Duff on Hospitality Law

This week’s Update features a variety of topics including the latest on Indonesia’s efforts to regulate OTAs, Spotnana’s new “event” travel booking tool and new record marketing spending by the largest OTAs (no surprise).

• Booking.com and Expedia May Face Indonesian Bans.  As of this past week, several large OTAs (including Booking.com and Expedia) had still not complied with Indonesia’s requirement to register as Private Scope Electronic Systems Operators (PSE).  The requirement is part of a regulation passed in November 2020 that requires digital platforms to obtain licenses to operate in Indonesia.  Recently, Indonesia has stepped up enforcement efforts around the regulation including blocking PayPal and other gaming websites temporarily in 2022.  Earlier this month, the remaining unregistered travel booking platforms (Airbnb, Agoda, Expedia, Booking.com, Trivago and Klook) received letters from Indonesia’s Ministry of Communication and Information asking that the platforms complete their registration by the end of the month.  Airbnb and Agoda have since registered.
• Spotnana Releases “Spotnana Events,” a Group Travel Booking Tool.  Despite its name, Spotnana Events isn’t a meeting booking tool.  Users of the platform won’t be able to book meeting rooms and associated food and beverage.  Instead, the new corporate tool allows users – both profiled and, notably, unprofiled - to book travel that is tied to a particular event, event dates, event booking parameters, etc.  The new technology will be made available to both regular corporate users of the Spotnana travel management tool as well as standalone users.  The tool will also be made available to channel partners and as a white label solution.
• OTA Annual Sales and Marketing Records Are Broken, Again.  In 2023, Expedia Group, Booking Holdings, Airbnb and Trip.com spent collectively $16.8 billion in sales and marketing (which represents a 20% increase over their 2022 combined total).  Of the four, Trip.com saw the largest spending increase – increasing 2022 amounts by 117% (and roughly equally pre-pandemic amounts).  Not surprisingly, the two largest spenders were Expedia Group ($6.9 billion in sales and marketing (including B2B commissions under its growing B2B platform)) and Booking Holdings ($6.8 billion for marketing).  For Expedia, the amounts spent on sales and marketing equate to 54% of total revenue.  For Booking Holdings, its expenditures represent 32% of total revenue.

This week’s Update offers two differing industry perspectives on Google’s DMA compliance efforts.  We also update the status (demise) of TripAdvisor’s much criticized subscription program, TripAdvisor Plus.  Enjoy.

• • Perspectives on Google’s Gatekeeper Efforts.  This past week (March 7) saw D-Day arrive for those platforms designated as “gatekeepers” under the Digital Markets Act (DMA).  On the day before, EU Travel Tech, whose members include most major leisure and managed travel platforms, issued a letter to the European Commission criticizing Google’s changes and complaining that the changes continued to feature Google’s own products and services over those of its members.  According to the industry group, Google’s efforts “fall significant short of compliance, potentially rendering the new rules ineffective.”  At the same time, organizations representing hotels, airlines and restaurants issued their own statements, warning that the changes could drive users away from their members and to large online intermediaries (i.e., OTAs).  According to one statement, several of the industry’s groups could lose as much as 50% of their online traffic to intermediaries.  As it begins its review of the many changes proposed by Google and other gatekeepers (and considers possible enforcement efforts), the EU Commission will have some difficult decisions to make. 
  • TripAdvisor’s Latest.  A few weeks ago we included a story detailing the steps taken by TripAdvisor to evaluate possible future transactions.  This past week, we learned that TripAdvisor’s first possible suitor is John Malone’s Apollo Global Management, a private equity firm with a long history in the travel world (Expedia, AmexGBT, Oceania, Norwegian Cruise Lines and Diamond Resorts).  Last week also marked the official demise of TripAdvisor’s subscription program, TripAdvisor Plus.  Readers of our Update will recall the many stories featured over the past few years (the subscription service was  made widely available in June 2021) detailing the program and suppliers’ (and my) general poor view of the program. 

This week’s Update features a wide variety of topics – Hopper, Capital One vacation rentals, Expedia layoffs and Hilton campgrounds.

