A recent Orbitz press release touted “Orbitz Launches Groundbreaking Hotel Search Experience with Industry-Leading Property Comparison Features.” In reality, the changes are incremental, mostly derivative and unfortunately not significantly innovative. With Orbitz indicating that growing its hotel business is a top priority, they need superior product functionality to climb back up to last year’s second place share of unique visitors from this year’s fourth place share. While the enhancements give Orbitz functionality similar to its competition, its price guarantees remain the most customer friendly in the industry.
The hotel merchant tax issue is creating havoc for online travel agencies. At the present time, more than 200 municipalities, counties and states have lawsuits pending in an attempt to claim additional tax revenues based on the markups applied by Online Travel Agencies (OTAs.) In some cases, the suits are groundless as the current hotel occupancy tax laws are based on the revenue received by the hotel. However, some cities are changing their tax laws to base the taxes on the retail price paid by traveler. Unfortunately, there is widespread confusion – this article attempts to provide clarity on the key issues and a recommendation for resolving the hotel merchant tax problem.
Online travel agencies such as Expedia, Travelocity, Orbitz and Priceline are being subjected to lawsuits from a large number of cities claiming that they are underpaying the hotel room tax on stand-alone hotel bookings. A $184 million consumer class action lawsuit was recently filed in Washington State against Expedia that now opens a new front for these online travel agents to defend.
Online travel companies Expedia, Travelocity, Orbitz and Priceline have grown substantially through acquisition of small entrepreneurial organizations that have created innovative online travel technologies. Critics say that the online travel industry reached a functionality plateau and the online travel companies have difficulty with organic innovation. The root cause may be due to the trade-offs involved when managing for quarterly profits and investing in R&D for longer term success.