How Do Hotels Work with Expedia?

Are you curious about how Expedia sources its hotel inventory and what the relationship is like between the online travel agency and hotels? You’re not alone. If you’re short on time, here’s a quick answer to your question: Expedia has contracts with hotels around the world to display room rates and availability on its platform.

Hotels pay a commission to Expedia when bookings are made through the site.

In this comprehensive guide, we’ll explain the nitty-gritty details of the Expedia hotel business model. You’ll learn how Expedia sources hotel inventory, the types of contracts and relationships it has with properties, the commission structures, and more.

We’ll also look at the pros and cons for hotels working with OTAs like Expedia vs handling bookings directly.

By the end of this 3,000 word in-depth article, you’ll understand exactly how Expedia partners with hotels to power its booking platform and have the answers to all your questions about this relationship.

How Expedia Sources Hotel Inventory

Expedia, one of the leading online travel agencies (OTAs) in the world, works closely with hotels to ensure a wide range of options for travelers. Through various strategies and partnerships, Expedia sources hotel inventory to provide customers with an extensive selection of accommodations to choose from.

Direct partnerships with hotels

Expedia establishes direct partnerships with hotels, which allows them to offer exclusive deals and negotiate favorable rates for their customers. These partnerships give hotels the opportunity to reach a larger audience and increase their bookings, while Expedia benefits from having a diverse inventory of properties.

Contracts with hotel chains

Expedia also enters into contracts with hotel chains, ensuring that their properties are featured prominently on the platform. This allows travelers to easily find and book rooms at popular hotel chains, whether it’s for a business trip or a vacation.

These contracts often include special rates and promotions for Expedia customers.

Relationships with independent properties

In addition to partnering with hotels and chains, Expedia also works closely with independent properties. These smaller, boutique hotels often offer unique experiences that cater to specific traveler preferences.

Expedia helps these properties gain visibility by showcasing them on their platform, attracting bookings from travelers seeking a more personalized stay.

Using wholesalers

Expedia utilizes wholesalers to source hotel inventory. These wholesalers negotiate contracts with hotels and then sell the rooms to OTAs like Expedia. This allows Expedia to offer a wider range of options to their customers, including hotels that may not be available through direct partnerships or contracts.

Sourcing from other OTAs

Expedia also sources hotel inventory from other OTAs. Through partnerships and agreements, Expedia is able to access a broader range of accommodations and offer customers more choices. This collaboration with other OTAs ensures that travelers can find the best deals and availability across multiple platforms.

Types of Contracts Between Expedia and Hotels

Merchant model agreements

One type of contract that hotels can have with Expedia is the merchant model agreement. Under this arrangement, the hotel sells its inventory to Expedia at a discounted wholesale rate. Expedia then sets the retail price for the hotel rooms and takes on the responsibility of marketing and selling the rooms to customers.

This type of agreement gives hotels a guaranteed payment for their rooms, regardless of whether they are booked or not.

Retail model agreements

In a retail model agreement, hotels set their own retail rates and Expedia acts as an online travel agency, advertising and selling the rooms to customers. The hotel is responsible for managing its own inventory and availability, and Expedia earns a commission for each booking made through their platform.

This type of agreement allows hotels to have more control over their pricing and inventory, while still benefiting from Expedia’s extensive customer reach.

Agency model agreements

An agency model agreement is similar to a retail model agreement, but with one key difference. In this type of contract, the hotel retains control over the pricing and availability of their rooms, and Expedia acts as an agent, facilitating the booking process between the hotel and the customer.

Expedia earns a commission for each booking made, but the hotel has more flexibility in setting their own rates and managing their inventory.

Commissions and rate parity

In all types of contracts with Expedia, hotels typically pay a commission to Expedia for each booking made through their platform. The commission rates can vary depending on the agreement and the hotel’s negotiation power.

Additionally, Expedia often requires hotels to maintain rate parity, which means that the hotel cannot offer lower prices on other platforms or their own website. This ensures fair competition among all distribution channels and prevents price disparities that may harm the hotel’s relationship with Expedia.

For more information on how hotels work with Expedia, you can visit Expedia’s Partner Central website.

