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Article Excerpt
The merchant model is all but dead, according to John Davis, chairman, CEO and president of Pegasus Solutions, which last month joined four hotel chains in selling to Priceline majority ownership of Travelweb.
Meeting this month with BTN editors Jay Campbell and Bruce Serlen, Davis discussed how changes in hotel distribution impact travel management.
BTN: With demand returning and the amount of excess inventory diminishing, can the merchant model continue as it has?
John Davis: It's already changed. Last October or November, the five largest hotel companies, including Marriott and Starwood, decided they were going to have price parity. They were saying that no matter where you go, you're going to get the same rate. You can go to Expedia or Orbitz or call the 800 number. In order to have price parity, they had to eliminate the ability to mark up. Otherwise, they would have no control over pricing. As a result, major chain bookings for the third-party sites became a commission product. It's back to where it was--we're back to the future.
Once the paste was out of the tube, the third-party sites had to take what they could get. The major chains went to them, saying, "We'll give you these low rates, but here's how much commission we'll pay you." The rate varies, depending...
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