Travelocity's surrender to Expedia

I remember the first time I booked on Travelocity back in 2001 -- a nonrefundable airline ticket to Miami for spring break.  But being the beer bonging undergrad with impaired judgment at times, I accidentally entered the wrong travel dates.  I immediately called Travelocity's customer service hotline to rebook the correct dates.  They told me I had to make a new booking and refused to refund the erroneous one.  Man I hated that (ugly) gnome from that point forward.

Time to put this gnome out of its misery

Reflecting on this experience, I half grinned when I read about the strategic marketing partnership between Expedia and Travelocity announced last week and expected to begin begin next year.  It appears to me this is more or less Travelocity's inevitable surrender.  Its supply and customer operations will soon be handed over to Expedia, and the Travelocity brand will become little more than a gnome that thinks it can pull from its sleeve a marketing plan that will trump the online and offline marketing power of Priceline, Expedia, and TripAdvisor.

But will Travelocity even get a reasonable chance to flex its marketing muscle  when all its content and pricing will be powered by Expedia?  A Travelocity spokesman Joel Frey says they will continue to offer their own travel deals and pricing that will be different from Expedia.  I'm not convinced.  As if Expedia would even entertain the idea of letting its new ex-competitor affiliate undercut its own pricing, especially under the performance share model they've entered together.

The winner in this partnership is Expedia, who will soon absorb the North American traffic and booking orders of its previous arch nemesis.  According to Phocuswright, the market share of these two brands combined is over 60% based on its estimates of 2012 gross bookings.  Commanding this much market share will bolster Expedia's relevance and negotiation power with suppliers, and will likely lead to conversion increases as it sources better rates and inventory for consumers.  All of this couldn't have come at a better time with Booking.com biting at Expedia's ankles and OTA traffic increasingly diverted through meta search sites.  With intensifying competition and diminishing margins in the OTA industry, along with increased substitution from vacation rental sites, I suspect other companies will surrender themselves