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