DALLAS -- Hotels.com terminated its distribution agreement with
Travelocity as the hotel discounter pulled its hotel inventory off
Hotels.com claimed Travelocity breached its contract Aug. 29 by
terminating "the exclusivity to which Hotels.com was entitled under
the hotel supply agreement."
Hotels.com also claimed Travelocity breached the agreement other
times during the past two years. For example, Travelocity did not
honor the exclusivity pact for Web portals powered by Travelocity,
Travel and AOL Travel, said Bob Diener, president of Hotels.com.
Diener added that Travelocity did not honor the exclusivity
agreement in "a large number of cities."
Diener said Hotels.com was contracted to be Travelocity's
exclusive provider of merchant hotel inventory, in many markets,
until December 2004. The provision, enabling Hotels.com to display
hotel inventory on Travelocity, was supposed to expire in June
2005, said Diener.
Travelocity's parent, Sabre, said in a Securities and Exchange
Commission filing Aug. 29 that Travelocity "exercised its right,
pursuant to Travelocity's affiliation agreement with Hotels.com ...
to expand the distribution of its own merchant hotel
Perhaps an indication that the Travelocity-Hotels.com tiff could
end up in court, Travelocity president and CEO Sam Gilliland said,
"Hotels.com may not like it, but they remain bound to the terms of
our agreement, including its confidentiality, even though we have
exercised our contractual right to end the exclusivity
Regarding Hotels.com's accusation that Travelocity breached its
contract, Gilliland said, "Hotels.com hadn't provided any notice of
breach, we're certainly not in breach, and we're hopeful any such
concerns can be resolved in a confidential manner, consistent with
For the three months that ended June 30, Hotels.com derived some
13.8% of its revenue from the Travelocity relationship. Diener
chose not to look at the relationship that way, saying that hotel
sales on Travelocity account for 3% InterActiveCorp's overall
revenue. Hotels.com is a wholly owned subsidiary of InterActive
Hotels.com is now turning to sister company Expedia as a
partner. The two companies, both owned by InterActive Corp., are
"commencing full-scale cooperation and cross-selling initiatives,"
With Travelocity out of the picture, marketing strategies
between Hotels.com and Expedia can be implemented at "a much faster
pace," said Bob Diener, president of Hotels.com.
Meanwhile, Travelocity Sept. 2, trumpeted the growth of its
merchant hotel program.
The program now includes more than 7,000 hotels, said
Travelocity, which exceeds its year-end goal of 4,000 signed and
operational merchant hotels.
To contact reporter Jerry Limone, send e-mail to [email protected].