Duff on Hospitality Law

This week’s Update features another heavy dose of earnings-related stories, including details from last week’s Booking Holdings release.  If you are interested, we’ve linked below a copy of the transcript from Booking.com’s earnings release call.  Enjoy. 

• • Highlights from Booking Holdings’ Latest Earnings Release.  While Booking posted strong financial results in its latest quarterly (and year-end) earnings release (quarterly and annual revenue, room nights and gross bookings were up considerably against 2021 numbers and showed solid increases over 2019), these were my takeaways from the recent release:
    • Payment Platform.  Booking.com processed 42% of its gross bookings in the fourth quarter on a merchant model basis through Booking.com’s payment platform.  This number is consistent with the third quarter numbers.  I expect to see this number climb considerably over the course of 2023 as more hoteliers consider moving to the platform.
    • U.S. Market.  Both Priceline and Booking.com continue to do well in the U.S. market (room night growth and gross bookings now exceed 2019 levels), with growth believed by Booking to be outpacing the market’s recovery overall and resulting in increased market share (look out Expedia).
    • Mobile Application.  45% of rooms nights were booked through Booking Holdings’ mobile applications (a 13% increase over 2019).  As we have reported in previous Updates, Booking.com’s app was the most downloaded OTA app globally in 2022 and reached the number one spot in the United States in 2022 for the first time (look out Expedia).
    • Merchandising (a/k/a discounting).  According to Fogel, offering “attractive” prices to travelers is critical to providing value to Booking’s customers.  These attractive prices are the result of obtaining competitive rates directly from Booking’s supplier partners and “building up” the ability to offer discounts and other incentives (i.e., merchandising).  Booking reports that it has been pleased with the results achieved from merchandising in 2022 (in fact, the cost of these merchandising efforts in 2022 were much higher than in 2019 and offset any take rate increases seen from increasing revenue from payments) and has plans to continue its use (“selectively”) going forward.  Question whether these merchandising opportunities are the result of Booking’s contracting efforts or leveraging ongoing changes in EU competition law.
    • Year Ahead.  If Booking’s January results are a harbinger of what is to come for Booking in 2023, it looks to be a good year.  In January, Booking booked 95 million room nights, a new monthly record by approximately 10 million.  The increase in bookings reflects a 60% year-on-year increase and a 26% increase over the same period in 2019. 

• • IHG Seeing Benefits of Technology Strategy.  Last week we featured a story that highlighted Marriott’s recent successes with its digital platform.  This week we include a similar story on IHG.  In its recent earnings release call, CEO Keith Barr highlighted IHG’s many digital efforts, which began back in 2015 when IHG partnered with Amadeus to develop an entirely new global reservation system.  According to Barr, the new GRS has been critical to IHG’s more recent efforts (and successes) with loyalty, IHG’s mobile app and IHG’s updated web presence.  In its most recent earning release, IHG reported that 58% of all digital bookings at IHG come through mobile devices, which makes it IHG’s fastest growing revenue channel.  IHG also reported that mobile app revenue for the year increased 30% over 2019 levels. 

Our weekly Online Travel Update for the week ending February 17, 2023, is below.  This week’s Update features a number of stories coming out of last week’s quarterly earnings releases by several of the largest online travel platforms.  We’ve also attached transcripts from the recent earnings calls for both TripAdvisor and Airbnb.  Enjoy.

• • Intermediaries Regain Ground in Latest Hotel Booking Trends Report.  SiteMinder has released its latest annual Hotel Booking Trends report detailing 2022 online booking trends.  Highlights from the latest report include:   
    • OTAs were ranked in the top two positions in 79% of SiteMinder’s Top Twelve Lists (versus 37% in 2021)
    • Booking.com was the most popular booking channel across SiteMinder’s Lists (Expedia Group websites were second)
    • Direct bookings were down against 2021 numbers in 42% of the markets surveyed (though on par with 2019 numbers)
    • GDS bookings were up in 47% of the markets surveyed as corporate travel began its rebound
    • Airbnb continued to gain strength and made 89% of the Lists (compared to 28% in 2019)