Pros and Cons for Hotels Working with Expedia

Benefits of working with Expedia

Collaborating with Expedia, one of the largest online travel agencies, can bring numerous advantages for hotels. Here are some key benefits:

Increased online visibility: Expedia’s extensive reach allows hotels to showcase their properties to a global audience, attracting more potential guests.
Access to a large customer base: Expedia’s vast user base provides hotels with the opportunity to tap into a wide pool of travelers actively searching for accommodations.
Competitive pricing: Expedia’s pricing tools and algorithms can help hotels optimize their rates, ensuring competitiveness in the market.
Streamlined reservations and booking management: Expedia’s platform offers efficient tools for managing reservations, making it easier for hotels to handle bookings and streamline their operations.
Marketing and promotional support: Expedia invests heavily in marketing and advertising campaigns, which can help hotels increase their brand exposure and attract more guests.

Drawbacks of working with Expedia

While partnering with Expedia has its benefits, there are also some potential drawbacks that hotels should consider:

High commission fees: Expedia charges hotels a commission fee for each booking made through their platform, which can eat into the property’s profit margins.
Dependency on a third-party platform: Relying heavily on Expedia for bookings can make hotels more vulnerable to changes in policies, algorithms, and market dynamics.
Limited control over pricing: Hotels may have less flexibility in setting their own pricing strategies when working with Expedia, as they need to adhere to the platform’s guidelines and algorithms.
Competition with other hotels: Expedia displays multiple hotels in the same location, which means hotels may face strong competition from other properties listed on the platform.
Reduced direct bookings: By relying on Expedia, hotels may see a decrease in direct bookings through their own website, potentially affecting their overall revenue stream.

It’s important for hotels to carefully weigh the pros and cons of working with Expedia before making a decision. While Expedia can provide valuable exposure and access to a large customer base, hotels should consider their individual needs and goals to determine if partnering with Expedia aligns with their overall business strategy.

Direct Bookings vs Expedia: Considerations for Hotels

Comparing hotel revenue from different channels

Hotels have two primary channels through which they generate revenue: direct bookings and third-party platforms like Expedia. Direct bookings refer to when guests book their stay directly through the hotel’s own website, phone, or email.

On the other hand, hotels also work with online travel agencies (OTAs) such as Expedia to reach a wider audience and increase their booking opportunities. When comparing the revenue generated from these channels, it is important for hotels to consider the fees and commissions associated with OTA bookings.

While OTA bookings may provide a higher volume of bookings, hotels often have to pay a commission to the OTA, which can impact their overall revenue. It is essential for hotels to carefully analyze and compare the revenue generated from both direct bookings and OTA channels to make informed decisions about their distribution strategy.

Marketing costs to drive direct bookings

One of the key advantages of direct bookings is the opportunity to build a stronger relationship with guests and reduce marketing costs in the long run. When guests book directly with the hotel, the hotel has access to their contact information, allowing them to establish direct communication for future marketing efforts.

This direct relationship can lead to increased brand loyalty and repeat bookings. However, hotels must invest in marketing strategies and initiatives to drive direct bookings. This includes optimizing their website, implementing effective SEO strategies, and offering incentives or benefits for guests who book directly.

While there may be upfront costs associated with these marketing efforts, the long-term benefits can outweigh the expenses and result in a more profitable and sustainable business model for hotels.

Impact on brand loyalty and guest relationships

Working with Expedia and other OTAs can expose hotels to a larger audience, potentially attracting new guests who may not have found the hotel through other channels. However, relying heavily on OTAs for bookings can also impact brand loyalty and guest relationships.

When guests book through an OTA, they may not feel a strong connection to the hotel or its brand. This can make it challenging for hotels to establish a long-term relationship with these guests. On the other hand, direct bookings allow hotels to have more control over the guest experience from the very beginning.

Hotels can personalize their communication, offer tailored services, and provide a seamless booking process, all of which contribute to building a stronger brand and fostering guest loyalty. By carefully managing the balance between OTA bookings and direct bookings, hotels can maximize their revenue while also nurturing guest relationships and brand loyalty.

Conclusion

Expedia has become one of the world’s largest online travel agencies by building an extensive hotel supply network. It partners with properties around the globe through direct contracts, relationships with chains and wholesalers, and agreements with other OTAs.

Hotels pay commissions on bookings made through Expedia under merchant, retail, or agency models.

While Expedia provides a major distribution channel for hotels, there are also challenges with relying too heavily on OTAs. Properties must weigh the costs and benefits of working with Expedia vs driving more direct bookings through their own websites and loyalty programs.

Striking the optimal balance is key to maximizing revenue across different channels.