Hoteliers have spent a lot of time this year grumbling about the practices of the online travel giants. But the standoff that prompted Expedia to pull all of Choice Hotels International's brands from its sites appears unlikely to have a domino effect, experts say.

"Other hotel companies will look at this and say, 'Good for Choice,'" said travel industry analyst Henry Harteveldt of Forrester Research. "But then they will turn around and say, 'Wow! If Choice isn't there, we have a better chance of capturing their customers.'

"There are a lot of sales and marketing people out there applauding this, but they are not going to follow suit. They see opportunity here."

Expedia, the world's largest online travel agency, pulled Choice Hotels properties from all of its sites, including Hotels.com, last month after the online giant and the hotel company failed to reach agreement on terms of a new contract.

While both sides issued statements accusing the other of being unreasonable, each declined interviews and requests for more detailed information about their negotiating postures.

Choice accused Expedia of demanding "full control of our franchisees' room inventory and pricing, including last-room availability." Such an agreement, the company said, would have prevented Choice franchisees from holding onto some of their inventory to sell on their own at higher rates during peak periods.

Expedia said it was simply asking for the terms Choice has been operating under since its contract expired in 2007.

Dara Khosrowshahi, CEO of Expedia, told analysts in a call about the company's earnings last week that Expedia was simply trying to ensure it was offering customers the best prices.

"It's really not an issue of economics; it's more an issue of wanting rate parity," he said, adding that other hotel companies were comfortable with its terms.

Bjorn Hanson, a professor at New York University's hospitality school, said that last-room availability would be a bigger issue for Choice than, say, for Marriott, because its economy and midscale brands target mostly leisure travelers. Thus, they have more consistent peak periods, such as annual holidays.

But without the backing of at least one other hotel company, specifically a giant such as Marriott or Starwood, Hanson said, Choice's stand is unlikely to lead to any change in either the demands of the online travel companies or the high fees that hotel companies have come to abhor.

Indeed, hotel companies are famous for grumbling about the online giants' terms. And the grumbling increases when the economy goes south. With rates and occupancy way down this year, hoteliers have been complaining about giving away their rooms to the online agencies, yet they are scrambling to put heads in beds.

"I'm a little disappointed that others didn't say, 'We agree with Choice, and let's pull out,'" Hanson said. "If two or three other companies even just started to negotiate for this, it would really change the dynamics, instead of leaving Choice all by itself."

Because of that lack of support, some wondered if Choice CEO Steve Joyce, who has been at the helm of the company for just a year, overreacted in trying to make a name for himself.

"I think he probably overplayed his hand," said an industry watcher who asked not to be named. "And now it's hard to back down."

Choice has some 5,000 hotels around the world operating as franchises under a variety of economy and midprice brands, including Comfort Inn, Comfort Suites, Quality, Sleep Inn, Econo Lodge, Rodeway Inn, Clarion and Cambria Suites.

It was unclear if Joyce sought the backing of those franchisees before rejecting the Expedia terms that resulted in the hotels being pulled from the booking sites.

Choice has said only that it was "very appreciative for the outpouring of support and encouragement we continue to receive from our franchise owners and others in the industry" as it continued its negotiations with Expedia.

That franchise support, Harteveldt said, will be key in determining how long Choice can hold out.

"What I'm sure is going to happen is the franchisees at Choice are not going to be so pleased with this," he said. "So I hope the executives at Choice have put together their talking points and their messages. And I hope the franchisees accept that. What could potentially happen, depending on how the franchisees negotiated their contracts, [is that] they may say, 'I am going to go do business with Expedia on my own.' ... Then that undermines Choice's position."

Expedia also faces some risks in the standoff, Harteveldt said, because without Choice onboard, it can't claim to carry all the major brands.

Khosrowshahi said the financial impact for Expedia after pulling the Choice properties "is minimal to none."

"Hopefully we can get to a place where we are working with them again, but right now it's not a big deal."

This is not the first time Expedia has found itself in this situation.

Past disputes have led to similar standoffs with Northwest Airlines and InterContinental Hotels Group. IHG was out of Expedia's systems for four years. It rejoined earlier this year, apparently after Expedia agreed to a set of uniform criteria IHG had established in 2004 for all of its agreements with online travel sellers. Ironically, those were the criteria that had sparked the dispute in the first place.

IHG declined to comment on Choice's battle with Expedia, other than to say it was now happy with all of its online partnerships.

"What I think is really sad is that this story is repeating itself," Harteveldt said. "Expedia wants to play God and tends to think too much of itself and not enough of its partners."

Comments
JDS Travel News JDS Viewpoints JDS Africa/MI