Updated 7:38 a.m. Eastern Standard Time, 28 December 2012 with additional comment from Expedia’s Adam Anderson.
GLOBAL REPORT—Several prominent hotel operators in Scandinavia are not renewing their contacts with Expedia.com and Hotels.com over questions of rate parity and commissions.
First Hotels, Nordic Choice, Scandic Hotels and Thon Hotels have canceled their contracts, accounting for approximately 450 hotels in the region—or approximately 0.3% of Expedia’s global portfolio of 160,000 partner hotels.
The dispute, according to company representatives, stems primarily from ongoing questions of rate parity—namely the ability for operators to offer the lowest rates on their proprietary websites.
“We are not agreeing on that for the past six years. … We want to have independent distribution for all our hotel rooms,” said Bjørnar Tretterud, First Hotels’ VP of sales and marketing.
First Hotels was the first company to pull its inventory when it did so in September, although the operator alleges Expedia had been blocking its 61-hotel inventory since the middle of June.
“We canceled our contract in September after a series of very bad negotiations meetings where Expedia, in my personal opinion, brings nothing to the table and has a long list of new understandings of our contract,” Tretterud said.
“We want to be able to control our prices in all channels—for example, having the lowest price on our Web. That is not possible if you operate with rate parity,” Jan Lundborg, VP of revenue management and distribution of Scandic Hotels, wrote via email.
Scandic, which has 161 hotels in its portfolio, was the second operator to cancel its contract. Next came Nordic Choice, the Choice Hotels International affiliate that had 162 hotels in its portfolio at the end of 2011, whose representatives did not provide comment by deadline. Thon Hotels followed, terminating its contract 27 November, which means the company’s inventory at its 69 hotels no longer will be displayed as of 31 December, according to CEO Morten Thorvaldsen.
“We have terminated the contract because we have not managed to reach an agreement with Expedia. We did not want to enter 2013 with the current terms and conditions with Expedia. This means that it is not possible to book Thon Hotels on Expedia's websites from 1st January 2013,” he wrote via email.
Adam Anderson, director of industry relations at Expedia, confirmed the operators and Expedia had yet to reach agreements on new contracts: “We have seen a few of the Scandinavian region hotels decide to pull their inventory from Expedia.
“It’s not something that we’re thrilled about,” he added. “In general, we’re confident in the value we provide our hotel partners.”
While he declined to divulge specifics of the negotiations, which the online travel agency holds as confidential, Anderson did confirm that he had seen press reports in which hoteliers have expressed concern about not being able to offer the best available rate on brand.com.
The issue of rate parity has garnered significant attention outside Scandinavia in recent months, although with a slightly different bent. Whereas in the cases above Expedia is pushing for rate parity across channels, investigations and lawsuits elsewhere have scrutinized such parity that was already in practice.
In July, for example, the United Kingdom’s Office of Fair Trading issued preliminary results of its investigation into price fixing by hotels and OTAs, saying in a statement of objections that Booking.com, Expedia and InterContinental Hotels Group have infringed competition law by agreeing to rate parity that maintained the same rates on OTAs and brand.com.
Then in August in the U.S., two different lawsuits—one in California and one in Texas—were filed, both accusing several major hotel brands and OTAs of colluding on price and limiting travelers’ ability to secure deals on hotel rooms.
Most recently, Swiss competition commission Comco is investigating contracts by Booking.com, Expedia and Hotel Reservation Service for allegedly limiting hotels’ options to vary their prices.
“There are several anti-competition authorities that are showing interest in this subject as a rate-parity mechanism makes it difficult to for the hotelier to lower the prices even further as it (rate parity) forces the hotelier to sell via the OTA to close to zero margin. This is not in the interest for the end-customer, something the authorities are starting to identify,” Jan Lundborg, VP of revenue management and distribution for Scandic Hotels, wrote via email.
Hotel operators also pointed to unfair commissions and alleged marketing violations as reasons for their not renewing contracts with Expedia, which is parent company of several OTAs, including Expedia.com and Hotels.com.
“First Hotels has asked for mediation in London because of our disagreements with Expedia, this is according to our contract, but Expedia has so far not been willing to meet for mediation. Our claim is 20 million Norwegian Krone ($3.6 million) for misleading marketing and compensation for lost business,” Tretterud said.
He alleged Expedia was showing the company’s inventory as fully booked even though rooms were made available to the OTA.
Expedia’s Anderson declined to confirm the allegations, again citing the confidential nature of its dealings with hotel partners.
First Hotels is seeking mediation on the issue in a variety of arenas. “We have brought our case in to Norwegian law and are about to bring it to Swedish laws as well,” Tretterud said.
First Hotels’ executives also have raised the issue with the Norwegian Competition Authority.
“The Norwegian Competition Authority became aware of the case through the media in September. On this basis, the authority has invited some hotel chains to an informal meeting, where they can provide information about the agreement between the chains and online travel agents, and how these agreements can affect competition in the market,” said Øyvind Nilssen, senior economic adviser for the authority.
The meeting is scheduled for later this month.
First Hotels’ Tretterud said he has been in contact with several other brands and affiliations who have said they will pull their inventories as well. Despite attempts to reach the named parties, HotelNewsNow.com was not able to confirm the claims.
For its part, Expedia is eager to resolve the disputes, Anderson said.
“We obviously have to have some more productive discussions with our partners in the region. It’s an important region for us,” he said.
“We’re in touch with these guys and we share their concerns. They’ve been partners, and we’d love to have partners again. We need to sit down and have some productive discussion about what that looks like,” Anderson added.
First Hotels’ Tretterud did confirm that after some delay, Expedia representation reached out last week and mediation is under way.
Those operators who spoke with HotelNewsNow.com confirmed they still distribute rooms on several other OTAs.
Since taking its inventory off Expedia and Hotels.com, First Hotels, which previously drew approximately 8% of its bookings through the channels, has since shifted strategies to drive more visitors to FirstHotels.com.
“Most of the losses have now been generated in increasing turnover in Booking.com and our own website,” Tretterud said. Year over year, the company has seen a 78% increase in bookings made on its brand site.
But Tretterud and the other operators interviewed for this report said they were eager to get back into bed with Expedia.
“I want to get back to Expedia if under the right terms and conditions and if under the right commissions,” he said, adding that Expedia has a team of “brilliant marketers” with whom they want to continue working closely..
The sad reality is, expedia does little more for hotels than bleed revenue. If expedia (and other OTA's) disappeared overnight, travelers would simply book directly with the hotels of their choice. Assuming guests paid the same amount for their bookings, the hotels would see a 20%-30% (or more) increase in revenue, money they could put back into their properties and improve guest experience. Instead, that money funds expedia's massive advertising budget and fills their fat cats' wallets - no - matresses.
1/22/2013 6:33:00 AM
I guess because a lot of hotels flaunt rate parity, and other OTA's turn blind eye and Expedia does not.
1/3/2013 2:59:00 PM
So guys you should pull inventory from all ota ´s if you have balls? Do you think that all traffic will be redirected to your brand. Com sites? I ´ m sure you will not survive for more then 6 months! So naive!!!
12/31/2012 1:28:00 PM
Hats off to them. Hope the so called world leader FRANCHISORS in the US learn from this. They dont spend money on web marketing and pay a BIG premium to Expedia/Hotels.com and other OTAs.Why cant they use the same money for a Full Fledged Sales & Marketing Team as well as WebDevelopment and SEOs?I am even aware of a BIG Flag,who had a marketing budget for ONLY 6 months/year,saying winter months are slow and they CANNOT afford to have advertising dollars. This is how smart this Corporates are in the US
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