Orbitz 2010 Annual Report Download - page 7

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each travel product separately. Our net revenue per transaction is generally higher for dynamic vacation
packages than for travel products booked separately.
Retail Model
Our retail model provides customers the ability to book air, hotel, cruise and car rental reservations. Air
transactions comprise the majority of our retail bookings. Under our retail model, we earn commissions from
suppliers for airline tickets, hotel stays, car rentals and other travel products and services booked on our
websites. We generally receive these commissions from suppliers after the customer uses the travel reservation.
We may, depending upon the brand and the travel product, also charge our customers a service fee for booking
their travel reservation on our websites. Generally, our net revenue per transaction is lower under the retail
model compared with the merchant model. However, air reservations booked under the retail model contribute
substantially to our overall gross bookings and net revenue due to the high volume of air reservations booked
on our websites. We recognize net revenue under the retail model when the reservation is made, secured by a
customer with a credit card and we have no further obligations to the customer. For air transactions, this is at
the time of booking. For hotel transactions and car transactions, net revenue is recognized at the time of
check-in or customer pick-up, respectively, net of an allowance for cancelled reservations. In the retail model,
we do not take on credit risk with the customer; we are not the primary obligor with the customer; we have no
latitude in determining pricing; we take no inventory risk; we have no ability to determine or change the
products or services delivered; and the customer chooses the supplier.
Supplier Relationships and Global Distribution Systems
Supplier Relationships
We have teams that manage relationships and negotiate agreements with our suppliers. These agreements
generally cover access to the supplier’s travel inventory as well as payment for our services. Our teams cover
air, hotel, car rental, cruise, travel insurance and destination services suppliers. Our teams focus on managing
relationships, obtaining supplier-sponsored promotions and negotiating contracts.
The global hotel services team is responsible for negotiating agreements that provide us access to the
inventory of independent hotels, chains and hotel management companies. As part of our efforts to drive
global hotel transaction growth, we have increased the number of hotel market managers on our global hotel
services team, particularly in Asia Pacific and Europe. With this additional staff in place, we have signed a
substantial number of new direct hotel contracts, which provide us with higher margins, better hotel content
and increased promotional opportunities.
Global Distribution Systems
Global distribution systems (“GDSs”) provide us access to a comprehensive set of supplier content
through a single source. Suppliers, such as airlines and hotels, utilize GDSs to connect their product and
service offerings with travel providers, who in turn make these products and services available to travelers for
booking. Certain of our businesses utilize GDS services provided by Galileo, Worldspan and Amadeus IT
Group (“Amadeus”). Under our GDS service agreements, we receive revenue in the form of an incentive
payment for air, car and hotel segments that are processed through a GDS.
Galileo and Worldspan are subsidiaries of Travelport, and we have an agreement with Travelport that
covers the GDS services provided by both Galileo and Worldspan. This agreement contains volume
requirements for the number of segments that we must process through Galileo and Worldspan and requires us
to make shortfall payments if we do not process the required minimum number of segments for a given year.
As a result, a significant portion of our GDS services are provided by Travelport GDSs. For the year ended
December 31, 2009, we recognized $112 million of incentive revenue for segments processed through Galileo
and Worldspan, which accounted for more than 10% of our total net revenue.
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