“The One Year Expedia Bump”
Expedia’s Collection Model Changes – Data Cruchers Be Aware!
i). Changes that the condo-hotel unit owner will see comparing year over year results.
ii). Intellectual Considerations – Year over year changes effecting STR Report data & analysis
Our metric model shows the ‘cause and effect’ analysis (exhibit C) of Expedia’s change
What if I told you that the ADR and Rev Par changes on Exhibit C (below) were ALL due to the change in Expedia’s Commission Collection Model?!
A new commission collection model is being put into play by Expedia in 2013 that will affect what unit owners in condo-hotels see on their Owner Statements and what hoteliers see on their monthly STR Reports.
The On-Line Travel agent (OTA), Booking.com introduced a different commission collection model upon entering the market a number of years ago, in which guests booking reservations through the Booking.com website are required to pay the hotel directly and in full at check in. In turn, the condo-hotel (or traditional hotel) would be required to pay the percentage fee commission owed to Booking.com, by cutting a check for the established percentage rate agreed upon and multiplied by the Gross Room Revenues received.
Since inception, Expedia.com (and most other OTA’s) collected gross room revenues directly from guests and, in turn, would remove their commission fee before paying the condo-hotel (or traditional hotel) for the guests stay.
Sales tax challenges experienced by OTA’s (because they have been collecting revenues directly from guests) are believed to be a significant factor in making this change to the commission collection model. In effect, the move no longer will require Expedia (or any other OTA who follows) to be looked to for sales taxes.
i). the Gross Room Revenue change in revenues reported to condo-hotel unit owners.
Exhibit A Old Model New Model
Gross Room Revenues Collected by OTA: $1,000 $ 0
Gross Room Revenues Collected by Hotel 0 $1,000
**Fess Removed by OTA: < 250> 0
Owner Statements in 2012 showe $ 750 –
Hotel pays Expedia & Booking.com < 250>
Amount collected by hotel for reservation $ 750 $ 750
**IF commission were equal from both OTA’s the aforementioned would be the result. Commission, however are not always equal.
THE ONLY CHANGE that will be seen is the appearance that Gross Room Revenues in the Condo-Hotel have increased. THERE SHOULD BE NO NET CHANGE TO THE OWNERS CHECK.
Condo-Hotel Owners Statement Before-2012 New-2013
Gross Room Revenues from Expedia $ 750 $ 1,000
Less: Travel Agent & OTA commissions < 50> < 300>
Less: Reservation Fees < 10> < 10>
Less: Credit Card Fees < 5> < 5>
Total Deductions from GRR < 65> < 315>
Net Gross Room Revenues 685 685
Percentage Representing Unit Owner Share 46% 46%
Amont due to owner before deductions 315 315
Linen Fee, etc. < 15> < 15>
CHECK TO OWNER $ 300 $ 300
ii). Intellectual Considerations – the one year Expedia bump!
The real change that takes place in looking at data in 2012 and 2013 (from the Expedia Commission Model Collection change) comes about when analyzing your Average Daily Rate and Rev Par results each month in reports like STR, where even small dollar jumps can be deemed to be significant. Further comparisons to your competitive set will also change year-over-year depending upon each hotels sales mix.
Condo-hotels (and traditional hotels) with excessive reliance on OTA channels (of which Expedia always is a significant part) to generate Gross Room Revenues will show a higher 2013 Average Daily Rate and REVPAR rate, even if sales have been the same as the prior year. The difference will be the 20% to 30% fee commission paid to Expedia.
As no one can ever know what each member of your competitive sets sales mix is, for one year you could see a “superficial” bump up of ADR and REVPAR.
Our intellectual review also shows that the “Expedia One Year Bump” will have an effect on components relating to Incentive Bonus Plans in many Hotel Management Agreements!