Expedia to run Google Sponsored Links

Google and Expedia have entered into a partnership where the online travel agency will display Google’s Sponsored Links on some of its international domains (UK and Italy according to Travolution).

This is a surprising move for a big OLTA which usually keeps the website traffic within its own pages (booking, fulfillment, etc.). But this is not Expedia’s first action in this area. Coming back last year, in Nov2007, Expedia has signed a deal with InterContinental Hotels Group and introduced a media-based pricing model which combined transaction pricing with clicks on specific IHG properties within expedia.com.

The real fact with OLTAs is that a significant slice of the users are using the OLTA website to search for the services and then choose to book directly with the supplier. This was one of the reasons for the Expedia - IHG agreement. According to Paul Brown, president, Expedia North America and Expedia Partner Services Group, “Expedia brings partners two sources of value in terms of transactions and exposure like a media company does. We display those hotels billions of times a year but that does not always turns into transactions on our sites.” (via Travelmole).

According to a Comcore study, the supplier websites account for 72 percent of online hotel spend as of first quarter 2008, a 3-percentage increase from the previous year. Hotel market share through online travel agency sites (e.g. Expedia and Orbitz) is now 28 percent, 3-percentage points down from a year ago.

The media model in online travel has been first introduced by meta-search companies which redirect the audience to the direct travel suppliers. Their main revenues are generated by the referrals sent to the suppliers and the use of sponsored links.

Interesting to see if other big OLTAs will follow Expedia’s step in the near future.