Duff on Hospitality Law

American Airlines’ decision to soften its approach on distribution with travel agents and advisors garnered most of the industry’s attention this week.  Otherwise, the holiday week for many was relatively quiet.  Enjoy.

• • Another Quarter and Another Staggering Amount Spent on Sales and Marketing.  According to their first quarter financials, the “Big Four” online travel agents (Expedia Group, Booking Holdings, Airbnb and Trip.com Group) spent a staggering $4.08 billion in sales and marketing in the first quarter of this year (a 10% increase over the same period last year).  How do these amounts compare to companies outside the online travel industry?  In the first quarter, the Big Four outspent their industry counterparts by a factor of 4 – when measured as a percentage of overall revenue (9.2% vs. 37%).     
  • A Few More Carrots Than Sticks:  American Airlines’ About Face.  Facing cuts in its financial forecasts, American Airlines announced this past week that it was moderating its historically aggressive NDC rollout.  According to American CEO, Robert Isom, the airline’s financial misses were due, in part, to its misguided sales and distribution strategy.  Going forward, American will seek to incentivize agencies’ and advisors’ use of its NDC platform as opposed to penalizing those who don’t.  As part of its newly announced change, American is reversing one of the most controversial aspects of its NDC campaign, the withholding of American Advantage loyalty benefits on bookings made through non preferred NDC advisors.   
  • Travel Technology Association Holds Its First Policy & Innovation Showcase.  Members of the Travel Technology Association held its first Policy & Innovation Showcase this past week for members of Congress and the media.  Companies presenting and/or hosting this event included Sabre, Airbnb, Tripadvisor, Expedia, Booking Holdings, Amadeus, Travelport and Chase Travel Group.  Issues currently on the Association’s agenda include the reform of the Communications Decency Act (Section 230), the American Privacy Rights Act and ancillary fee transparency.  According to comments by Association CEO Laura Chadwick, all travel companies are becoming technology companies. 

This week’s Update features a variety of stories, including interviews with two of the online travel industries major influencers, Ariane Goren of Expedia and Drew Pinto of Marriott.  I hope you enjoy. 

• • American Airlines’ War with Tour Operators Continues.  Responding to American Airlines’ newly (on May 13) enacted policies on cancellations and re-bookings, Tauck advised travel advisors this past week that it had stopped booking travel with American Airlines and other Oneworld members (including British Airways, Japan Airlines and Qantas).  The policies in question impose a $50 cancellation fee on cancellations beyond the 24-hour booking window and a $50 cancellation / re-booking (aka churn) fee on two or more churns.  
  • Southwest’s Distribution Evolution Continues – Flights Will Now Appear on Google Flights.  It was just last week that we featured a store detailing Southwest’s new partnership with Chase Travel, the first ever by Southwest to feature its flights on a third-party consumer facing booking platform.  Now, Southwest is moving to Google.  As of Wednesday last week, Southwest’s flights are now featured alongside other airlines on Google Flights.  Flights must still be booked directly with Southwest on the airline’s website.
  • Lotte Card Is the Latest Financial Institution to Launch a Travel Platform.  Joining the likes of Chase and Capital One, Korean card issuer, Lotte Card (9.35 million cardholders), has announced the launch of a new travel portal offering cardholders the opportunity to search and book accommodations, flights and car rentals.  The new platform will be powered by Hopper’s B2B division, Hopper Technology Solutions (HTS).
  • Hoteliers and Real Estate Information Firm Seek Dismissal of Anti-Trust Case.  In one of several algorithmic price-fixing cases targeting the hospitality industry, the defendants (six hoteliers and CoStar) moved last week to dismiss the claims, arguing that there was no evidence that the defendants had conspired to fix prices through the hoteliers’ use of CoStar’s (STR) long-used benchmarking tools.  As we noted in last week’s Update, a similar price-fixing case against Las Vegas casino / hotel operators was recently dismissed. 

Booking.com’s “gatekeeper” designation under the EU’s Digital Markets Act (DMA) and artificial intelligence’s increasing influence on online travel garnered much of the attention this past week.  Enjoy.

