BELLEVUE, Washington—While Expedia executives have been tight-lipped about the company’s mid-October decision to take most Choice Hotels International properties off of its Expedia.com and Hotels.com Web sites because of an expired contract, president and CEO Dara Khosrowshahi and CFO Michael Adler addressed it during the company’s third-quarter earnings conference call Thursday.
During the 52-minute conference call, Khosrowshahi was asked by JPMorgan analyst Imran Khan to give some color on the situation with
Choice and a potential similar situation with Best Western International. As reported earlier this week on HotelNewsNow.com, Best Western SVP of marketing and sales Dorothy Dowling said during the company’s convention that it was balking at Expedia’s demand for last room availability, a three-year term with no exit clause and a 25-percent net rate.
Read "Best Western: Coming into focus."
Khosrowshahi’s response: “As far as the discussions we have had with Choice, we're not doing business with Choice right now on a chain basis. We don't have the vast majority of Choice hotels on our site. I don't want to get into the particulars of, let's say, negotiations and discussions we have had for Choice other than to say, first of all, our primary goal is to have the broadest, deepest set and highest-quality set of inventory for the benefit of our customers.
“And this doesn't signal any kind of a change in our overall philosophy as far as how we work with our hotel partners and what we're looking at. It's not really an issue of economics. It's more an issue of our wanting rate parity and inventory parity for our customers. When our customers come to Expedia, we want them to know that they're getting the best prices and certainly we're insistent on that. To the extent that Choice doesn't want to work under those terms, we won't be doing business with each other. Those are terms that we work with, with our other strategic partners. They're comfortable with it. We're comfortable with it. So it's nothing unusual from what I would say is typical practice for us in most of our other OTA competitors, so to speak.
“The good news for us and for our Expedia shareholders is that when we look at the recapture analysis, when we look at our bookings in Choice markets versus—or markets where we have Choice presence versus markets where Choice doesn't have much of a presence, it looks like we're recapturing the vast majority of the bookings. So as far as a financial impact for us, it is minimal to none. And hopefully we can get where we can work with Choice on a go forward basis, but right now really is not a big deal.
“As far as Best Western goes, we don't have a chain deal with Best Westerns. We work with Best Westerns on an independent basis. And everything I know in talking to our market managers, the relationships with those hotels are great and hopefully we'll continue to do lots of business with them as we'll continue to do lots of business with our other strategic partners.”
Later in the call, Deutsche Bank analyst Herman Leung asked about rate parity and inventory parity with hotel chains such as Choice and Best Western. He asked how the negotiations have changed over the past year and what impacts the long-term viability of the contracts that Expedia has with its suppliers.
Adler’s response: “We don't have any issue whatsoever with Best Western. We have done business with the independents for some time. We continue to do business with them, and there is absolutely no change there.
“In general, as far as our hotel contracts and relationships, they've actually been quite stable. The last five, six, seven renewals have—obviously there are discussions that take place, but there hasn't been significant change in how we do business with our hotel partners really over the past one or two years. I think there is a good understanding. There is a great partnership. We work very hard for them and we want to be there especially in this environment for them to help them as much as we can. Our chain volumes are very, very healthy.
“I would say Choice is an outlier. Obviously, they're making choices as to whether they want to participate in the marketplace and if they do, terrific. If they don't, we are really capturing the vast majority of bookings, so we'll be fine. And hopefully we'll come to terms with that.”
Earlier in the week, Choice senior SVP for corporate communications said the two companies have resumed negotiations, and Choice’s top priority is to allow its franchises to maintain control over their inventories.
Read "Choice, Expedia resume negotiations."
