Orbitz 2013 Annual Report Download - page 6

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6
Partner Marketing
The Partner Marketing team is responsible for building innovative online marketing and advertising partnerships across
our global portfolio of leading consumer and business travel brands. We generate advertising revenue by providing our partners
access to our customer base through a combination of display advertising, performance-based advertising, video production and
other marketing programs. Travel companies, convention and visitor bureaus, credit card partners, media, packaged goods and
other non-travel advertisers advertise on our websites.
Supplier Relationships and Global Distribution Systems
Supplier Relationships
We work with suppliers to provide our customers with a broad and deep range of highly competitive travel products and
services on our websites. We have teams that manage relationships and negotiate agreements with air, hotel, car rental, cruise,
travel insurance and destination services suppliers. Our supplier teams negotiate contracts regarding access to the supplier’s
travel inventory and payment for our services, manage supplier relationships, and obtain supplier-sponsored promotions.
For hotels, we are focused on offering our customers the ability to book the most relevant hotels at the most competitive
prices. To do this, we focus on infrastructure to ensure we have appropriate connectivity with our suppliers, sophisticated sort
order algorithms and robust promotional capabilities. Our global hotel services team works closely with hotel chains and
independent hotels to increase the number of properties that participate on our websites and to ensure that our customers have
access to their best available prices, including prices exclusive to our brands, where possible.
For airlines, we have long-standing relationships with hundreds of airlines, including most major U.S. and international
carriers. We work with our suppliers to provide our customers with a highly competitive product offering.
Our suppliers continue to look for ways to decrease their overall distribution costs, which could significantly reduce the
net revenue OTCs earn from travel and other travel-related products. We have encountered, and expect to continue to
encounter, pressure on supplier economics and positive and negative effects of a competitive market environment. As a result,
the revenue we and other OTCs earn in the form of incentive payments from global distribution system providers or in the form
of mark-ups and commissions from our suppliers is likely to be impacted over the long term as supplier contracts are extended,
renegotiated or as we add new suppliers.
Global Distribution Systems
Global distribution systems (“GDS”) 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 (both units of Travelport) 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 processed through a GDS.
These GDS service agreements may contain minimum segment volume commitments and require 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 processed by these providers. For the year ended December 31, 2013, we recognized $98.7 million of
incentive revenue from GDS providers, which accounted for more than 10% of our net revenue. In February 2014, Orbitz
announced that it had entered into new multi-year GDS service agreements with Amadeus, Sabre Inc. and Travelport for the
provision of technology and travel management solutions. The ability to use multiple GDSs across our business will provide us
greater operational flexibility to take advantage of the strengths of each of the providers starting in 2015 as certain exclusivity
provisions with Travelport lapse.
Merchant and Retail Models
We generate revenue primarily from the booking of travel products and services on our websites. We provide customers
the ability to book travel products and services on both a stand-alone basis and as part of a vacation package, primarily through
our merchant and retail business models.