Duff on Hospitality Law

Booking Holdings’ recent earnings release garnered much of the industry’s attention this past week for a variety of reasons, including legal. It will be interesting to watch how important changes to the legal landscape affect the company’s primary booking platform and its many supplier partners.

• • Trip.com Enjoys Strong Fourth Quarter and Year. Trip.com reported stellar fourth quarter and full year (2023) results this past week.  Highlights include (i) full year net revenue of $6 billion (122% growth YOY), (ii) full year accommodation booking revenue of $2.4 billion (133% growth YOY) and (iii) total full year sales and marketing expenses of $1.3 billion.  By segment, annual revenues broke down as follows:  39% accommodations, 41% transportation, 7% packages and 5% corporate travel.
  • Legal Updates Featured Prominently in Recent Booking Holdings’ Earning Release. This past week’s fourth quarter and full year earnings release from Booking Holdings featured two important legal updates.  First, Booking announced that in the fourth quarter the Spanish National Markets and Competition Commission had levied an “unprecedented” $530 million dollar fine against Booking.com in a draft opinion.  The fine stems from Booking.com’s infringement of Spanish competition law.  According to Booking.com’s CFO, David Goulden, the Company plans to appeal the decision if it becomes final (which could take years to resolve) but in the near term, the Company will have to make changes to some business practices in Spain.  Second, and perhaps more significantly, Booking reiterated its plans to notify EU regulators early this year of its “gatekeeper” status under the EU’s Digital Markets Act (DMA) (which our readers know effectively means the end of existing contractual parity provisions in the EU).  These two important legal updates are in addition to a ruling by a Netherlands’ appeals court finding that Booking.com is indeed a travel agency (and no longer a technology company now that it collects and processes payment) and that as a result its employees must be enrolled in an industry-wide pension fund. 
  • Still Think That AI Will Solve Everything? Air Canada Might Think Otherwise. A recent small claims court ruling provides an important reminder (and salient advice) to anyone thinking about using an AI powered chatbot.  The case stems from allegedly incorrect advice given by Air Canada’s website’s chatbot over the airline’s bereavement policy.  In response to a traveler’s claims that it had received incorrect advice from the chatbot, the airline sought to defend the claims by arguing that it could not be held liable for the chatbot’s incorrect advice (somehow the chatbot was a separate legal entity responsible for its own advice).  What?  The judge disagreed with the airline’s position and found the airline responsible for not taking reasonable care to ensure that the chatbot’s advice was correct.

TripAdvisor’s rumored sale garnered most of this past week’s headlines, though reaction to Expedia’s recent earnings release and in particular, Peter Kern’s announced departure, came in a close second. Salacious headlines out of Expedia’s HQ’s bathrooms featured prominently at the end of the week, but we won’t be “viewing” those stories; this is a family publication after all.

• • News of a Potential Sales Overshadows TripAdvisor’s Recent Earnings Release. It was a busy week for TripAdvisor.  Last Monday, the company announced it had formed a special committee and retained a strategic advisor to evaluate proposals for a potential transaction.  Just two days later, TripAdvisor released a solid fourth quarter and full year earnings report highlighted by record annual revenues and strong growth in its experiences and activities platform, Viator.   Analysts speculate that the potential sale (together with a sale of TripAdvisor’s controlling shareholder, Liberty TripAdvisor Holdings) is likely to a private equity company (and not an established OTA or booking platform).  As for the earnings release, highlights include (i) total annual revenue of $1.78 billion (up 20% YOY and 10% greater than previous high point), (ii) total annual EBITDA of $334 million (up 13% YOY), (iii) Viator annual revenue of $737 million (up 40% YOY and now accounts for 40% (previously 33%) of overall company revenues) and (iv) total annual selling and marketing costs of $940 million (up 20% YOY).
  • Priceline’s Penny Is Getting Smarter. Following six month of intense on the job training, Priceline’s generative artificial intelligence chatbot, Penny, is getting an upgrade.  Leveraging the intelligence she (it?) has gathered from the millions of customers who have used the chatbot, Penny is now expanding beyond hotels to flight, car rentals and vacation packages and can be used for planning, booking and modifying trips.  New functionality will allow users to use Penny to save coupons, airline credits, etc. and to monitor and report changes in airline fares.
  • Travel Platforms Seek Changes to Pending FTC Junk Fees Regulation. Earlier this month, the Travel Technology Association (members include OTAs, GDSs, etc.) submitted comments in response to the FTC’s proposed junk fee regulation.  While supportive generally with the FTC’s effort, the Association advocated that intermediaries be absolved of liability when travel suppliers (mostly hotels) fail to provide accurate, complete and timely mandatory fee information so long as intermediaries make reasonable efforts to collect such information.  According to the Association’s comments, hoteliers don’t always provide the information necessary to ensure compliance with the proposed transparency requirements.

The big news last week of course was Peter Kern’s announcement that he is stepping down as Expedia Group CEO in May. Peter’s announcement came as part of an otherwise robust quarterly earnings release for Expedia. What Peter’s departure means for Expedia and its many partners remains to be seen.

