Duff on Hospitality Law

The EU Commission’s official decision to block Booking Holdings’ planned purchase of eTraveli (a decision that Booking has publicly criticized and committed to challenging) garnered much of the news this past week, as well as stories from Skift’s annual Skift Global Forum held in New York this past week.  Enjoy.

• • Effects of Expedia / Hopper Split Explained (by Hopper).  In an interview this past week at the Skift Global Forum, Hopper founder and CEO, Fred Lalonde, claimed that Expedia (not Hopper) suffered the ill effects of the sudden termination of the parties’ supply agreement.  According to Lalonde, concerns over competition led to Expedia’s decision, not Expedia’s purported consumer concerns.  Lalonde cited Hopper’s growing market share in flights (at the expense of Expedia) as support of his competition claims.  Any concerns that Hopper might have had about the loss of important hotel inventory may be short lived as Hopper also announced last week new hotel supplier deals with wholesalers Hotelbeds and WebBeds (on top of Hopper’s growing number of direct supplier contracts). 
    
    
  • EU Commission Officially Vetoes Booking’s Purchase of eTraveli.  The long awaited decision by the EU Commission regarding Booking Holdings’ proposed purchase of eTraveli finally arrived.  In short, the Commission believed that the acquisition would have further cemented Booking’s already dominant market position (60% market share) in hotel distribution in the EU.  With an enhanced flight offering (identified by the Commission as a major acquisition channel for prospective hotel guests), Booking would have been in a position to expand its travel ecosystem and thereby drive even more traffic to its platform (ultimately resulting in higher costs for hoteliers and consumers).  In rendering its decision, the Commission considered and ultimately rejected Booking’s proposed compromise – a so-called “carousel” whereby a Kayak powered menu of competing hotel offers from other OTAs would have been shown upon checkout by flight customers.  According to the Commission, the fact that the carousel would have been powered by a Booking Holdings company led to questions of transparency and possible discrimination.  As we have noted in prior Updates, Booking has publicly criticized the EU’s decisions (as late as last week at the Skift Global Form) and has vowed to fight the Commission’s decision.  More to come . . .  
    
    
  • Expedia’s “Fall Release 2023” to Feature a Number of Consumer Improvements.  According to recent announcements by Expedia, its planned fall release of updated products and features contains a little something for everyone.  Consumers will soon have the opportunity to converse (via ChatGPT) with Expedia’s brand apps (Expedia, Hotels.com and VRBO) about prospective properties’ amenities and services.  Conversational travel guides will also be made available to users of the Expedia and Hotels.com app.  Other new app features include “Trip Planner,” a new tool to allow travelers to plan group travel, and improved functionality for managing users’ loyalty program (“One Key”) accounts.

We’ve found fall to be the busiest of all seasons in the online travel world as everyone returns to work from summer breaks and the dates of the major online travel conferences are fast approaching.  As you can see from the long list of stories in this week’s Update this fall is no different.

• • Resort Fee Updates.  Perhaps the biggest news this past week was out of California where previously discussed California legislation has made it to the California governor’s desk for signature.  Whether Governor Newsom will sign one or both of the new bills remains to be seen.  Under the California legislation, it would be illegal to display a rate (or pricing generally) without including all mandatory fees and charges (excluding taxes).  The legislation would apply to both hoteliers and online platforms and would require the display of total price to both listings (for properties wherever they may be) shown to travelers in CA and CA listings shown to those outside CA (which, practically, like in so many other contexts, will cause most hoteliers and platforms to convert to total price everywhere).  Governor Newsome has until October 14 to sign or veto the bills.  If the governor does nothing, both would become law by default.  Other resort fee updates from this past week include Hilton’s announced transition to displaying mandatory fees up front (exactly what that means remains to be seen).  Hilton’s announcement, like so many others, encouraged uniform treatment among hoteliers and their online platform counterparts.  Also making news was Choice’s announced settlement with state attorneys general in Pennsylvania, Colorado, Nebraska and Oregon.  Under the settlement, Choice has agreed to move to total price by the end of 2023.
    
