Hilton, Marriott mum as hotel group redoubles anti-OTA efforts

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The largest U.S. hotel trade group is sharpening its attack on OTAs through broader lobbying efforts, even as the two largest U.S. hotel companies continue to boost room demand and take share from independent lodging operators.

For their part, OTA representatives are labeling such lobbying efforts misguided, while Marriott International and Hilton are taking matters into their own hands through negotiations and web-direct campaigns.

The American Hotel & Lodging Association (AH&LA), a Washington-based trade group, is taking aim at OTAs. In that sector, the two largest companies, Priceline Group and Expedia, account for about 93% of all U.S. OTA bookings, according to Phocuswright data. AH&LA is arguing that the two are acting like a "duopoly" by effectively boosting commission rates by negotiating for lower wholesale hotel-room prices, especially with nonbranded establishments.

Additionally, the AH&LA alleges that OTAs are harming consumers by hiding service fees charged to the guest by lumping them in with taxes. The trade group is also highlighting the prevalence of so-called "rogue" OTAs whose graphics and user interface trick guests into thinking they've booked directly with the hotels.

The AH&LA, which first addressed rogue OTAs in a 2015 campaign, estimated at the time that such sites generate $1.3 billion a year in bookings, or almost 1% of the $158 billion in revenue Phocuswright estimates were generated by U.S. hotels last year.

"This is an issue around competition or lack of it, which we believe always hurts the consumers who stay at our hotels, as well as deceptive practices that compound that harm," said AH&LA spokeswoman Rosanna Maietta. "Consumers are operating under the illusion of choice, thinking they are comparing between multiple brands. But in reality we're talking about two companies: Priceline or Expedia."

The AH&LA, which lobbied against Expedia's $1.34 billion acquisition of smaller competitor Orbitz Worldwide in 2015, is taking further aim at an OTA industry that continues to both consolidate and grab a larger share of the online market.

By acquiring Orbitz, Expedia boosted its share of U.S. OTA bookings to about 70%, from 53%, while Priceline accounts for about 23%, according to Phocuswright. Meanwhile, between 2013 and 2020, OTAs will have increased their share of online U.S. hotel bookings to 52%, from 47%, while hotel websites' share is expected to drop accordingly.

Steve Shur, president of the Travel Technology Association, a Washington-based OTA trade group, was critical of the AH&LA's efforts, while Expedia CEO Dara Khosrowshahi took issue with the allegations.

"If you look at our share, Expedia accounts for less than 10% of total lodging volume in the U.S., which is our strongest market," Khosrowshahi said in reference to the duopoly allegation. "We've been reducing prices for our hotel partners in terms of commission rates. Our partners are getting more for less."

"The AH&LA's entire policy agenda is based on getting the government to stifle competition on their behalf," Shur said. He added that independent hotels benefit from OTAs "tremendously" because OTAs enable them to compete directly with larger chain hotel operators.

The AH&LA is boosting its lobbying effort as the largest U.S. hotel operators continue to report increased demand for their rooms. Marriott International, which acquired Starwood Hotels & Resorts in September, said last week that its revenue per available room (RevPAR) for North America rose 3.1% from a year earlier, while net income, factoring in Starwood's year-earlier results, jumped 26%.

Hilton said earlier this month that its U.S. RevPAR advanced 2.5% from a year earlier and cited better-than-expected group demand for reaching the high end of its prior forecast.

As for the AH&LA's lobbying efforts, both Hilton and Marriott remain relatively mum on the subject and instead are focusing on their own direct-book advertising campaigns and loyalty program perks.

Hilton CEO Christopher Nassetta, whose company debuted its "Stop Clicking Around" direct-booking campaign early last year, estimated on the company's May 2 earnings call that Hilton's first-quarter direct-web bookings as a percentage of total bookings increased to 30%, from 28% a year earlier.

Meanwhile, Marriott CEO Arne Sorenson said on his company's earnings call last week that Marriott reduced online distribution costs at former Starwood properties by ensuring that the OTA wholesale rates for those hotels comply with the more favorable Marriott terms.

And while Sorenson acknowledged the importance of cracking down on rogue OTAs, he was less communicative about the AH&LA's lobbying strategy.

"I don't have much to say about industry efforts on the Hill," Sorenson said.

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