• • Chase Scores Major Win with Southwest Airlines.  Want to get away?  Chase Travel has a solution.  Chase Travel is the only online platform (not competing card companies or the major OTAs) to offer Southwest flights to online leisure bookers.  For years, Southwest subscribed to a direct channel only distribution strategy, but lately that strategy has been changing – albeit in small increments.  Does Southwest’s arrangement with Chase signal even greater future availability of Southwest flights on public online channels?  Only time will tell. 
  • Both Google and Expedia Announce New AI-Powered Trip Planning Tools.  At this past week’s annual Google developer conference, Google announced new and/or improved AI-powered trip planning tools for both Google Gemini  (the paid version of Google’s AI chatbot) and traditional Google search (through AI Overviews).  AI Overviews will be available to all Google search users this week, while the new Gemini tool will be available this summer.  Expedia also introduced AI-powered tools this past week at its annual Expedia Explore event.  New CEO, Ariane Gorin, speaking at her first Expedia Explore event, introduced Romie, Expedia’s new AI travel assistant that can help travelers with planning and booking travel.  What role will paid display advertising, key words and commissions play in these new tools?  Google hasn’t said.  When asked about the effect of commission levels on Romie, Expedia, CTO Rathi Murthy, said only that commissions don’t play a role – today.  Time for everyone to start thinking more broadly about search . . . and appropriate limitations.     
  • Booking.com Is a Gatekeeper.  Now what?  In today’s Update, we provide a number of perspectives on the EU Commission’s recent designation of Booking.com as a “gatekeeper” under the Digital Markets Act (DMA) for its online intermediation services.  With the EU Commission’s announcement, Booking.com now has 6 months to comply with the DMA’s applicable requirements.  In 6 months, Booking.com must submit a written compliance report detailing how it complies with the DMA requirements.   Other DMA obligations, including those associated with any merger or acquisition that Booking.com might wish to make, apply immediately.  In the months ahead, hoteliers should expect to hear from Booking.com as to how it intends to comply with the DMA’s requirements and how compliance will affect their existing distribution agreements.  Stay tuned. 

Our weekly Online Travel Update for the week is below. And for those mothers out there, we hope you had a great Mother’s Day! This week's highlights:

• • Las Vegas Hotels Earn Dismissal of Algorithmic Price-Fixing Case. One of the first of now several algorithmic pricing-fixing class action suits brought against members of the lodging industry was dismissed last week by a Nevada federal district court. Defendants in the case included Cendyn (relating to the co-defendants’ use of Cendyn’s revenue management tools GuestRev and GroupRev), Blackstone, Treasure Island, Caesars and Wynn. In dismissing the case, the federal court judge held that the claimants “have not plausibly alleged a tacit agreement between Defendants or a restraint on trade in part because Hotel Defendants are not required to and often do not accept the pricing recommendations generated by Cendyn’s products.” Click here for a complete copy of the court’s order dismissing the case.
    
    
  • Is Airbnb Considering a Subscription Model? In a recent Skift interview, Airbnb CEO, Brian Chesky, noted that he favored (and had been considering) a paid membership or subscription program versus traditional points-based loyalty programs. Loyalty and the possibility of an Airbnb loyalty program have been talked about for years – dating back to comments by Chesky in 2016. The key question for many is whether Airbnb and its still unique product offering would even benefit from offering such a program, which can be an expensive endeavor.
    
    
  • Federal Investigation of Airlines’ Loyalty Programs and Co-Branded Credit Cards Continues. A few weeks ago, we featured a story detailing an ongoing investigation by the US Department of Transportation and Consumer Financial Protection Bureau into airline loyalty programs and relatedly, their co-branded credit cards. A hearing on the issue was held this past Thursday and notably, none of the major airlines (nor their trade association) participated (though their loyalty programs were the subject of much of the discussion). Discounts carriers Sprint, Allegiant and Breeze participated in the hearing. Topics covered during Thursday’s hearing included the role airline loyalty programs may play in preventing competition in the market and the effect of airlines’ practice of devaluing miles.

This week’s Update again features a wide variety of stories, including an important update on the much beleaguered spokesman for metasearch site, Trivago.  Enjoy.