    
  • Booking.com to Launch U.S. Credit Card.  Many of last week’s online travel headlines focused on Booking.com’s “leaked” plans to launch a U.S. co-branded credit card.  No one should be surprised by this announcement, particularly those that have spent any time considering the pros and cons of embracing Booking’s payment platform.  Booking.com’s financial partner for the card is unknown.  With the launch of a co-branded credit card, Booking.com will be better positioned to leverage the many opportunities associated with its payment platforms include traveler credits, rebates and other traveler benefits. 
    
    
  • MakeMyTrip’s Corporate Booking Platform Making Progress.  While much of the attention regarding new corporate travel platforms goes to the larger, more established platforms, MakeMyTrip’s corporate platform, MyBiz, has been quietly recording successes.  With a goal to automate users’ entire booking process (through generative AI and other technologies), the Indian platform now offers foreign and domestic flights, hotels, trains and cabs.  In its four years of existence, the platform has already grown to over 50,000 users.

This week’s update includes a variety of stories, including an explanation by the UK’s CMA as to why it viewed the proposed Booking Holdings and eTraveli merger differently than its European competition counterparts. Highlights:

• • CMA Explains Differences with European Counterparts Over eTraveli Merger.  As our readers will likely recall, the UK’s competition authority (the Competition and Markets Authority) previously approved the planned merger of Booking Holdings and eTraveli, while its European counterparts at the EU Commission are rumored to be vetoing the merger.  According to a chief economic advisor at the CMA, the divergent outcomes are the result of different authorities faced with different facts and different consumers.  Speaking more broadly, the advisor added that the Booking / eTraveli merger generated “ecosystem” concerns (i.e., largely undefined concerns that a technology platform and its many interconnected businesses become entrenched and ultimately harm innovation and competition).  In short (my two cents), the CMA’s differing view of these so-called “ecosystem” concerns led to it reaching a different outcome. 
    
    
  • Credit Card Travel Platforms:  A Quick Overview.  For those of you seeking a summary of the credit card travel platforms (and their attributes) currently available (platforms we’ve covered in several posts the past year or two), the attached story from Forbes provides a helpful overview. 
    
    
  • Kayak’s Shift to Corporate Travel.  Since Kayak’s release of “Kayak for Business” in the summer of 2021, over 30,000 small and medium businesses have used Kayak’s booking tool.  But Kayak’s aspirations don’t end there.  Kayak is now targeting large corporate clients.  With its partner Blockskye (a blockchain-based startup), Kayak has been developing and testing an enterprise solution with PwC.  Since last fall (2022), the Kayak enterprise solution has processed more than 400,000 bookings for PwC’s 65,000+ employees in the United States.  According to Kayak CEO, Steve Hafner, the goal of the new solution is multifold – disintermediate traditional GDSs (via NDC), “stick it to the credit card companies” (via direct payment solutions) and take on existing (disfavored) market legacies – American Express GBT and Concur (through a better overall solution).  It will be interesting to watch how these legacy corporate platforms – including Amex GBT and Concur – respond to this newest corporate offering.  More to come. 
    
    
  • Booking.com Partners with Affirm.  Wait.  What?  Among the many potential benefits or detriments (depending on your perspective) of Booking.com’s much lauded payments platform is the ability to offer guests a variety of consumer friendly fintech products, products offered through Booking Holdings’ fintech business.  With its recently announced partnership with Booking.com, Affirm can now boast that it powers the consumer financing options (BNPL) for the two largest online travel platforms - Expedia and Booking.com.  Affirm also powers consumer financing options for other Booking Holdings’ companies – Agoda, Priceline and Kayak.  I have to admit, I’m a little confused.  If Booking Holdings is making huge commitments to create its own fintech unit, why partner with Affirm?  Change of direction?  Temporary solution?  Learning opportunity for Booking?  Perhaps a realization that creating your own platform (build) is far more difficult (and costly) than partnering (buy)? 

This week features a heavy dose of Booking Holdings’ updates, including updates on the story we featured last week regarding Hungary’s recent decision to launch a formal investigation into the country’s online travel industry.  Enjoy.

