Orbitz, Expedia and Hotels.Com Sweeten Reward-Points Deals To Keep Travelers From Just Browsing; Credits Offered Up To 10% Of Booked Travel
Users of the travel site Orbitz could get credits, or Orbucks, worth 10% of what they spend on hotels and 7% on airfare, unusually high totals.
Now is the ideal time to load up on loyalty points—good for hotel stays, rental cars and airline tickets.
Savvy travelers can get two or even three times the points for one reservation, thanks to a brewing battle between travel websites Orbitz, which unveiled a major escalation of the customer payback this week, Expedia and Hotels.com. Even infrequent travelers can collect booking-site points on top of airline miles and credit-card paybacks, and sometimes double-dip on hotel points, too.
Why the big kickbacks for consumers? Many travelers use online travel agencies to compare prices, but when it comes time to buy, they go directly to the airline or hotel they want. Online travel agencies used to charge booking fees, giving consumers an incentive to buy elsewhere. But they dropped most of their fees several years ago. The bet now is that fat rewards will turn browsers into buyers.
Hence, the deluge of points: Book a trip on the Orbitz website, and if you are a member of Orbitz Rewards, you'll get back 3% of every dollar spent at a hotel and 1% for airfare. Book it using an OrbitzVisacredit card just launched on Tuesday and you get 8% back on hotels, 6% on airfare and 6% on packages, plus 2% of anything else you buy with the credit card. And if you book using a mobile device, you can get an extra 2% back on hotels and 1% on airfare.The online sellers face all kinds of competition from referral sites like Kayak.com that search multiple sites and then direct you to the deal you pick, and from startups that offer unpublished discounts and nontraditional stay options like apartments, spare rooms and even living-room couch rentals.
The rewards are paid in Orbucks, which can be redeemed instantly for hotels booked on Orbitz. This means you could get as much as 10 Orbucks if the $100 was spent on hotels and seven if it was spent on airfare. One Orbuck can be redeemed for $1 off a hotel room.
A total of 10% credited back on hotel spending and 7% on airfare is unprecedented in the low-fare, tight-margin world of travel bookings, especially when it can come on top of regular airline miles you earn and in many cases hotel program points as well. That's far richer than most airline awards, where you typically get one mile for every mile flown and then redeem the miles for awards, with the average traveler getting about 1.5 cents for every mile earned. And you don't have to give up one for the other.
Hotels.com offers a de facto 10% back on hotel bookings by offering a coupon for a night's stay after every 10 nights bought through the agency. The coupon is worth the average price paid for the 10 nights (excluding taxes and fees).
A Visa credit card from the travel site Orbitz that launched this week allows users to build up reward points more quickly. Orbitz
Most vendors don't offer generous loyalty points on airfare because airlines don't pay them much in the way of commissions. Expedia Rewards offers two points for every dollar spent on a hotel, but only one point for every $5 spent on airfare.
"It is aggressive," said Orbitz.com President Chris Orton. "We want to make sure this is a really serious component of our business."
The American Consumer Satisfaction Index, published this week by the University of Michigan, showed online travel agencies had the highest satisfaction scores among travel industries. (Airlines had among the lowest scores of any industry.) But consumers still said they preferred to book directly with airlines and hotels.
"This is a way to lock the consumer into booking with the OTA," or online travel agency, said Henry Harteveldt, a travel analyst and co-founder of Atmosphere Research Group. "OTAs are certainly very serious about remaining strong competitors."
Orbitz says customers in its loyalty program typically book more transactions than customers not in the program and are 20% more likely to buy four- and five-star hotels.
Despite the rich rewards, many consumers just focus on getting airline miles, and sometimes hotel points, when they travel. Online travel agencies think by offering richer rewards they can get more consumers interested in double-dipping and even triple-dipping points.
"It's becoming increasingly popular, but I don't think everyone knows it exists," said Sarah Gavin, Expedia's senior director of marketing.
Online travel sellers are weighting their rewards to drive more hotel bookings, which are far more lucrative than airline bookings. Some hotels offer rooms at deep discounts and let online travel agencies price them higher and pocket the difference. Some pay commissions of 15% to 20% for room bookings, analysts say. Expedia says 71% of its 2013 revenue came from hotel bookings.
Many hotels won't pay points in their own loyalty programs when you book through an online travel agency, depending on the contract between the hotel and the agency. Consumers often don't know if they can double-dip on hotel points until they check in—it can vary even by individual property. But travelers routinely report that they get hotel points anyway from hotel companies when they give the desk clerk their loyalty program number.
Consumers are often loyal to a particular airline for frequent-flier miles, yet agnostic about hotel brands, shopping by price, location, ratings and reviews. The loyalty programs of the booking sites give hotel benefits regardless of brand and let you earn points at independent boutique properties.
To make its program more appealing last fall, Expedia doubled the rewards it pays on packages to two points per dollar spent from one. It also started paying points for booking other tourist activities through the site, such as tickets to Disney World, and began offering 500-point bonuses for booking with mobile devices.
Consumers who book with mobile devices tend to book closer to when they travel and are more certain to buy than just shop, so sites like Expedia are eager to drive customers to mobile devices. Once consumers get a booking site's app, they are more likely to stay loyal to that site. Expedia is so eager, it is temporarily offering triple points on top of the 500-point bonus for mobile bookings. Expedia also reduced the minimum number of points needed to redeem a discount certificate to 3,500 from 7,000. For 3,500 points, you get a $25 coupon.
Hotels.com says it has 10 million people registered for its Welcome Rewards program. Many customers use the credit they earn after 10 stays to buy a more expensive room and pay the price difference, the company said.
Milton Lai, senior director of global loyalty, says the program has paid out about 2 million free nights since it began in 2008. "Giving 10% back is not cheap at all," Mr. Lai said. "Based on research, we were banking on getting enough repeat business back to cover the cost, and we've been able to do that."