Duff on Hospitality Law

This week’s Update features another heavy dose of earnings-related stories, including details from last week’s Booking Holdings release.  If you are interested, we’ve linked below a copy of the transcript from Booking.com’s earnings release call.  Enjoy. 

• • Highlights from Booking Holdings’ Latest Earnings Release.  While Booking posted strong financial results in its latest quarterly (and year-end) earnings release (quarterly and annual revenue, room nights and gross bookings were up considerably against 2021 numbers and showed solid increases over 2019), these were my takeaways from the recent release:
    • Payment Platform.  Booking.com processed 42% of its gross bookings in the fourth quarter on a merchant model basis through Booking.com’s payment platform.  This number is consistent with the third quarter numbers.  I expect to see this number climb considerably over the course of 2023 as more hoteliers consider moving to the platform.
    • U.S. Market.  Both Priceline and Booking.com continue to do well in the U.S. market (room night growth and gross bookings now exceed 2019 levels), with growth believed by Booking to be outpacing the market’s recovery overall and resulting in increased market share (look out Expedia).
    • Mobile Application.  45% of rooms nights were booked through Booking Holdings’ mobile applications (a 13% increase over 2019).  As we have reported in previous Updates, Booking.com’s app was the most downloaded OTA app globally in 2022 and reached the number one spot in the United States in 2022 for the first time (look out Expedia).
    • Merchandising (a/k/a discounting).  According to Fogel, offering “attractive” prices to travelers is critical to providing value to Booking’s customers.  These attractive prices are the result of obtaining competitive rates directly from Booking’s supplier partners and “building up” the ability to offer discounts and other incentives (i.e., merchandising).  Booking reports that it has been pleased with the results achieved from merchandising in 2022 (in fact, the cost of these merchandising efforts in 2022 were much higher than in 2019 and offset any take rate increases seen from increasing revenue from payments) and has plans to continue its use (“selectively”) going forward.  Question whether these merchandising opportunities are the result of Booking’s contracting efforts or leveraging ongoing changes in EU competition law.
    • Year Ahead.  If Booking’s January results are a harbinger of what is to come for Booking in 2023, it looks to be a good year.  In January, Booking booked 95 million room nights, a new monthly record by approximately 10 million.  The increase in bookings reflects a 60% year-on-year increase and a 26% increase over the same period in 2019. 

• • IHG Seeing Benefits of Technology Strategy.  Last week we featured a story that highlighted Marriott’s recent successes with its digital platform.  This week we include a similar story on IHG.  In its recent earnings release call, CEO Keith Barr highlighted IHG’s many digital efforts, which began back in 2015 when IHG partnered with Amadeus to develop an entirely new global reservation system.  According to Barr, the new GRS has been critical to IHG’s more recent efforts (and successes) with loyalty, IHG’s mobile app and IHG’s updated web presence.  In its most recent earning release, IHG reported that 58% of all digital bookings at IHG come through mobile devices, which makes it IHG’s fastest growing revenue channel.  IHG also reported that mobile app revenue for the year increased 30% over 2019 levels. 

Our weekly Online Travel Update for the week ending February 17, 2023, is below.  This week’s Update features a number of stories coming out of last week’s quarterly earnings releases by several of the largest online travel platforms.  We’ve also attached transcripts from the recent earnings calls for both TripAdvisor and Airbnb.  Enjoy.

• • Intermediaries Regain Ground in Latest Hotel Booking Trends Report.  SiteMinder has released its latest annual Hotel Booking Trends report detailing 2022 online booking trends.  Highlights from the latest report include:   
    • OTAs were ranked in the top two positions in 79% of SiteMinder’s Top Twelve Lists (versus 37% in 2021)
    • Booking.com was the most popular booking channel across SiteMinder’s Lists (Expedia Group websites were second)
    • Direct bookings were down against 2021 numbers in 42% of the markets surveyed (though on par with 2019 numbers)
    • GDS bookings were up in 47% of the markets surveyed as corporate travel began its rebound
    • Airbnb continued to gain strength and made 89% of the Lists (compared to 28% in 2019)

