How the internet is changing the way people buy and sell travel

1. Eyefortravel
Shift in distribution channels:
How internet is changing the way people buy
and sell travel
May 11, 2009 – Durban, South Africa
Diego J. Lofeudo
Director of Market Management
Expedia Travel
diegol@expedia.com

2. AGENDA
1. How the Internet is evolving as a distribution and marketing
channel for travel products
• Growth in online adoption
• Effects of the internet on consumers
• Effects of the internet on hotels and travel suppliers
• Effects of the internet on intermediaries
2. How to profit from online distribution (focus on OLTAs)
• Effects of the online shift to hotels and travel suppliers
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 1

3. Growth in Online Adoption
More and more customers are buying travel online
Source: www.internetworldstats.com
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 2

4. Growth in Online Adoption
More and more customers are buying travel online
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 3

5. Effects of the internet on consumers
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 4

6. Effects of the internet on hotels and travel suppliers
• World wide distribution and marketing
• Access to mountains of information
• Flexibility
• Control and real time decision making
• Revenue Management
• Consumer is now ‘Pro - sumer’
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 5

7. Effects of the internet on intermediaries
• Traditional travel agents: value added / mix model / less
transactional more experiential
• Wholesalers and traditional tour operators: direct to
consumers / large investments in technology and
marketing
• Online travel agencies: Battle to win hearts and minds of
consumers and suppliers
• Better functionality for consumers
• Improved tools for suppliers
• Alternative compensation models (transaccional & media)
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 6

8. AGENDA
1. How the Internet is evolving as a distribution and marketing
channel for travel products
• Growth in online adoption
• Effects of the internet on consumers
• Effects of the internet on hotels and travel suppliers
• Effects of the internet on intermediaries
2. How to profit from Online distribution (focus on OLTAs)
• Effects of the online shift to hotels and travel suppliers
• New Marketing channel for public and private sector
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 7

9. How to profit from online distribution
1. Expedia?
2. Basics
• Content management
• Inventory and rates management
• Provide excellent service
3. Advanced
• Merchandizing and Marketing
• Retail Management
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 8

10. Expedia Travel – From MSN to the World
Expedia holds a leadership position in nearly every market where we are present
No.1 OLTA, in 19 countries
No.1 hotel specialist, in 50 countries
Leading discount travel site reaching price-conscious travelers
Corporate travel agency operating in 9 countries
No.1 community player with more than 15M reviews and opinions
Leading online travel service provider in China
Operating more than 100 in-market concierge and activity desks
We build leading brands that are highly relevant to our partners
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 9

11. And they visit The World’s Largest Travel Channel
© 2007 Expedia. Confidential and proprietary. All rights reserved. Source: Nielsen NetRatings February. 2008 Expedia Partner Services Group | 10

12. Expedia – The Power of the Global Distribution
One Extranet, one contract and your hotel is seen and sold worldwide
No partner can offer you such valuable exposure at ZERO fix cost
does!
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 11

13. Expedia – The Power of the Global Distribution
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 12

14. Expedia General Figures
• $21bn sold in travel in the last 12 month #1 online travel company
• Around 75 million people visit our sites every month.
• 75% of the people buying their holidays online visit one of our sites
at least once before buying. Value and billboard effect.
• 14 million hotel searches are made every day in Expedia sites.
• 1.6 rooms are sold every second, an average of 140.000 rooms are
sold per day at Expedia (circa 2000 rooms sold when I finish my
20min presentation) 
If we put in line all the beds we sell every month, we
We fill 150 Boeing 747’s every day! could build a bridge between New York and London.
We land more than 130 paxs a day just in JNB Some 14 rooms per hour (24/7) sold just in ZA!
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 13

15. How to profit from online distribution
1. Expedia?
2. Basics
• Content management
• Provide excellent service
• Inventory and rates management
3. Advanced
• Merchandizing and Marketing
• Retail Management
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 14

16. Content management
95% of US leisure Bookers and 92% of Lookers
say descriptive content is important to them.
The Web Site Content That Matters To Travelers, Forester research
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 15

17. Provide excellent service
The Web Site Content That Matters To
Travelers
Forester Research
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 16