• • AI Trip Planners Are Everywhere.  While we all have read stories detailing the major booking platforms’ adoption of generative AI for trip planning (some of those stories have been featured in our weekly Update), smaller AI powered niche planners are now popping up everywhere.  This past week, Skift featured three new planners – Troupe (short term rentals), GenixGPT (“hidden gems”) and JetAI (private plane charters).  What’s obvious is that not all of these planners will make it - fall out is inevitable.  What will be interesting to watch is how many, if any, will be acquired by the major booking platforms.
    
    
  • Booking.com’s Payment Delays – Part II.  Last week we featured a story detailing the decision by the Hungarian competition authority to open an investigation into the country’s online travel booking industry, driven in large part by Hungarian hoteliers’ multiple complaints regarding delayed payments (room rate less commission) via Booking.com’s payments platform.  Apparently, the problem was a little more widespread than just Hungary (affecting hoteliers throughout Asia), may have dated as far back as April of this year (and continued through the heavy tourist seasons for many) and may have even affected commission payments to members of Booking’s affiliate network (though Booking claims these delays were part of planned maintenance of its systems).  Meanwhile, back in Hungary, Hungarian officials raided the Budapest offices of Booking.com on Wednesday (September 6) as part of its ongoing industry investigation.   

This past week (the unofficial end to summer for many of you) was a relatively busy one in the world of online travel. Highlights include:

• • EU (Unofficially) Kills Booking Holdings’ Planned Purchase of eTraveli.  For weeks now, we’ve been providing updates on Booking Holdings’ planned purchase of air booking platform, eTraveli.  While the European Commission has until September 27 to issue its final ruling, sources indicated late last week that the Commission was prepared to veto the purchase.  Sources close to Booking have stated that Booking plans to appeal any final veto.
    
    
  • Add Sonesta to the List of U.S. Hotel Companies Being Sued Over Resort Fees.  Last week Hyatt, this week Sonesta.  According to Travelers United, the consumer advocacy group that brought both the Hyatt and Sonesta class actions claims, more lawsuits against more companies are coming.  This latest suit against Sonesta focuses both on Sonesta’s alleged failure to provide total pricing (rate and mandatory fees) early in the booking process and Sonesta’s combination of taxes and fees in later disclosures.  As the list of hoteliers implementing total price on their websites and mobile applications grow (see additional story on Hyatt, Marriott and MGM changes), it will be interesting to see how these lawsuits evolve. 
    
    
  • Delayed Payments Leads to Hungarian Investigation of Online Booking Industry.  Last week, Hungary’s Competition Authority announced the launch of an accelerated inquiry into the online booking industry, and in particular, whether competition among industry members may have been distorted by Booking.com’s payment platform’s delayed payments to accommodation providers.  According to local news stories, Booking.com was several weeks delayed in making payment to multiple accommodation providers in the month of July – after announcing and then missing a series of promised payment deadlines.  July payments were ultimately made by mid-August.  The largely unexplained delay resulted in 28 complaints being made to the Competition Authority alleging the wrongful withholding of fees. 

This week’s Update features a variety of stories, including the latest news on the new cottage industry of resort fee litigation and Amazon’s growing (yet understated) significance in the travel industry. Enjoy.

• • Hyatt Faces Class Action Over Resort Fees.  Late last week, consumer advocacy group, Travelers United, filed a class action in Washington D.C. superior court over Hyatt’s alleged resort or destination fee practices.  This lawsuit is the latest in a string of lawsuits brought against hoteliers (e.g., Hilton and Hyatt) and OTAs (Booking Holdings) over their alleged failure to properly disclose mandatory fees.   

• • Amazon’s Growing Understated Influence in the Travel Industry.  Thought you knew everything about Amazon’s pursuit of the travel industry? Think again.  While many of us get caught up in Amazon’s latest efforts in Indian rail passes or virtual tour offerings, Amazon has been quietly growing its role in the travel industry – largely through its cloud computing offering, Amazon Web Services.  Amazon’s cloud customers include Travelport, ATPCO, Lonely Planet, Ryanair and Trip.com.  In fact, AWS and Trip.com have formed a joint innovation lab focused on, among other things, flight business, hotel business and artificial intelligence. 