• • Expedia’s Peter Kern Is Out and the Numbers Look Good Too. Peter Kern’s announced departure as Expedia Group CEO took front stage during last week’s quarterly earning call.  Peter’s announced replacement is Ariane Gorin.  Ariane has been with Expedia for over 10 years serving in many executive roles, most currently as President of Expedia for Business.  While the planned leadership change featured prominently during last week’s call, Peter and team also presented some strong (even record breaking) results . . .  For calendar year 2023, Expedia generated $104 billion in total gross bookings ($74 billion of which was in lodging bookings (growing 18% year of year)), $12.8 billion in revenue and $2.7 billion in EBITDA (at a margin of 21%).  Last year also marked the strongest year yet with Expedia’s B2B business, with top and bottom lines growing by 33%.  For the fourth quarter, total gross bookings were $21.7 billion (6% increase year over year), and revenue totaled $2.9 billion (a record breaking quarter).  For those of you wanting additional detail about the recent earnings release or call, we’ve attached a copy of the earnings transcript. 

• • Expedia Must Face Competition Claims of Former Swiss Booking Platform. A Washington federal court judge refused last week to dismiss the claims of former booking platform Amoma against Expedia.  According to Amoma, Expedia Group’s metasearch site, Trivago, made changes to its site that decreased Amoma’s presence on the site and increased its cost to display rooms.  The changes resulted in Amoma’s advertised lower rates being obscured from users of the meta search site.  According to federal judge, Barbara Rothstein, Amoma made plausible allegations that Expedia abused its market power to harm a competitor.

• • Another Week, Another Announced Settlement on Resort Fees. On Wednesday last week, Colorado Attorney General, Phil Weiser, announced that it had settled claims against Marriott, Weiser’s third such settlement with a national hotel chain (Omni and Choice).  Like other previously announced settlements, this latest settlement requires that total price (rate plus mandatory fees) be the most prominently displayed price in any advertisement or offer.  Online search results sortable by price must also display total price.  The settlement also requires that Marriott require third party managers operating Marriott hotels to comply with the settlement and for Marriott to take actions to enforce the settlement if such managers do not comply. 

• • Google Ends Two Hotel Ad Products. Beginning in October of this year, Google will be canceling its COVID era Commissions Per Stay and Commissions Per Conversion advertising products.  According to Google, the cancellations are due in part to Google’s planned phasing out of third-party cookies later this year. 

This week’s Update features a variety of stories, including updates on airlines’ continuing efforts to move away from traditional distribution systems (GDS) and a review of 2023’s booking trends. For those of you interested, I’ve also included the slides from my presentation at HEDNA in New Orleans last month.

• • American Seeks to Move All Bookings to the Internet.  During last week’s quarterly earnings call, American Airlines’ Chief Commercial Officer, Vasu Raja, made clear American’s plans for the future – “We sell our product through the internet.”  American appears to be making great progress toward its goal with 80% of fourth quarter bookings coming through the airlines’ website, app or via NDC.  More importantly, when compared to results from 2019, the airline is up in revenue (15%) and down in selling expenses (8%- 9%).  Travelers who book their American Airlines travel through the internet will also benefit with greater loyalty program mileage and better servicing. 

• • New “Junk Fee” Settlements Announced by Nebraska Attorney General.  Nebraska Attorney General, Mike Hilgers, announced a new settlement agreement regarding mandatory fees with Hilton Hotels, adding Hilton to the list of recent settlements with Marriott, Omni and Choice.  The newly announced settlement requires Hilton to “prominently” display total price (rate plus any mandatory hotel fees) on the first page of the Hilton website and when searching and sorting by price.  Hilton also agreed to pay $300,000 in attorneys’ fees and costs.

• • EU Court Publishes Grounds for Booking’s Appeal of EU Commission’s eTraveli Decision.  The EU court hearing Booking Holdings’ appeal of the EU Commission’s decision to block Booking’s planned purchase of eTraveli published this past week Booking’s asserted grounds for overturning the decision.  Among its many claims, Booking asserts that the Commissions’ concerns over the proposed transaction’s effects on competition within the online travel industry (most notably accommodations) contained significant and obvious errors, including (a) overstating the impact of the proposed transaction, (b) miscalculating Booking’s incremental market share growth resulting from the transaction and (c) mischaracterizing Booking’s commissions and room rates.  We will continue to update our readers as this much watched case proceeds. 

• • Series of Recent Reports Confirm Industry’s Rebound in 2023.  Three separate reports released last week by SiteMinder, MEWS and SHR Group provided interesting insight into the industry’s prior year performance.  Highlights from the reports include (a) Booking.com remains the most popular bookings channel in most international markets, with Expedia or Agoda (depending on the market) in second and direct bookings in third, (b) although direct bookings remained strong during the year, one study found that hotels’ share of bookings through direct channels (excluding group, wholesale or contract bookings) actually fell, (c) booking windows have increased (in large part due to growing international travel), (d) more North American hotels are monetizing their non-hotel room spaces (parking and meeting rooms) and (e) the return of international travel is largely the result of growing outbound Asian travel.