Case Study - The Priceline Group and Expedia Inc.Since the late 1990s, travel distribution has seen a considerable shift from offline toonline channels. Many entrepreneurs who were quick to recognise the potential ofnew technologies have since become major travel intermediaries.Priceline.com was originally set up in 1997 as a travel auction site where consumersoffered a price and traders chose whether or not to accept it. In 1999 the companywas offered for public sale and valued at US$12.9 billion. Since 2004, The PricelineGroup has acquired several online travel retail sites: Booking.com (2005),agoda.com (2007), TravelJigsaw (now rentalcars.com; 2010), KAYAK (2013),OpenTable (2014), Rocketmiles (2015). In addition it acquired reservation-management technology companies that provide revenue and marketing solutions tohotels or restaurants that sell via Booking.com or OpenTable: PriceMatch and ASDigital (2015). The Priceline Group operates six brands, employs 18,500 staff andoperates in 224 countries. In 2016 it handled US$68.1 billion in gross bookings (ThePriceline Grou,p 2017).Figure: Channels of distribution in the tourism systemSUPPLERS CAPACITYTransportoperatorsAccommodationoperatorsrooms/propertiesAftractionNon-residentialCruiseoperatorsSicketsvenues spacecompaniescobinsseatsVa solesoffice orwebsiteOenWHOLESALERvio GOSsystemTOUR &MICE OPERATORACENCYVia soles office or websiteCUSTOMERBoth companies earn revenue via three business models:• Agency model: Suppliers determine the selling price for their availableinventory and display it on the OTA's website(s). The customer makes abooking and details of the booking are made available to the supplier. Onarrival the customer pays the supplier direct, and the supplier then pays theOTA the agreed rate of commission on the booking. Commission rates aretypically between 10-30 per cent (Xotels, n.d.).• Merchant model: Suppliers negotiate a net rate with the OTA, who then addstheir own mark up and determines the selling price. Capacity may bedynamically packaged with other travel components (e.g. flight, hotel or carrental). The customer pays the OTA at the time of booking, and the OTA paysthe supplier at a time agreed in the contract.• Advertising model: Travel and non-travel advertisers display content on theOTA's websites to gain access to the OTA's viewers, and then pay the OTAfor click throughs. The OTA's metasearch sites, KAYAK (Priceline) andTrivago (Expedia), earn referral fees from other travel companies when acustomer clicks through from the OTA site to the advertiser's website.2. Using the figure above, draw channel of distribution diagrams for Expedia ancPriceline. What do you notice about the structure of each company?

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The structure of this firm is essentially based on the distribution channels which are wholesalers,…

2. Using the figure above, draw channel of distribution diagrams for Expedia anc Priceline. What do you notice about the structure of each company?