Only time will tell if United will follow through on its
recent, bold pronouncement that it will stop doing business with the Expedia
Group of OTAs as of Oct. 1.
But should United bring the promised move to fruition, it
could signal a new resolve by the Chicago-based carrier to drive distribution
away from the price-sensitive OTA model and on to its own website and mobile
"The airlines that we speak to are very big on
investing in the digital transformation process," said Aditi Mehta, a
marketing manager for Pros, which develops pricing engines and revenue
management solutions for airlines. "Over the past couple of years, we've
seen United invest heavily in their website and mobile app."
On the carrier's April 17 earnings call, chief commercial
officer Andrew Nocella said United plans to move forward with distribution
partners better suited to its future.
"Expedia has historically been very good in selling our
lowest fares," Nocella said. "But, quite honestly, we think we can
sell our lowest fares just as well, and that's where we are. So we look forward
to having a direct relationship with our customers going forward."
The comments came as United's contract with Expedia is set
to expire on Sept. 30 and barely a week after a federal judge had ruled that
United can withhold inventory from Expedia Group for flights departing after
the expiration date.
Among the Expedia Group websites that would stop selling
United if the contract is not renewed are Expedia, Orbitz, Travelocity, Hotwire
and CheapTickets. Its travel management company, Egencia, would not be
Appearances aside, however, there's always the chance that
United is posturing for a better agreement. In 2016, the companies extended
their contract just two days before it was set to expire.
Maggie Rauch, senior director of research at Phocuswright,
cautioned, "There's a history of airlines and OTAs getting to the brink
and resolving it at the last minute."
She said United could be negotiating over the commission
rate it pays to Expedia or about the manner in which Expedia displays its
But Rauch also said that as airlines first unbundled fares,
then began rebundling them in the form of tiered-fare products, it made the
price comparison model of OTAs trickier to pull off.
"As those changes have become a more permanent part of
the way travel is bought and sold, it gives travelers a reason to look on an
airline site," she said.
Indeed, Phocuswright research shows that airline direct
channels have gained traction versus OTAs in recent years. In 2010, 68% of
online leisure and unmanaged business bookings were captured by airline websites
compared with 32% by OTAs. That split had increased to 79% versus 21% by last
A 2016 study prepared for IATA by Atmosphere Research Group's
Henry Harteveldt found that airlines expect a similar trend line going forward.
Overall, the survey found, airlines expected direct channels
to account for 45% of reservations by 2021, up from 33% in 2016, while they
expected OTAs' share of bookings to drop from 20% to 16%.
Airlines versus OTAs
If United removes its inventory from Expedia, it will be
following a path that is becoming increasingly common among airlines. JetBlue
and Delta have removed inventory from selected OTAs in recent years, though not
from any as large as the Expedia network. More substantially, Southwest doesn't
work with OTAs at all.
Kurt Ebenhoch, executive director of the Travel Fairness Now, said that the trend is harming consumers, who end up with fewer
options for comparing ticket prices.
"What this is really about is the millions of people
who go to Expedia's website to book travel," he said. "There are all
kinds of studies that show consumers want a one-stop shop."
Mehta, though, said airlines like United want more
opportunity to control the offer they make to customers, especially as
improving technology enables them to increasingly personalize those offers.
"I'm sure United has done the calculus, and they are
looking at where they are seeing the return from," she said. "They
are probably seeing a lot of return from their own channels."