• • Google Again Delays Demise of Third-Party Cookies.  Good news for online marketers using third party cookies via Google Chrome.  Google has again delayed its planned elimination of third-party cookies – this time until early 2025.  Google’s recent announcement is the third such delay since announcing in 2020 that it would be eliminating third party cookies within two years.  Google attributes its latest delay to two primary factors – (1) advertisers, which have been up in arms over the planned elimination and its likely effects and (2) regulators, primarily the UK’s Competition and Markets Authority (CMA), which has expressed concern over the elimination and its potentially anti-competitive effects. 
  • Sustainable Travel Options Not As Important As Originally Thought?  For several weeks now, we’ve featured stories detailing online travel platforms’ sustainability efforts.  Now comes a report from Booking.com suggesting that sustainable travel options may not be that important to travelers.  In short, while the majority of travelers (84%) may say that having and making sustainable travel choices may be important to them, it isn’t a priority.  In fact, many of the survey’s respondents (28%) reported that they are weary of even hearing about climate change.  Approximately a third of the respondents reported that they thought that climate change damage had already occurred.  As for who should bear responsibility for doing something about climate change, almost half responded that governments (44%) or travel companies (43%) should be responsible (and not individual travelers).  The Booking.com survey results mirror many of the findings of other research in the area, including a survey conducted earlier this year by Phocuswire. 
  • Instant Online Group Bookings – Fact or Fiction?  For those of you who have been to one of my presentations on online distribution, you know that I typically end my presentation with a brief overview of what we see in the distribution world in the months or years ahead.  For several years now, online group bookings (and online group booking tools) have made our list.  But now, years after the somewhat anticlimactic introduction of many of these online tools and platforms – think Bizly, Groupize, CVENT’s Instant Book and lodging industry backed Groups360 (as well as the many direct booking tools introduced by many of the large lodging operators) - the future of online group bookings may be farther away than we first expected.  According to a recent survey by Business Travel News (BTN), there are several factors hindering the option of these online platforms – among them (1) the inherent power and benefits of legacy RFPs, (2) lack of appropriate inventory and (3) company procurement guidelines requiring competitive bids.   

This week’s Update features a variety of topics – sustainability (x2), airline loyalty programs, NDC and direct booking campaigns (among others).  I hope you enjoy.

• • DOT Announces Hearing on Airline Frequent Flyer Programs.  Last week, the US Department of Transportation (DOT) announced plans to co-host (with the Consumer Financial Protection Bureau) a hearing on May 9 on airline loyalty programs (and associated airline cobranded credit cards) as part of its ongoing investigation into airlines’ alleged deceptive trade practices.  According to a statement issued by the agencies, the hearing will provide an opportunity for the agencies to “gather more information for determining if additional action is needed to ensure fair competition in these industries and a fair and transparent experience for passengers and cardholders.”  Among the areas of interest for the agencies are (1) the practices around booking award tickets, (2) the devaluation of miles over time, (3) the transferability of miles and benefits and (4) the notice given to travelers when program changes occur.  Notably, not one of the major airlines or their cobranded card partners will testify at the hearing.  As in years past, the results of this effort could prove instructive to hoteliers with regard to their own loyalty program and co-branded card practices.  
  • Hotelbeds Delays IPO.  Global wholesaler Hotelbeds has reportedly delayed its IPO ambitions until late 2024 or early 2025.  According to reports, the delay is an attempt to achieve an even higher valuation (higher than the expected $4 billion valuation if Hotelbeds had gone public this summer). 
  • Google and Expedia Announce New Sustainability Features.  In separate announcements this past week, both Google and Expedia announced new features and products to allow travelers to better identify and book (Expedia) more sustainable travel.  On Wednesday, Google announced that it was adding new tools to its Maps, Search, Flights and Hotels products to help travelers identify more environmentally friendly travel options.  These latest tools are in addition to Google’s already existing (and widely used) carbon emissions estimate technology.  Expedia announced the launch of two programs to assist DMOs in promoting sustainable tourism and more environmentally friendly travel options.  The first program,  Destination Climate Champions, educates DMOs on incorporating sustainability into their daily practices.  The second program, Destination Giveback Initiative, works with DMO partners to identify and donate to local causes.
  • Wyndham Seeks to Drive Direct Business Bookings.  Wyndham announced plans last week to improve how companies book group meetings and events and individual business travel.  Among the announced changes, companies booking events and travel can now receive loyalty program points and rewards.  Additional changes include improved account tools making it easier for companies to establish corporate accounts.  Wyndham’s efforts come on the heels of announced changes at Hilton designed to improve the direct booking process for businesses.

