eBay, Webjet - HotelClub May Be Biggest Winner

By Martin Kelly, Editor, Travel Trends

TRAVEL and eBay – should be a match made in heaven but to this point the US selling giant has made few inroads into the category, either in Australia or overseas. There are a few reasons, the big one being that eBay is traditionally a customer to customer sales platform, and travel is not easily sold on that basis. Apart from the occasional holiday home, travel is business to consumer all the way down the line.

So the announcement that Webjet will this year start selling accommodation through eBay is an interesting one. The company will join a ragtag bunch using eBay to sell accommodation. Right now there are just 29 ‘accommodation’ listings on its Australian site, many from a stand alone operator in Bali. In contrast, type in ‘computers’ and 2645 results are returned.

Details of the deal are still being finalised. Today’s announcement merely flagged ‘the intention’ of each company to enter into a commercial arrangement to sell accommodation product. What form could that take? Let’s speculate on that in a moment. First, some clarification of Webjet’s accommodation strategy...

Virtually all Webjet’s accommodation product is sourced through HotelClub, a wholly-owned subsidiary of Orbitz. Webjet has very few direct relationships with accommodation providers. Webjet’s accommodation product is sold through lotsofhotels.com/au - even if you click on the hotel link on webjet.com.au that’s where you’ll go.

According to lotsofhotels.com/au ‘Flairview Travel’ (now known as HotelClub, though Webjet still refers to the superseded entity on its site) is also “the provider of our hotel reservations system”. In other words Webjet has a long-standing white label agreement with HotelClub, which pays Webjet a commission for each booking sourced through its sites.

Standard white label site commissions are generally around 5%, though Webjet is no doubt getting more thanks to its scale. In the past Webjet has said it likes this arrangement because it’s clean and keeps staffing costs down – no direct relationship with accommodation providers means no client service team.

But it also means lower commissions and no direct involvement in the industry, resulting in low brand awareness. Lotsofhotels.com/au is hardly a household name while Webjet.com.au remains fundamentally an airline booking engine. Unlike the US sites, it has never provided a sales breakdown. Worth noting here that latest US online travel retail results are being driven by accommodation.

So, eBay… how does it work? It’s reasonable to assume that Webjet will be using eBay’s fixed price listing option rather than the auction system, and has negotiated a deal that will send traffic to lotsofhotels.com/au, where transactions will take place (rather than on eBay via PayPal, which is normally the case). Webjet will also have negotiated special placement and fulfilment rates.

The standard eBay insertion fee for items between $100 and $399 is $2.50, while the company also takes a cut from the final sale price. On items between $75.01 and $1000 the final value fee is 5.25% of the initial $75 plus 2.75% of the remaining closing price.

How much will be left for Webjet at the end of the day after eBay takes its cut? No information available on that right now, though the company will provide profit guidance in August. Also no indication yet of when Webjet branded accommodation product will start appearing on eBay.

Whatever happens, two things are certain: (1) it will be a great test of eBay as a travel selling platform, and (2) HotelClub, by simply owning the relationship both with suppliers and Webjet, will benefit more than any other party for absolutely no extra effort.

Travel Trends: June 5, 2008

 

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