expect our revenue per room night to remain under pressure in the
future.
Through various of our Expedia-branded and other websites, travelers can dynamically assemble multiple
component travel packages in a single transaction at a lower price as compared to booking each component
separately. Packages assembled by travelers through the packaging model on these websites primarily include a
merchant hotel component and an air or car component. Travelers select packages based on the total package
price, without being provided component pricing. The use of the merchant travel components in packages
enables us to make certain travel products available at prices lower than those charged on an individual
component basis by travel suppliers without impacting their other models. In addition, we also offer third-party
pre-assembled package offerings, primarily through our international points of sale, further broadening our scope
of products and services to travelers. We expect the package product to continue to be marketed primarily using
the merchant model.
Under the advertising model, we offer travel and non-travel advertisers access to a potential source of
incremental traffic and transactions through our various media and advertising offerings on trivago and our
transaction-based websites.
Our HomeAway brand offers subscription-based vacation rental listing products and services to property
owners or managers where property owners or managers purchase in advance online advertising services related
to the listing of their properties for rent over a fixed term (typically one year), and on a transaction-basis where a
commission is earned on traveler bookings completed on our websites. Going forward, we expect to transition
over time to more transaction-based service offerings, including the introduction of a consumer booking fee.
Relationships with Travel Partners
Overview. We make travel products and services available from a variety of hotel companies, large and
small commercial airlines, car rental companies, cruise lines, destination service providers and with the closing
of the HomeAway acquisition property owners and managers. We seek to build and maintain long-term, strategic
relationships with travel suppliers and global distribution system (“GDS”) partners. An important component of
the success of our business depends on our ability to maintain our existing, as well as build new, relationships
with travel suppliers and GDS partners.
Travel Suppliers. We strive to deliver value to our travel supply partners through a wide range of innovative,
targeted merchandising and promotional strategies designed to generate consumer demand and increase their
revenue, while simultaneously reducing their overall marketing transaction and customer service costs. Our
strategic account managers and local hotel market managers work directly with travel suppliers to optimize the
exposure of their travel products and brands through our points of sale, including participation in need-based,
seasonal and event-driven promotions and experimentation within the new channels we are building.
We have developed proprietary, supplier-oriented technology that streamlines the interaction between some
of our websites and hotel central reservation systems, making it easier and more cost-effective for hotels to
manage reservations made through our brands. Through this “direct connect” technology, hotels can upload
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