• • Airbnb’s Chesky Rejects Need for Traditional Loyalty Program and Seeks to Expand Traditional Hotel Inventory.  During last week’s earnings call, Airbnb Brian Chesky rejected the need for Airbnb to offer guests a traditional points-based program like its distribution competitors.  According to Chesky, “the best loyalty program is building a product people love so much that they want to come back.  We don’t have to pay them to come back.”  Although Chesky may not be interested in emulating his competitors’ loyalty program offerings, he is interested in adding more of their traditional product types, specifically hotels.  Adding more traditional hotel inventory, Chesky noted, would allow Airbnb to better position itself as a traditional booking platform.  Chesky’s apparent re-embrace of traditional hotels represents a thawing of Airbnb’s previous pandemic-induced “freeze” on traditional hotels.  Could we soon see corporate wide direct distribution agreements between hoteliers and Airbnb?   
  • Marriott Increasing Digital Investment in 2023.  Yes, hoteliers too can sometimes be featured in our weekly Update . . .  In its recent earnings call, Marriott shared that product innovation, particularly through Marriott’s Bonvoy mobile application and other digital products, remains a priority for Marriott entering 2023.  According to Marriott CFO, Leeny Oberg, the newly planned investments will “transform” users’ experience on Marriott’s mobile application – for both Bonvoy members and the Marriott employees who serve them.  Marriott’s investment in its digital channels appears to be producing positive results as Marriott mobile app usage grew by 32%, digital room nights grew by 27% and digital revenue grew by 41% (year over year) this past year. 

Our weekly Online Travel Update for the week ending February 10, 2023, is below.  This past week saw the beginning of quarterly earnings releases by the major platforms, with Expedia and its meta search platform, Trivago, being the first.  Expect more details about these 4^th quarter releases in future updates.  Enjoy.

• • Expedia’s Loyalty Program Posts Strong Gains.  While Expedia posted reasonably strong fourth quarter and full year (2022) financial results this past week (see attached earnings release transcript for more detail), it was the growth in Expedia’s loyalty program that garnered much of the attention.  During the fourth quarter, the number of Expedia customers who became loyalty program members grew by 60% over the same period in 2019.  With those increases, Expedia entered 2023 with more active loyalty program users than ever (more than 10% higher than the previous peak).  According to Expedia CEO, Peter Kern,  the number of Expedia loyalty program members and number of active Expedia app users (which also grew over the past quarter) are the two primary factors that Expedia uses when evaluating progress against its goal of maintaining long term its highest-value customers. 
  • Trivago Targets Direct Bookings.  In recent correspondence accompanying its fourth quarter and full year (2022) earnings release, Trivago highlighted its ongoing efforts to grow hotel direct bookings.  According to Trivago, direct bookable rates are now available on the meta search site for properties that receive 50% of click outs (and increase from 38% prior to its direct booking push).  Trivago hopes to get that number to over 80% by the end of the year.  Direct bookings are now possible in 8 of Trivago’s markets. 

Have a great week everyone.   

Our weekly Online Travel Update for the week ending February 3, 2023, is below.  This week’s Update features of number of stories detailing the Biden Administration’s growing efforts to address “unfair” fees, including hotel resort fees.  Enjoy.

• • Biden Calls for Legislation Limiting Unfair Fees.  Add ticket agency fees (thank you Taylor Swift) to the growing list of “unfair” fees being targeted by the Biden Administration.  In comments at last week’s meeting of the White House Competition Council, the President called on Congress to pass legislation (the Junk Fee Prevention Act) limiting fees in several industries, including an outright ban on “surprise resort and destination fees.”  The likelihood of any substantive legislation coming out of Congress – particularly given the strong business interests that will likely line up to oppose any such legislation and the general divisive (dysfunctional) nature of Congress – is very low.  While federal legislation may be a remote possibility, the same headwinds may not hinder similar efforts at the federal regulatory level (FTC) or individual state level.  This week’s news of possible federal legislation on the issue comes as several clients are hearing rumblings or actually receiving written notice of increased efforts to reign in resort fees at the state level. 
  • Google’s Overall Advertising Revenues May Be Down, But Not for Travel.  While overall Google’s parent, Alphabet, saw a fourth decline in overall advertising revenue, travel advertising revenue actually increased over the latest quarter.  
  • Rising Interest Rates Increase Value of Merchant Bookings.  With Expedia reported to have earned $20 million in interest income in the third quarter of last year, in part, on funds held as part of prepaid guest bookings, it is no wonder other platforms are getting into the payments business (yes, we recognize that there are many other benefits as well).  Airbnb earned $58 million in interest income. 
  • Event Platform, CVENT, Reportedly for Sale.  If a sale does occur, it won’t be the first time the platform is taken private.  This time, private equity heavy weight, Blackstone, is the rumored suitor.  Will a sale mean changes to the platform’s management (and impossible contracting practices)?  Likely not, as CVENT’s management stayed largely intact through CVENT’s many prior transitions. 

Have a great week everyone. 

Our weekly Online Travel Update for the week ending Sunday, January 27, is below.  This week’s Update provides updates on both DOT’s and FTC’s recent rulemaking efforts around “hidden” industry fees.  Enjoy.