• • Airbnb’s Chesky Rejects Need for Traditional Loyalty Program and Seeks to Expand Traditional Hotel Inventory.  During last week’s earnings call, Airbnb Brian Chesky rejected the need for Airbnb to offer guests a traditional points-based program like its distribution competitors.  According to Chesky, “the best loyalty program is building a product people love so much that they want to come back.  We don’t have to pay them to come back.”  Although Chesky may not be interested in emulating his competitors’ loyalty program offerings, he is interested in adding more of their traditional product types, specifically hotels.  Adding more traditional hotel inventory, Chesky noted, would allow Airbnb to better position itself as a traditional booking platform.  Chesky’s apparent re-embrace of traditional hotels represents a thawing of Airbnb’s previous pandemic-induced “freeze” on traditional hotels.  Could we soon see corporate wide direct distribution agreements between hoteliers and Airbnb?   
  • Marriott Increasing Digital Investment in 2023.  Yes, hoteliers too can sometimes be featured in our weekly Update . . .  In its recent earnings call, Marriott shared that product innovation, particularly through Marriott’s Bonvoy mobile application and other digital products, remains a priority for Marriott entering 2023.  According to Marriott CFO, Leeny Oberg, the newly planned investments will “transform” users’ experience on Marriott’s mobile application – for both Bonvoy members and the Marriott employees who serve them.  Marriott’s investment in its digital channels appears to be producing positive results as Marriott mobile app usage grew by 32%, digital room nights grew by 27% and digital revenue grew by 41% (year over year) this past year. 

Our weekly Online Travel Update for the week ending February 10, 2023, is below.  This past week saw the beginning of quarterly earnings releases by the major platforms, with Expedia and its meta search platform, Trivago, being the first.  Expect more details about these 4^th quarter releases in future updates.  Enjoy.

• • Expedia’s Loyalty Program Posts Strong Gains.  While Expedia posted reasonably strong fourth quarter and full year (2022) financial results this past week (see attached earnings release transcript for more detail), it was the growth in Expedia’s loyalty program that garnered much of the attention.  During the fourth quarter, the number of Expedia customers who became loyalty program members grew by 60% over the same period in 2019.  With those increases, Expedia entered 2023 with more active loyalty program users than ever (more than 10% higher than the previous peak).  According to Expedia CEO, Peter Kern,  the number of Expedia loyalty program members and number of active Expedia app users (which also grew over the past quarter) are the two primary factors that Expedia uses when evaluating progress against its goal of maintaining long term its highest-value customers. 
  • Trivago Targets Direct Bookings.  In recent correspondence accompanying its fourth quarter and full year (2022) earnings release, Trivago highlighted its ongoing efforts to grow hotel direct bookings.  According to Trivago, direct bookable rates are now available on the meta search site for properties that receive 50% of click outs (and increase from 38% prior to its direct booking push).  Trivago hopes to get that number to over 80% by the end of the year.  Direct bookings are now possible in 8 of Trivago’s markets. 

Have a great week everyone.   

Our weekly Online Travel Update for the week ending February 3, 2023, is below.  This week’s Update features of number of stories detailing the Biden Administration’s growing efforts to address “unfair” fees, including hotel resort fees.  Enjoy.

• • Biden Calls for Legislation Limiting Unfair Fees.  Add ticket agency fees (thank you Taylor Swift) to the growing list of “unfair” fees being targeted by the Biden Administration.  In comments at last week’s meeting of the White House Competition Council, the President called on Congress to pass legislation (the Junk Fee Prevention Act) limiting fees in several industries, including an outright ban on “surprise resort and destination fees.”  The likelihood of any substantive legislation coming out of Congress – particularly given the strong business interests that will likely line up to oppose any such legislation and the general divisive (dysfunctional) nature of Congress – is very low.  While federal legislation may be a remote possibility, the same headwinds may not hinder similar efforts at the federal regulatory level (FTC) or individual state level.  This week’s news of possible federal legislation on the issue comes as several clients are hearing rumblings or actually receiving written notice of increased efforts to reign in resort fees at the state level. 
  • Google’s Overall Advertising Revenues May Be Down, But Not for Travel.  While overall Google’s parent, Alphabet, saw a fourth decline in overall advertising revenue, travel advertising revenue actually increased over the latest quarter.  
  • Rising Interest Rates Increase Value of Merchant Bookings.  With Expedia reported to have earned $20 million in interest income in the third quarter of last year, in part, on funds held as part of prepaid guest bookings, it is no wonder other platforms are getting into the payments business (yes, we recognize that there are many other benefits as well).  Airbnb earned $58 million in interest income. 
  • Event Platform, CVENT, Reportedly for Sale.  If a sale does occur, it won’t be the first time the platform is taken private.  This time, private equity heavy weight, Blackstone, is the rumored suitor.  Will a sale mean changes to the platform’s management (and impossible contracting practices)?  Likely not, as CVENT’s management stayed largely intact through CVENT’s many prior transitions. 

Have a great week everyone.