This week’s Update features two stories on Booking Holdings’ pending acquisition of eTraveli, which remains under EU review.  Enjoy

1. Booking Holdings’ eTraveli Acquisition Remains Under Review.  It’s been a few weeks since we last updated the status of Booking Holdings’ long proposed acquisition of flight platform, eTraveli.  With the month of August rapidly coming to a close, it is crunch time for both Booking Holdings and the EU Commission regulators who are scrutinizing the proposed transaction.  Regulators are expected to issue their decision at the end of the month.  Regulators have expressed concern that the transaction will further cement Booking.com’s dominant position in the EU, particularly for hoteliers.  In response, Booking has recently proposed offering users who book flights on Booking.com a “carousel” of hotel options – featuring hotels available not only on Booking.com, but other platforms as well.  While some speculate that sister-company Kayak might be source of this alternative hotel inventory, it isn’t clear yet where the additional inventory might be sourced (e.g., competing hotel platforms, hotels’ own booking channels, etc.).
   
   
2. Hopper Launches Hopper Cloud for Airlines and Announces First Airline Partner.  On Wednesday this past week, Air Canada announced that it was partnering with Hopper to offer passengers booking on Air Canada’s website the option to purchase policies allowing them to cancel their flights at any time for any reason on eligible fares.  Hopper referred to the new partnership as the launch of Hopper Cloud for Airlines, extending the full array of fintech products and services to airline partners. 
   
   
3. Major Accommodation Platforms Increase (Again) Quarterly Sales and Marketing Spend.  It has been a refrain often repeated in our weekly Updates.  Another quarter, and another quarter of increased spending by the major accommodation booking platforms on sales and marketing.  While spending increased for each of the big three platforms (Airbnb, Expedia and Booking) for various reasons, all three were quick to point out the growing percentage of bookings coming through lesser expensive direct channels – loyalty programs, mobile applications, etc.    

It was another relatively quiet week in the industry other than news late this past week that the Texas AG had filed suit against Booking Holdings over its platforms’ deceptive display of resort fees. Some highlights from the past week:

Takeaways from Expedia’s Latest Quarterly Update.  I’ll let those much smarter than me comment on Expedia’s quarterly financials.  Items that caught my attention in reviewing the earning’s call transcript (copied) included the following:

1. Loyalty, loyalty, loyalty.  Expedia CEO, Peter Kern, could not say enough about Expedia’s recent launch of its combined loyalty program, One Key, and the value of a robust loyalty program.  Loyalty has clearly become a key focus of Expedia for the near term.  During the second quarter, Expedia enjoyed its highest number of active loyalty members – up 15% percent year over year.  Peter Kern estimates that the program now has 70 million members.  The One Key program offers users multiple tiers of program membership, with each progressively higher tier enjoying greater discounts.  Discounts are funded by supplier partners (not by Expedia (unlike Booking.com)).    
2. B2B Business Continues to Grow.  The strength of Expedia’s B2B program drove Expedia’s record gross bookings for the second quarter.  Revenue for Expedia’s B2B business grew 32% YOY in the second quarter.  Expedia announced two new B2B business partnerships this past quarter – Mastercard and most recently, Walmart. 

Takeaways from Booking Holdings’ Latest Quarterly Update.  Here are my takeaways from the latest quarterly earning’s update. 

1. Disparate Uses of Generative AI.  Booking Holdings’ use of artificial intelligence varies by platform – all in an attempt to ascertain the most beneficial use of the emerging technology.  Priceline employs generative AI in the form of “Penny,” a travel assistant that is intended to assist travelers at the “end-of-the-funnel” while making their booking.  In contrast, Booking.com’s use of the technology is at the “top-of-the-funnel” to assist users in their initial trip planning.  Kayak, unlike its sister companies, is currently exploring the use of AI internally for coding and other similar purposes. 
2. Alternative Accommodations Continue to Grow.  Approximately 34% of all Booking.com room nights were with alternative accommodations.  Global listings of alternative accommodations reached 7 million at the end of the quarter (an 8% increase YOY).
3. Mobile Application Use Continues to Grow.  Approximately 48% of all room nights were booked through Booking Holdings’ mobile applications in the second quarter (a 6% increase YOY). 
4. Payments Platform Grows.  Approximately 48% of Booking.com’s gross bookings were processed through Booking.com’s payments platform (versus 38% in the second quarter 2022). 

