Duff on Hospitality Law

Other than the news that Marriott and Expedia completed negotiations over their new contract (congratulations to Marriott for getting this behind you), this past week was relatively quiet on the distribution front. Enjoy.

Traveloka Challenges OTA Acronym
("Southeast Asia’s Online Travel Agency Traveloka Moves Into Food, Wellness Choices," News, APril 10, 2019)
Indonesia-based Traveloka is challenging what it means to be an online travel agent. The OTA recently added tours and activities to its traditional travel offerings and has begun targeting users in its domestic markets through the addition of lifestyle products (e.g., food, beauty, movies). In Indonesia, where Traveloka’s “discovery” platform was first introduced, users can purchase discounted restaurant vouchers, read reviews of local restaurants, and book a wide range of lifestyle products and services offered by many of the country’s traditional retailers.  Content for the platform is sourced directly from suppliers and vendors or indirectly through other third-party channels. Traveloka plans to roll out its discovery platform to other Southeast Asian countries, including Australia. If attempts by Traveloka (and AirAsia) to diversity their user base through the addition of lifestyle products and services proves successful, how long will it be before the more traditional global distributors follow their lead?

Expedia Unable to Stop Withholding of Critical Airline Data
("U.S. judge rules against Expedia in United Airlines fare listings lawsuit," Reuter US News, April 5, 2019)
In the continuing saga of United Airline versus Expedia, a federal judge in NYC ruled last week that Expedia was not entitled to a court order prohibiting the airline for cutting off access to critical fare and schedule data following the September 30 contract termination. According to the court, while Expedia was able to demonstrate a “likelihood of success” on the merits of its breach of contract claim, it was not able to satisfy the requirements needed for an immediate injunction. More to come...

This past week was relatively quiet on the distribution front. Have a great week everyone.

Online Travel Agencies Drawn into Indonesian Antitrust Probe
MLex Insight on Mar 26, 2019
Indonesian online travel agencies have now been drawn into a widening probe into various allegations of anticompetitive behavior in the country’s aviation industry.

This week’s Update includes status reports on several ongoing distribution-related court cases involving both hoteliers and distributors.

Conspiracy Theorists Live Another Day
("Lawsuit on hotels' internet advertising tactics moves forward," Reuters Company News on Mar 21, 2019)
Federal District Judge Rebecca Pallmeyer refused last week to toss out claims against several major hotel brands over their alleged conspiracy not to compete online. If you recall, the case centers around plaintiff’s claim that the major hotel brands agreed not to bid on each other’s keyword search terms (which ultimately resulted in higher room rates). The court’s ruling at this very early stage in the case by no means suggests that the plaintiff’s claims have merit. Instead, the court’s decision means (in the words of the court) that the brands had an “opportunity” to compete unfairly. Those interested in a detailed discussion of the plaintiff’s claims and the court’s initial (somewhat skeptical) review of those claims should take a look at the attached court order.

U.S. Circuit Court Deals a Blow to Short-Term Platforms
("Airbnb Loses Major Fight Over California City's Rental Law," Bloomberg Quint - Stories, March 13, 2019)
In somewhat of a surprise ruling issued last week, the U.S. Ninth Circuit Court of Appeals refused to strike down a Santa Monica city ordinance holding short-term rental platforms (Airbnb and Homeaway) legally liable for vacation rentals violating the City’s short-term rental ordinance. In reaching its decision, the Court rejected arguments by the platforms that the ordinance violated both the US Communications Decency Act of 1996 (which shields online services from liability for the content posted by third-party users on their websites) and the platforms’ constitutionally protected rights of free speech. The Ninth Circuit Court’s decision is consistent with other lower court decisions in Los Angeles and San Francisco, but runs counter to a separate Los Angeles lower court decision. While a decision by the Ninth Circuit obviously provides stronger precedential value for courts considering similar local laws and regulations in the future, it remains to be seen whether cities seeking to curb the growth of short-term rentals will seek to leverage this decision to more aggressively pursue the platforms facilitating the bookings as opposed to the hosts themselves.

This week’s Update includes a heavy dose of TripAdvisor updates. Once the dust settles a bit on this past week’s big news – the announced acquisition of Hotel Tonight by Airbnb – we’ll update everyone on the acquisition and its anticipated effects. Is it a game changer? I don’t think so. Does the acquisition expedite the inevitable standardization of products and services across all the major online travel distribution platforms, definitely. In the meantime, enjoy this week’s Update everyone.

