The online travel industry is extremely competitive, with players like Priceline, Travelocity, and Orbitz competing to offer the best deals in airline and hotel bookings. We’re seeing a sudden increase among travel agents in providing hotel bookings at the airlines’ websites under private-label partnerships. We recently wrote on Expedia’s partnership with AirAsia and South African Airways in this regard. Expedia has now rolled out a rewards program in an attempt to retain consumers and drive repeat visits by consumers. We value Expedia at a Trefis price estimate of $30.60, implying a premium of 10% to current market price.
Expedia Rewards Program is a spend-based program offering members reward points in direct proportion to the amount they spend on booking flights, hotel stays, car rentals and other services on Expedia websites. These reward points are in addition to those offered by the loyalty programs run by airlines, hotel chains and credit card companies, and can be redeemed for discounts on subsequent future bookings on Expedia.
While the reward points may translate into an additional 1% discount of air ticket bookings and additional 0.7% – 2% discount on hotel bookings, [1] we expect the loyalty program to gain limited traction among travelers and have negligible upside for Expedia’s stock.
Expedia’s Reward Program Will Have Little Impact
Under Expedia’s reward program, earning and redeeming reward points is limited to travel. Compare this with credit cards’ and airlines’ loyalty programs where users earn points on shopping, dining, paying bills along with travel, and can collect sufficient reward points quickly to redeem against something significant. While Expedia’s loyalty program could be attractive to frequent flyers, it is best suited for corporate clients and travel agents where the users can collect sufficient points to be used only for travel.
While this may be attractive, credit card companies like American Express offer more comprehensive travel services to corporate clients, inclusive of travel budget and expense management and reporting.
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