• • Google Updates Upcoming.  In an effort to comply with mounting pressure from the EU competition authorities, Google has agreed to make changes to the information displayed through several of its platforms and stores.  Specifically, Google Flights and Google Hotels will soon distinguish between services provided by Google versus third parties, make clear that Google Hotels does not verify or confirm guest reviews and comply with the transparency guidelines applicable to other online booking platforms. 
  • Objections Raised Over Proposed DOT Ancillary Fee Rules.  While industry trade groups have largely voiced support for increased transparency of ancillary fees, both ASTA and the Travel Technology Association have raised objections with the Department of Transportations’ proposed regulation on the same subject.  Specifically, both groups have raised objection with the draft regulation’s exclusion of global distribution systems.  The Travel Technology Association has also voiced concerns over the requirement that ancillary fee information must be displayed on the first page of search results, which, according to the Association, would make shopping extremely confusing for consumers, particularly for those using its metasearch site members.    
  • Five Thousand Comments and Counting:  FTC’s Notice of Proposed Rulemaking Garners Attention.  As comments to the Federal Trade Commission’s notice of proposed rulemaking on ancillary fees (including hotel and resort fees) continue to roll in, the FTC has elected to extend the comment period through February 8.  Anyone interested in reviewing the comments can find a searchable catalogue here - https://www.regulations.gov/docket/FTC-2022-0069/comments.

Have a great week everyone.  So great seeing so many people this past week in Seattle at HEDNA. 

Our weekly Online Travel Update for the week ending January 20, 2023, is below.  A new online cruise booking platform garnered most of the attention this past week, together with announcements regarding the continuing migration of group bookings to online platforms.  Enjoy. 

• • Are Cruise Passengers Ready to Book on Online Platforms?  Cruisebound says yes.  This past week, Cruisebound, the first online platform dedicated exclusively to ocean cruising (on 14 different inaugural cruise lines), was officially launched.   Historically, cruises have been thought to be too complicated to book online (e.g., multiple cabin types, fare codes, etc.).  Because of these complications, traditional brick and mortar travel advisors  have been the primary booking channels for most cruise lines.  Cruisebound intends to change that.  Backed by industry veterans, Jeff Boyd (Booking Holdings), Steve Kaufer (TripAdvisor) and Steve Singh (Concur) and led by the same team that founded Rocket Travel, Cruisebound hopes to attract first-time (younger) passengers through its easy-to-use online interface.  Customers who require additional assistance will access to a team of travel consultants.  In its initial testing, Cruisebound found that 91% of bookings were made via a mobile device and that the average age of customers was 36.  Both statistics are appealing to cruise lines seeking to extend their passenger demographics.  Cruisebound will earn its fees entirely through commissions paid by cruise lines and won’t charge passengers booking fees. 
  • Group Bookings Continue to Move Online.  Marriott and group booking platform, Groups360, announced this past week that 1500 Marriott properties in the United States and Canada will soon be available for online group bookings (both rooms and meeting space) through Groups360’s “Instant Book” platform.  Users of the platform will have real time access to hotels’ rates and inventory.  Although designed primarily for small meetings (i.e., 10-25 guestrooms on peak or meetings of 50 people), the platform also allows customers planning larger meetings to review hotels’ available inventory before submitting an RFP. 

Have a great week everyone.  I hope to see many of you here in Seattle at HEDNA’s annual conference. 

Our weekly Online Travel Update for the week ending January 13, 2023, is below.  This week’s Update features an interesting update on OTAs’ current loyalty programs and future ambitions and the recent (somewhat concerning) comments of Booking.com’s CFO regarding Booking.com’s ambitious plans for its payment platform.  Enjoy

• • OTAs’ Loyalty Ambitions Continue to Evolve.  PhocusWire featured this past week an interesting story on the evolving loyalty ambitions of the major distribution platforms – Expedia, Booking.com, Hopper and Airbnb (interesting to note that Agoda/Priceline, Trip.com or other large platforms did not make the cut).  Highlights from the article include (1) Expedia’s upcoming rollout of its new combined loyalty program, One Key, which will reward members with both upfront immediate discounts as well as loyalty program accruals that can be used for future bookings (including VRBO), (2) the anticipated cooperation among Booking.com’s existing loyalty program (Genius), its Rewards & Wallet program and its new payments platform to provide members both upfront discounts (up to 20% now and maybe larger in the future) and loyalty program accruals and (3) Hooper’s and Airbnb’s alternative approach to building brand loyalty via gamification (Hopper) and alternative service programs (Airbnb’s Aircover) without a traditional membership program. 
  • The Future of Booking.com’s Payments Platform?  The recent comments of Booking Holdings’ CFO, David Goulden, which were featured last week in Dennis Schaal’s weekly Online Travel Briefing for Skift, sent minor tremors through the hotel industry.  In his comments, Goulden blamed the slowing growth of Booking.com (in the years leading up to the pandemic) on its over reliance on the agency model (i.e., hotel collect model). Now, with Booking.com’s rollout of its payments platform (and its new merchant role), things may be changing at Booking.com.  According to Gould, the payments platform will allow Booking.com to better merchandise its products and services through various newly available “levers.”  More specifically, with regard to hotel rates, Gould noted that “we [Booking.com] relied entirely upon what we got from our property partners to give us great rate because its still primarily what we do, but we couldn’t participate in those more targeting pricing promotional activities, and now we can.” What should suppliers anticipate for 2023?  Rate discounts?  Instant credits or rebates?  Armed with recent (favorable) changes and clarifications in EU competition law, Booking.com is well poised to take advantage of any or all of these opportunities.       