As you can see from our short list of stories below, it was a relatively quiet week in the online travel world.  I hope you enjoy:

• • DerbySoft Moves Into Airline Industry.  Hotel distribution connectivity provider, DerbySoft, announced plans last week to acquire China-based Pkfare.  Pkfare provides connectivity services for hotels similar to DerbySoft, but also provides those services to approximately 600 airlines (an industry that DerbySoft has not yet penetrated).  Terms of the deal were not disclosed.  The companies plan to maintain their independent businesses, with certain back of house functions integrated. 
  • Expedia Exploring Sponsored Listings for VRBO.  The same sponsored listings (a/k/a advertisements) that Expedia and Hotels.com feature today on their respective websites may soon make their way to VRBO.  In a recent interview, Rob Torres (SVP of Media and Affiliate Solutions at Expedia) identified the listings as something he’d like to change at VRBO.  Airbnb does not currently provide an advertising platform on its site.   
  • Additional Thoughts on Recently Announced Expedia and Amadeus Partnership.  Last week we included the recent announcement by Expedia and Amadeus regarding their newly expanded technology relationship, an expansion that will allow Expedia to offer Amadeus’ New Distribution Capability (NDC) content.  By moving away from the decades old technology offered by the major GDS providers to NDC, Expedia will soon be able to offer its users many of same products and services offered through airlines’ own channels – seat selection, pre-flight services and onboard products and services. 

This week’s Update features two stories from local (Seattle) publications.  The first, from Seattle’s most well-known technology newsletter, Geekwire, provides a local perspective on Steve Singh’s ongoing efforts to create the corporate traveler’s  “perfect trip.”  The second, from our local Business Journal, provides additional details on the management shakeup at Expedia Group.  Enjoy.

• • EU Launches Investigations of DMA Gatekeepers.  This past month, the EU Commission has launched five investigations into gatekeepers’ (Alphabet, Apple and Meta) alleged non-compliance with the Digital Markets Act (DMA).  One of the two investigations of Google parent, Alphabet, focuses on whether Google’s recent changes continue to prefer its platforms and channels (particularly around travel) over those of third parties.
    
    
  • Seattleite Steve Singh Leads Investor Group’s Purchase of Direct Travel.  Former Concur CEO, Steve Singh, and other investors announced this past week the purchase of Colorado-based corporate travel management company, Direct Travel ($300 million annual revenue and 1800 employees).  Following the purchase, Singh will serve as the company’s executive chairman, a role he also serves with other corporate and group travel players, Spotnana , Center and Troop (all of which plan to partner with each other in the future).  The purchase is the fourth piece (of five total) in Singh’s effort to build the “perfect trip.”  According to Singh, the fifth and final piece will focus on tools to better manage hotel inventory and bookings.  Stay tuned.
    
    
  • Expedia and Amadeus Announce NDC Partnership.  Expedia and Amadeus captured much of the industry’s attention this past week with their announced 1-year technology partnership under which Amadeus will provide much of its NDC content to Expedia, allowing Expedia to offer travelers additional supplier products and services (e.g., airline seat selection). 

This week’s Update features multiple stories and perspectives on AmexGBT’s newly announced acquisition of CWT and Booking.com’s decision to drop its own sustainability ratings.  I hope you enjoy.

• • AmexGBT Set to Acquire Rival Travel Management Company CWT.  First the details . . .  According to AmexGBT CEO, Paul Abbott, the $570 million acquisition will allow AmexGBT to grow its corporate customer base by 4000 customers and will increase AmexGBT’s transaction volumes and revenues by 45% and 33%, respectively.  Other announced benefits include growth in certain key customer segments (energy, resources, marine and media, among others) and growth in AmexGBT’s small and medium sized enterprise (SME) business (a focus historically for both AmexGBT and CWT).  Increased automation and the leveraging of the AI technologies behind CWT’s myCWT platform are also among the other proposed benefits.  So what does this proposed merger between travel giants mean for others in the travel industry?  What about Expedia (which currently owns 16% of AmexGBT and has a 10-year lodging supply agreement with AmexGBT) and Booking.com (whose corporate travel program is a current partner of CWT and powers CWT’s SME business)?  Will the combined company only source inventory through one major OTA?  Only time will tell.  For direct travel suppliers, the additional leverage will make historically challenging negotiations even more difficult.   