• • AirAsia Adds Cancel for Any Reason.  AirAsia announced this past week that users of its platform (both website and application) can now cancel bookings of non-refundable fares through an integration with Hopper’s B2B Division – HTS (Hopper Technology Solutions).  HTS offers a wide variety of ancillary products and services (e.g., travel portals, fintech products) to its corporate users.  AirAsia currently offers flights from over 700 airlines.  With the addition of HTS’ ancillary cancellation product, fares that were once non-refundable (presumably a material term or condition of each airline’s offered fare) are now fully cancelable for any or no reason.  It would be interesting to know how these now “fully cancelable” fares offered through AirAsia comport with each effected airline’s own terms and conditions and those of any applicable distribution agreement.  
  • Capital One Adds Vacation Rentals.  Capital One announced last week that its Capital One Travel portal will soon feature vacation rentals from AvantStay, Boutiq and other property management companies (including eventually, Inspirato).  The rentals will be part of Capital One’s “premium” hospitality offerings. 
  • Quantas Offers Price Guarantee to Drive Platform Bookings.  A lot can be learned from the airline industry. Quantas has announced a new price guarantee that guarantees fares for up to five days when travel agents book through Quantas’ own distribution platform.  The guarantee is one of the first for the airline industry (and the only offered by an Australia or New Zealand airline).     
  • Hilton Campgrounds Coming Soon.  So why include a story about Hilton’s newly announced partnership with campground operator, Autocamp?  According to the recent announcement, Autocamp’s Airstreams, cabins and tents will soon be bookable on Hilton’s direct channels – presumably call centers, website, mobile application, etc.  It will be interesting to watch how Hilton and its channels (which until now have featured primarily traditional hotel products) will treat these very untraditional products.  It will also be interesting to see how long it takes these new products to make their way to large third-party channels (whether unintentionally through existing parity commitments or intentionally), if at all.    
  • Google’s DMA Changes Continue to Draw Criticism.  Review site Yelp is the latest to raise concerns with Google’s planned search results changes for flights, trains, hotels and restaurants in the EU.  According to Yelp, the proposed changes, which are required to help smaller companies gain more traffic from Google, are having the opposite effect (driving users to Google products).   

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. 

With many in the industry getting their first look at Google’s proposed “DMA” changes to European Union search results, many of this past week’s industry headlines were focused on the proposed changes and the industry’s generally unfavorable response.

• • Increased Marketing Efforts by OTAs Result in Fewer Direct Bookings.  In a report issued last week by SHR Group, the hospitality industry technology specialist reports that increased marketing investments by OTAs have begun to shift the share of bookings away from direct channels to indirect channels, have driven higher the costs of brand key word bidding (particularly on meta search sites where costs increased by over 128%) and have increased OTAs’ share of total room nights (largely through OTAs generating longer lengths of stay).   
  • First Impressions of Google’s Proposed DMA Changes to Search.  With the Digital Market Act’s (DMA’s) ban on self-preferencing by so-called “Gatekeepers” set to take effect in early March (March 7), Google has begun rolling out on a limited test basis proposed changes to its EU search results for flights.  The responses have been less than flattering.  Leading the opposition to the proposed changes is online travel platform eDreams Odigeo, which has made quite clear that it believes the proposed changes do not go far enough and warrant enforcement efforts by EU authorities.  eDreams’ concerns have been echoed by other industry groups, including eu travel tech and EU Tech Alliance, which have largely focused on Google’s alleged failure to effectively engage with industry members before moving forward with the changes.  While most of eDreams’ complaints are focused on flights, it claims that similar concerns also apply to the proposed changes for hotels and activities / experiences.  I expect that we may hear from hoteliers soon. 
  • Still Suffering from Rogue Wholesalers’ Abusive Use of Rates and Inventory?  Expedia’s Peter Kern Has a Simple Solution.  Peter’s proposed solution?  Take the issue seriously.  That’s it.  Simple, right?  Speaking at the lodging industry’s annual investment conference, ALIS, Peter Kern (first OTA CEO ever to speak at the long-standing industry conference) expressed surprise that independent and regional hoteliers (noting that many large hoteliers have tackled the problem through solutions offered by Expedia – a plug for Expedia’s wholesale distribution program (Optimized Distribution)) don’t take the issue seriously.  If only it were that easy Mr. Kern. 