Texas Attorney General Files Suit Against Booking Holdings.  “Duped”  “Misled” and “Deceived”  - All three words appear in the Texas AG’s recently filed complaint against Booking Holdings to describe Booking’s offending conduct.  Similar to previous complaints filed against Hyatt and Hilton, this latest complaint targets Booking’s failure to include mandatory fees in the rates displayed on its websites.  Even when the fees are finally disclosed at checkout, the small font and inconspicuous placement of the disclosures make them unlikely to be seen.  According to the complaint, Booking further misleads consumers by grouping mandatory fees together with taxes in a single line item “Taxes and Fees” at checkout.  The complaint not only highlights the effects of Booking’s practices on Texas consumers, but also on Booking’s “honest competitors” that are put at a competitive disadvantage by appropriately including mandatory fees in their displayed prices (the complaint points to recent settlements with Marriott and Omni and Marriott’s total price displays).  We will continue to monitor and report on this case as it moves forward.

After several slow weeks in the industry, this past week featured a number of important updates, including earnings releases and calls from Booking Holdings and Expedia Group.  Transcripts from the two companies’ earnings calls are attached.  Enjoy.

• • Expedia Scores a Win with Walmart + Travel.  While Expedia may have lost an important relationship with its recent termination of Hopper, Expedia was able to make up for some of that lost B2B traffic with a newly announced partnership with Walmart.  According to the companies’ announcement, Expedia will be providing the retailer with hotel, airline, rental car and activities inventories.  Walmart members who use Walmart to book travel will receive Walmart cash (up to 5% for hotels) back.  Users of Expedia’s B2B platform (or any other similar B2B platform) should give some thought as to how changes like the recent Hopper termination and now Walmart addition might affect their traffic through the platform and their performance against any contracted performance metrics.
    
    
  • AH&LA Voices Support for Proposed Federal Resort Fee Legislation.  By now, most everyone is familiar with recent federal legislation proposed by U.S. Senators Klobuchar (D-Minn.) and Moran (R-Kan.).  If you’ve not read the proposed legislation, click here to view an early initial draft.  To many pundits surprise (several suggested that hoteliers would never get behind the legislation), the American Hotel & Lodging Association has come out strongly in favor of the Act.
    
    
  • Expedia Group and Bookings Holdings Enjoy Strong Second Quarters.  Both Expedia Group and Bookings Holdings reported strong second quarter results last week.  Even with record levels of gross travel bookings in the second quarter, Booking Holdings expects that it may see even better results later this year (based on July hotel booking activity that represents a 20% YOY increase). Expedia also enjoyed a record breaking quarter (gross bookings and revenue), though revenues fell short of analysts’ expectations.  Earnings calls provided insight into a number of ongoing initiatives within both companies, including ongoing B2B efforts (Expedia), the launch of a single, unified loyalty program (Expedia), the introduction and use of Artificial Intelligence (both) and the connected trip (Booking). 

This week’s Online Travel Update is below.  With summer now in full swing, it is no surprise that last week was another relatively quiet week in the online travel world.  Speculation continues around the Expedia / Hopper termination and the possible fallout for the entire online travel industry.  For those of you interested in learning more about the recent split, we’ve included a link to Skift’s recent podcast on the issue.  Enjoy.

• • Sabre Records Win in Competition Between Major CRS Platforms.  Hyatt announced last week that it was partnering with Sabre for its new central reservation system to be rolled out in 2024.  Hyatt’s selection of Sabre breaks the long string of victories by Sabre competitor, Amadeus, which has previously announced similar CRS platform deals with IHG, Marriott and MGM.    
  • Expedia Cuts Staff in Several Departments.  Word began to spread (unofficially) last week that Expedia had laid off staff across multiple departments (including IT, support, recruiting, marketing and B2B services) affecting Expedia’s offices in the United States and abroad.  In response to inquiries, Expedia stated that the layoffs were part of the company's ongoing reprioritization and simplification of its resources.  Expedia would provide no details on the number of employees impacted.