Sales Principles Introduced for Online Booking Sites in the UK
("Hotel Booking Sites Get Consumer-law Compliance Principles from CMA," MLex, March 1, 2019) (subscription required)
By September 1, 2019, hotel booking sites operating in the UK must implement mandatory “sales principles” released last week by the UK Competition and Markets Authority (CMA). The release of principles follows the CMA’s months-long investigation into the sales practices of certain online booking sites and the sites’ recent agreement to improve transparency on the sites to avoid further regulatory scrutiny. The principles, which apply not only to OTAs and search engines, but also to hoteliers’ own booking sites, cover sort order, reference prices (e.g., “discount” or strikethrough pricing), hidden charges and pressure selling. According to the CMA, sites that fail to implement the principles by the September 1, 2019 date may be subject to further enforcement action.

This week’s Update includes a report on the EU Commission’s widespread examination of online platforms’ pricing practices and an update on the much-publicized standoff between United and Expedia. Enjoy.

Online Platforms Lack Price Transparency
("Most online shops lack price transparency, EU Commission," MLex, February 22, 2019)
Following the latest annual “sweep” of online platforms conducted by the EU Commission and members of the EU’s Consumer Protection Network (CPN), the EU Commission issued a press release last week previewing their findings (a full report will available shortly). According the press release, nearly 60% of the 560 websites reviewed by the Commission and CPN members demonstrated irregular compliance with EU rules, largely around pricing and discounting. Examples of the “irregularities” included (i) inauthentic or false discounting claims, (ii) inadequate disclosures of mandatory fees or other charges added to the final price and (iii) inadequate information about a consumer’s right to terminate a transaction. Although this latest sweep did not focus specifically on online travel platforms (online travel was the focus of a 2016 sweep), the findings and potential enforcement efforts resulting from this latest sweep are sure to affect a broad variety of e-commerce platforms, including travel.

We begin this week’s Update with some good news on the direct booking front. Enjoy.

Hilton’s Direct Booking Efforts Enjoying Success
("Hilton maintains focus on direct relationships as growth outstrips agency channel," Phocuswright, February 15, 2019)
As part of its fourth quarter (2018) earnings call last week, Hilton shared some good news on the results of its ongoing direct booking efforts. According to Hilton CEO, Chris Nassetta, bookings on Hilton’s direct web channels grew this past year at a rate three times the rate achieved by third party online booking channels. According to Nassetta, Hilton’s direct channels (both offline and online) now represent approximately 75% of Hilton’s total business (approximately one half coming through web channels). Naysayers might ask at what cost are these improvements being achieved, particularly given Hilton’s heavy focus on loyalty program growth, which has been core part to Hilton’s direct booking efforts. Whether these many investments by Hilton (and Hilton owners) to establish longer-term (loyal) relationships with guests will pay long term dividends (which are sustainable through the next inevitable economic downturn) remains to be seen.

Expedia Gets Tough
('Expedia sues United in fight over ticket-distribution costs," Seattle Times - Business, February 6, 2019) 
Although several sources reported late Friday that Expedia and United have agreed to temporarily suspend their court battle, Expedia’s willingness to pursue claims against United in the midst of contract negotiations is nonetheless interesting and, perhaps even, telling. Is the lawsuit a sign that Expedia is growing tired generally of travel suppliers’ threats to not renew (or even terminate) critical supplier agreements in efforts to obtain better contract terms? Or is the lawsuit simply a last ditch effort to ensure that a critical supplier continues to make good on its clear and unambiguous contractual commitment to provide the online booking platform critical travel products? Here’s what we know... According to the heavily redacted complaint (see attached) filed in the Federal District Court for the Southern District of New York, Expedia is seeking a declaration that United’s threatened withholding of flight data is a breach of the parties’ long-standing contract, an injunction prohibiting United from following through on its threatened action and damages in an amount to be proven at trial. The dispute centers around United’s plan to withhold flight information beginning in October, which Expedia alleges (and United apparently acknowledges) is the result of Expedia’s refusal last August to renegotiate key terms and conditions of the parties’ supplier agreement. According to Expedia, United has no contractual basis to withhold the information and by carrying through with the threat would harm thousands of Expedia customers. Whether the current stay remains in effect or the parties’ elect to re-engage in their New York jousting, we will continue to keep you updated.