It was another slow week in the online travel industry as much of the industry’s attention was focused on this past week’s annual HEDNA Conference (in New Orleans) and preparation for the lodging industry’s first major conference of the year, ALIS.

• Hawaiian and Sabre Settle Things.  Readers of our Update will recall that Sabre sued Hawaiian Airlines for breach of contract back in the summer of 2022.  The suit was in response to Hawaiian’s decision to charge Sabre subscribers a $7.00 booking surcharge and to withhold certain content from Sabre and instead make that content available through Hawaiian’s own direct booking channels or Hawaiian’s NDC-enabled direct connect solution.  Sabre alleged that the decisions violated the terms of the parties’ agreement (which, depending on the date of the agreement, likely required parity among Hawaiian’s booking channels and prohibited the airline from discouraging subscribers’ use of the Sabre platform via surcharges, etc.) and breached the airline’s implied covenant of good faith and fair dealing.  According to Hawaiian, the surcharges and prioritizing of channels was part of the airline’s overall effort to modernize via the adoption of NDC.  Fast forward to last week, and the parties have now filed a formal dismissal of the claims.  No information about the settlement is available yet, but we will update our readers when more information becomes available.    

• European Regulators Seek Information on Booking.com.  Not only is Booking.com expected by many to fall under the Digital Markets Act’s (DMA) “gatekeeper” designation in the coming months, but EU regulators are now exploring whether Booking.com (and 16 other large online platforms and search engines (e.g., Bing, Facebook, Google and Google Maps)) is a “very large online platform” and therefore subject to the many requirements of the DMA’s sister legislation, the Digital Services Act (DSA).  If determined to be a platform under the DSA, Booking.com will be required to use consumer friendly terms and conditions and to provide consumers and regulators transparency with regard to its advertising, recommendation and content practices.  2024 may turn out to be a big year for Booking.com.

This week’s Update features one of several stories published this past week regarding the escalating fight between renegade airline Ryanair and several of the large online travel platforms.  We’ve also included a few stories on GDS platforms – one on Travelport and the other on one airline’s well-documented push to modernize GDS’ (and their users’) practices.  I expect to increase our coverage of GDS this next year, as I anticipate seeing a number of changes coming out of the GDS world over the next year or two.  Enjoy.

• • Ryanair’s OTA War Continues to Escalate.  Readers of our weekly Update are familiar with Ryanair’s ongoing battle with certain major OTAs (primarily Booking Holdings’ various platforms).  In response to recent criticisms by Ryanair over the platforms’ allegedly unjustified fees and charges (or perhaps pending U.S. litigation by Ryanair against Booking Holdings), the platforms (Booking.com, Kayak and Kiwi) have removed entirely the airline’s flights.  According to Ryanair, the airline expected to take a short term hit on revenue as a result of the “pirates” (Ryanair’s term, not ours) actions.  In response, Ryanair intends to make its lowest fares available on its own booking platform and those of “honest/transparent” OTAs.  Is there a lesson here somewhere for hoteliers? 
    
    
  • ASTA Takes (Again) Its Complaints Over American Airlines to the Department of Transportation.  The ongoing battle between the American Society of Travel Advisors (ASTA) and American Airlines continues.  In a December 20 filing, ASTA again asked the U.S. Department of Transportation (DOT) to investigate the airlines’ practices and to require American to restore the travel content that it previously removed (and presumably, made available only to travel agents via NDC connections).  According to ASTA, many of the same problems that existed immediately following American’s transition to NDC in April of last year persist today.  American in turn has argued that ASTA and its members need to modernize and move away from legacy technology (legacy GDS systems). 
    
    
  • Third Party Platforms Voice Their Support for Junk Fee Legislation.  In advance of the U.S. House Committee on Energy and Commerce’s consideration of proposed legislation on resort fees (the legislation passed out of the Committee on a 44-0 vote), the Travel Technology Association (membership comprised of OTAs, GDSs and other platforms) submitted a letter for the Committee’s consideration.  According to Association CEO and President, Laura Chadwick, the legislation will help “reign in their [hoteliers] troubling resort fee practices.”  Interestingly, while the Association favors the proposed legislation, the Association also asked to add provisions holding hoteliers (not the platforms) responsible for failing to display correct resort fee information.  A complete copy of the Association’s letter is available here.