Have a great week everyone.  

Our first weekly Online Travel Update for 2023 is below.  With many still celebrating the recent holidays, last week remained rather quiet in the online travel world.  Enjoy.

• • Booking.com and Expedia Mobile Apps Fare Well in 2022.  Mobile app downloads are one of the many metrics that industry analysts like to watch when evaluating online travel companies.  According to a recent report from Apptopia, both Booking.com and Expedia fared well in the United States in 2022.  Booking.com’s mobile app moved up one spot to fifth in 2022 travel app downloads, and Expedia’s app jumped two spots to seventh.   Last year’s industry darling, Hopper, fell five spots to ninth (not entirely surprising given the now ubiquitous nature of Hopper’s price prediction and fintech tools).  Expedia’s jump reflects a near doubling of annual downloads (16.6 million) over 2021.   American Airlines was the only travel supplier to make the United States top ten list, with 12.3 million downloads.  Internationally, Booking.com also faired well, coming in third in 2022 international travel app downloads.  Among the OTA apps, Booking.com was the most downloaded app in both the United States and internationally. 
  • Further Details on India’s Approach to Rate Parity.  A few months ago, we shared details of the Competition Counsel of India’s decision imposing heavy penalties against India-based online travel agent, Make My Trip (and its related companies) and ordering the removal of contractual rate and availability parity provisions in its supplier contracts.  This week we feature a story that goes into greater detail regarding the CCI’s decision and the factors it considered before rendering its decision.  A couple of key takeaways . . .  First, the CCI evaluated MMT’s behavior in the context of online intermediation services for hotel bookings in India (a narrow definition of the relevant market), not the much broader market definition proposed by MMT (a similar market definition issue is now before a Dutch court).  Second, the anti-competitive effects of MMT’s broad parity obligations, exclusive listing obligations and deep rate discounts (a trifecta of factors working against hoteliers and other competing OTAs) more than outweighed the so-called “free rider” concerns voiced by MMT.  Third, the fact MMT’s requirements may have been “industry standard” does not carry much weight if the distributor at issue has sufficient market power to determine the relevant market’s terms.  

Have a great week everyone.  For those of you traveling to Seattle later this month for HEDNA’s annual Global Distribution Conference, I hope to see you there.  I’ll be speaking on Wednesday morning on the new distribution regulatory environment. 

Happy New Year! We are once again providing a roundup of some of the major developments and trends in the online travel industry that caught our attention this past year. Wishing everyone a successful 2023. 

- Greg Duff
 

Our weekly Online Travel Update for the week ending December 23, 2022, is below.  As our short list of stories highlights, last week was a relatively quiet week in the online distribution world.  Enjoy.

• • DOT Extends Comment Period for Proposed Rule on Airline Ancillary Fees.  For those of you who have followed our updates on federal rulemaking around ancillary fees in the travel industry (both airline and hotel), you’ll recall that before the FTC announced its plans to pursue rulemaking for hotel and resort fees, the Department of Transportation (DOT) announced its own plans to regulate ancillary fees in the airline industry, including publishing a proposed new rule on the issue in October.  At the request of several industry trade groups and associations, the DOT announced last week that it was extending the comment period for those interested in the proposed new DOT rule.  With the extension, the comment period now runs until January 23. 
  • Phocus Wire’s Movers, Shakers and Newsmakers in Travel for 2022.  As the year draws to a close, it is always interesting to read major publications’ reviews of the prior year.  The online travel industry is no exception as Phocus Wire last week shared its list 2022 movers, shakers and newsmakers.  From my perspective, I was surprised by both a few of the items included in Phocus Wire’s list as well as a few items omitted from Phocus Wire’s list.  What do you think?  Did Phocus Wire miss anyone or anything in particular?  My own year-end Online Travel Update will be out next week summarizing the stories I felt were most important for this past year.  I look forward to your thoughts and comments.