18. Inventory and Rates Management
Tour Ops case study – From Volume to Rev Mgmt
Tour Ops Expedia/Hotels.com
• Fixed net rates • Flexible net rates
• Fixed allocation • Increase & decrease
• Shrinking market Inventory
• Mass market • Growing market
• Rev Mgmt Market
14 May 2009 17

19. 1 day release
ONLINE
10 rooms allotment
$60 room 1 to room 4
$80 room 5 to room 10
1 day release BSC = $720 +
10 rooms allotment
High Season
$50 room 1 to room 4
1 day release $65 room 5 to room 10 21 days release
10 rooms allotment BSC = $590 + 10 rooms allotment
$40 room 1 to room 4
Mid Season $60 room 1 to room 10
$50 room 5 to room 10
BCS = $600 -
BSC = $460 + 14 days release
Low Season 10 rooms allotment
$50 room 1 to room 10
7 days release
BCS = $500 -
10 rooms allotment
$40 room 1 to room 10
BSC = $400 - Do you need us all (TO offline and Online)? YES
Should you talk to us all the same way? NO
14 May 2009 OFFLINE 18

20. Shortening the learning curve – Usual ‘mistakes’ while @
• No thinking on selling price. Same Net rate to everybody
without understanding the financials of the partner
www.hotelscomparison.com
• Internet is one market – no rates for GCC vs Scanda
• Partnering online without the benefits of the @
• No clue about your hotel content @
• No clue about how your hotel product is sold @
• No revenue management – sign and bye
• No promotional plan – all last minute ‘help help pls!’
• No participation on UGC sites www.tripadvisor.com
• Result??!!
• Hotel losses LOTS of money by underselling rooms
• Customers book a destination more @ friendly(Thailand)
14 May 2009 19

21. How to profit from online distribution
1. Basics
• Content management
• Provide excellent service
• Inventory and rates management
2. Advanced
• Merchandizing and Marketing
• Retail Management
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 20

22. Marketing
Media value of participating with Expedia
PLACEMENT IMPRESSIONS CLICKS
• Top Hotel • 7,743,507 – £154,870 •130,874 - £150,505
• Average •4,222,803 – £84,456 •62,713 – £72,120
• Low • 2,337,650 – £46,753 •42,786 - £49,203
Cost of Top 5 position head term on a major
Cost of a banner with Expedia is aprox £20 per 1,000 impressions search engine such as ‘london hotels’ estimated
at £1.15 per click
If your hotel doesn’t have the right content and
the right rate you are underutilizing this great
deal of exposure.
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 21

23. Merchandizing – from 1 to all Expedia.es
Expedia.com
Expedia.co.uk
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 22

24. Case study – South African Tourism
 Budget: $ 400.000 spend
 Campaign: October 2007 – May 2008
 Platforms: Expedia in the UK, US, Italy, France, Germany and the Netherlands
 Result: Additional $ 12.5 million USD turnover to the South African Tourism Industry
 - $2.9m Additional Lodging Turnover
 - $6.1m Additional Flight Turnover (4800+ Additional Pax / Arrivals)
 - $3.5m Additional Local Spend ($130 Daily Spend, Length of Stay: 5 Days)

$68.5 Million
Turnover in Period
$12.5+ Million Additional
$56 Million Turnover in Campaign
Period
$56 Million Turnover
brought to South Africa in
same Period Last Year
Same Period Campaign Period
Last Year
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 23

25. Summary
1. This shift online is impacting consumers, intermediaries, and travel suppliers.
Internet is changing the way people buy and sell travel (i.e. Cape Towm is sold as
a long weekend city break!!!)
2. Revenue Management is key to maximize profits. Moreover in times of economy
slowdown. Every single penny counts.
3. More of the same will take us nowhere. Moving mind set from signing contracts
to managing contracts.
4. Wear online hat when doing business with online Tour Operators. Wear offline
hat while doing business with offline tour operators.
5. Expedia is your best option to maximize revenue, reach worldwide audience,
learn about e-commerce and benefit from our vast online experience.
6. There is money involved for those doing the right thing. Lots!.
7. We are moving into all areas of Africa. Be the first not the last to join us and
benefit from this new way of doing business. Hotels / Lodges / Guest Houses pls
visit www.joinexpedia.com for more info.
© 2007 Expedia. Confidential and proprietary. All rights reserved. Expedia Partner Services Group | 24

26. Thank you!
diegol@expedia.com
www.joinexpedia.com