Hyatt - Expedia Relations to Not “Pass Go”

With summer travel underway, hotel chains are ramping up their efforts to force online travel agencies (OTAs) to draw a chance card. Garnering the most attention is Hyatt’s aggressive strategy to cut Expedia out of its corporate travel segment if an agreement is not made by the end of July. Hyatt's power play comes after a number of reportedly failed negotiations with the consumer-facing behemoth.

Of course, the focus on booking direct is not new. This follows the trend set by other chains such as Hilton’s 2016 Stop Clicking Around campaign, as well as Marriott’s 2015 #ItPaysToBookDirect.

“Stop Clicking Around” takes the focus off OTAs, and rewards consumers from booking directly through the site, as well as offering loyalty perks when booking from “approved travel agents”. These loyalty campaigns aim to take back market share from OTAs and shatter the public conception that the best price can be found on these third parties.

Hyatt is in a slightly different position when compared to Hilton and Marriott, both of whom have more assets available on booking sites. At a reported 673 properties available on Expedia’s site, Hyatt accounts for a much smaller slice of the pie than its peers.

However, Hyatt’s international recognition could very well set a precedent for future contract negotiations between chains and OTAs. While the details of the negotiation remain somewhat opaque at this time, Skift reported Hyatt’s intention to leave the door open to "other third-party distributors in line with our [sic] efforts to improve hotel profitability.”

This story is but one chronicle in the series of hotel-versus-OTA giant that has been playing out in the industry over the last few years.

While OTAs inarguably grant more visibility on a global scale to hotels, many major chains are voicing complaints at the sometimes stratospheric commission rates (which can range from 10-30%) that can be brutal on smaller businesses, and OTAs’ trend in employing misleading marketing tactics that drive loyalty away from the hotel.

The brunt of the complaints are focused at the Expedia and Priceline duopoly, lodged mostly in part by the American Hotel & Lodging Association (AHLA) who count Hilton, Marriott, and Hyatt hotels among their members.

...optimism for Hyatt’s direct booking approach, which has been given a corporate boost from funds internally reallocated from Expedia commissions...

The negative reaction to the high OTA commission rates became the catalyst for a wave of hotels revitalizing their loyalty programs. In the spring of 2016, Hyatt rolled out discounted member rates for guests looking to directly book with the hotel.

Since the revitalized loyalty program’s launch, Hyatt’s CEO Mark Hoplamazain reported to Skift earlier this year that 70% of the revenue from member-rate bookings were coming from new, or previously inactive loyalty members.

There is early optimism for Hyatt’s direct booking approach, which has been given a corporate boost from funds internally reallocated from Expedia commissions to a loyalty campaign marketing fund.

However, Expedia does not have a corporate history of being intimidated by public disputes, as noted by the IHG debacle from 2004-2007 and the Choice conflict in 2009. Both disputes resulted in the chains’ properties available on at least some of Expedia’s consumer base.

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With an estimated record-breaking 44.2 million Americans traveling for Independence Day, the AHLA has stepped up efforts to educate consumers with a “Search Smarter” campaign, which highlights the monopolizing nature of Expedia and Priceline by—you guessed it: playing off the Monopoly board game.

According to a representative from the AHLA, this campaign is a response to the spike in reported bad hotel bookings that accounted for a loss of $3.9 billion for hotels in 2016.

AHLA intends to continue shedding light on online booking scams by pushing legislation through the House and the Senate, as well as raise awareness with the FTC.

The end of July could either bring another paradigm shift in travel product distribution, or it could result in yet another agreement with Expedia that prolongs the love-hate relationship of hotel chains and the increasingly-dominant OTA.

One thing is for sure, with hotels making more frequent plays to dominate the market with combative campaigns, this duopoly can’t expect to get out of jail totally free.

Sources: Skift, Bloomberg, Lodging Magazine, Travel Pulse, US Travel Association, CNBC



Posted by Mallory Thomas