Orbitz Hotels: Turning Apples into Vinegar?
“On Orbitz, Mac Users Steered to Pricier Hotels,” proclaimed the bold Wall Street Journal headline, which ignited a firestorm of negative publicity. Turns out Apple users “spend as much as 30% more a night on hotels” than PC users. They are 40% more likely than PC users to book 4- or 5-star hotels.
Based on this research, Orbitz started featuring more expensive hotels in its recommendations to Mac-based customers.
Apparently, many people read the Wall Street Journal as if Orbitz was charging Apple customers more for the same hotels, which the company quickly denied. There were price differences but these may have been due to different room categories being available when hotels were compared.
Has Orbitz made a smart move?
So, has Orbitz acted smartly in recommending pricier hotels to people like me who prefer Macs?
“Smart” says highly respected travel industry analyst Henry Harteveldt, cofounder of Atmosphere Research Group and chair of the Association of Travel Marketing Executives.
I see Henry’s point. After all, adult Mac users are significantly wealthier on average than PC users. Knowing that a majority of Apple customers choose more deluxe hotels, Orbitz gives them the hotel choices they need, while saving them time sorting through irrelevant ones. With more and more customers using mobiles, transactions must move quickly.
On the other hand, I say not so fast. That criterion, customers who use Apple, includes far too many people who must not behave as the majority. As Orbitz found, there’s a serious public relations danger involved in this type of large group sorting.
Please understand that I want sellers on the web to make my Internet experience more relevant. I want them to
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Determine my browser to make sure pages load more quickly,
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Remember my past purchase history, in order to serve up relevant recommendations,
- Track what I am viewing during my current session online, again in order to serve me better.
In other words, I want Internet displays based on my behavior and that of people truly like me.
Will Apple customers overspend?
I like using Orbitz, whose site performs in a wonderfully user friendly way. I even had a very minor and now inactive business relationship with the company.
What this Apple customer does not like is to be included within a group so varied that my purchase behavior may not be typical of the majority, especially if this may lead to spending more than I would have.
Make no mistake, featuring more expensive hotel recommendations on its pages in my opinion will cause some Apple customers to spend more on Orbitz if they are not careful, even when they would have preferred not to.
What if a supermarket featured all of its name brand, more expensive products near its front door and its generic, less expensive items at the other end of the store? Not surprisingly, many people would make their selections before reaching the less expensive part of the store, even if they wanted more value. Moreover, others might feel manipulated and decide to shop elsewhere.
Of course, if the market had let in only people who prefered name brands through that door, there would be no problem.
Has Orbitz damaged its brand?
When the Wall Street Journal article came out, Orbitz responded quickly and decisively that it does not charge Apple customers more for the same hotels.
I happened to be at an annual meeting of the Association of Travel Marketing Executives, when company CEO Barney Harford forcefully drove home this point. As Tnooz.com said, Barney had gone “on the warpath against the Wall Street Journal.”
Nevertheless, a first impression often becomes the most lasting impression. I wonder how many people a year from now will be telling their Apple friends not to use Orbitz because “it charges more.”
This situation becomes even more serious because some people already believe that third party sellers like Orbitz are more expensive than buying directly from hotels, even though in my experience this often proves to be spectacularly not true.
It’s hard to predict the lasting impact of this controversy. Unlike a Wal-Mart, Orbitz does not have strong enemies who will use every perceived misstep to their advantage. Its Apple customers may understand its good intentions.
Thank you very much, Henry.
In addition to what you mentioned, Orbitz maintains the ability for users of its site easily to sort hotels by star rating and lowest price, in order to find the value they want on any visit. Apple users of Orbitz are not confined to the initial displays, while they wait for Orbitz to learn more about them.
I too find the practice of online travel agencies (OTAs) wanting us to prepay many stays discouraging. In fact, I will not book this way unless these sites offer significant price reductions.
I do like that Hotels.com, as an example, does not charge any additional fees beyond what the hotel may charge, except for its Priceline-like nonrefundable very deeply discounted specials. In the majority of cases where most, if not all, of the prepaid amount is refundable, at least in my experience, Hotels.com refunds to the credit card immediately, which is appreciated. This provides flexibility at least in terms of one’s credit limit!
Still, I totally agree with you that OTAs should display both pre-paid and regular rates. More too should display AAA, senior, and other special rates available on hotel sites.
Don, great piece and relevant discussion.
One perspective to add—why is Orbitz doing this? Why does any e-commerce company try to target the products it first shows on the screen to the particular user whenever possible?
They do it to improve the funnel and increase the transaction rate. NOT, generally speaking, to increase revenue per transaction.
Yes, putting nicer hotels on the default page will over time cause more people to choose those hotels by getting to see them first. BUT, Orbitz did this targeting in response to higher revenue, not to stimulate it.
Their primary goal is to increase transactions. And the best way to do that is to make the user experience better, by making for quick navigation and relevant information for the user.
The distinction here is important, because it demonstrates that Orbitz and the user’s incentive are aligned. Orbitz wants the user to buy, and to do that, they are trying to create the best possible experience—including showing the hotels they think present the best first view to the user using whatever limited data they have about that user.
It doesn’t matter that some Mac users want cheap hotels, because statistically, they want nicer ones—so statistically, Orbitz is giving a better user experience to its Mac users (en masse) when it shows them what they want, hopefully leading to more transactions.
To summarize: There’s no hidden agenda or unfriendly activity here—It’s all in the name of user experience. That should please everyone.
My take on Orbitz’s motivation is shown by the last sentence of the post, “Its Apple customers may understand its good intentions.” I do not believe there was any “hidden agenda or unfriendly activity” going on.
On the other hand, I strongly believe from a public relations standpoint Orbitz made a mistake. What you have explained in your comment is very difficult to explain to a suspicious public that has already formed an opinion based on the original media coverage. Moreover, in case you don’t know, the Apple community is a very vocal community. These controversies tend to fester.
I also wonder if Orbitz really needs to make use of Apple data in this way. After all, its big competitors seem to be getting along without doing so.
Happily for it, Orbitz has handled its response so much better than some companies in these situations.
Thank you very much for your comments. Much appreciated.
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Don, you’ve written a very thoughtful assessment.
Do bear in mind that Orbitz doesn’t suppress any available hotels to its users. It aggregates data to show what it believes arre the most relevant options on first use. Over time, for repeat site users, based on the user’s behavior, Orbitz—like many other travel and non-travel eCommerce sites—will further refine hotel displays to what it believes are options that the user will find interesting.
Is this perfect? No. As you note, someone who prefers three-star hotels could be put off if on their first visits all they see are hotels that they feel are too expansive, and if they don’t find it easy enough to find hotels in their preferred price range. Also, even a habitual four- or five-star booker may find it bothersome if they have to slug through a search to find a less expensive hotel if that’s what they want.
What has been lost in this discussion is, frankly, a business practice that I find more problematic with all OTAs: The OTAs’ practice of showing only pre-paid rates for most hotels. I understand that these rates are generally at attractive price points, that the OTAs earn higher commissions from these rates, and that we are discussing business, not charity. Still, not showing post-paid rates, which admittedly may be more expensive but which also provide more flexibility to the user, undermines the true value of the OTA to the traveler. This, along with the biases the OTAs all apply in how they present available hotels within each star grade, is the equivalent of a supermarket displaying its store-brand products, which generate a higher margin for the store, towards the front of each aisle and at eye-level.