• • Booking.com Drops “Travel Sustainable” Program.  Following criticism from the Netherlands Authority for Consumers and Markets (ACM), Booking.com announced last week that it had removed its Travel Sustainable accommodation scores from its booking platform.  According to the ACM, Booking.com’s presentation of the program was misleading and wrongly gave travelers the impression that travel is sustainable.  Booking.com now intends to rely on third party certification programs and will provide properties a label when they have received a third-party sustainability certification.

• • DOJ and FTC File Statement of Interest in Algorithmic Price Fixing Case.  This past week the U.S. Department of Justice and Federal Trade Commission filed a joint statement of interest in a pending case against major casino hotel operators alleging that the operators violated U.S. antitrust law by agreeing to use a third party computer pricing algorithm to set room prices.  According to the agencies, hotels cannot use algorithms to engage in conduct that is otherwise illegal if done by a real person.  The statement clarified two important aspects of U.S. anti-trust law as it relates to the use of pricing algorithms.  First, claimants do not need to prove that competitors spoke directly, particularly when an algorithm provider that works with the competitors is alleged to be acting in concert.  Second, an agreement among competitors to use a pricing algorithm is unlawful, even if the competitors retain some pricing control.  This isn’t the first time that one or both agencies have intervened in cases involving pricing algorithms.  In recent cases involving the real estate industry and meat processing industry, the agencies challenged competing firms’ use of pricing algorithms.  A copy of the agencies’ joint statement is linked to our story below.

This week’s Update features a variety of topics, including Italy’s newly announced investigation of Booking.com, American’s ongoing battle with ASTA and Qantas’ new TMC portal:

• • Italy Launches Investigation of Booking.com.  Just weeks ago, Booking Holdings announced as part of its fourth quarterly earnings release that Spanish competition authorities were considering levying an unprecedented $530 million fine against its Booking.com platform.  Now, Italy is joining the fray.  On Friday, the Italian Competition Authority announced that it had opened an investigation into Booking.com and its alleged abuse of its dominant market position.  At issue are the alleged advantages given to hotels that participate in Booking’s Preferred Program in exchange for higher commissions and Booking’s automated price matching tool (the so-called “Booking Sponsored Benefit”).   According to the Authority, the two practices could have the effect of excluding competing online travel agents from the market.  The investigation was triggered by complaints from Italian hotel associations. 
  • ASTA Launches PR Campaign Against American Airlines.  As the war between ASTA (American Society of Travel Advisors) and American continues over American’s campaign to transition advisors to NDC (and thereby reduce overall distribution costs), ASTA has taken its position to lawmakers and the public via a new ad campaign and consumer-facing website.  New ads running in Politico direct readers to ASTA’s new website, which includes messages for both travelers and travel advisors and encourages both groups to contact their legislators.  Both sections also encourage a congressional investigation into American.   
  • Concur Travel Expands Hotel Offerings.  This past week Concur SAP announced that it was making several changes to its booking and travel management platform, Concur Travel.   The changes include expanded hotel content (via new integrations with Amex GBT, CWT, Flight Centre and HRS), rail content, emissions data (hotels, air, rail and rental car options) and itinerary sharing.  
  • Qantas Launches New TMC Booking Platform.  Travel management companies and agencies have a new platform (Qantas Distribution Platform) for booking Qantas flights using NDC content.  Access to the platform is limited to TMCs that have an existing commercial agreement with Qantas and are connected to one of Qantas certified technological partners, including Sabre, Travelport and Amadeus.  Users of the platform will have access to special offers, discount pricing and shopping capabilities not otherwise available through traditional channels.  According to the Qantas website, the new portal is best “suited for simple bookings” with complex customers and system requirements best supported through Qantas’ certified technology partners.  Sounds like a statement intended to calm Qantas’ legacy GDS partners’ concerns as Qantas seeks to move customers to a new alternative platform.