Marriott International has negotiated that online travel agency Expedia is now the exclusive distributor of its wholesale and promotional rate, an agreement that will produce aftershocks for other major hotel companies and the entire OTA-hotels dynamic.
All year, hotel industry watchers have been watching for signs of new agreements between Marriott International and one of the big presences in the online travel agency world, Expedia.
Marriott is the largest hotel firm on the planet, and what it can negotiate with OTAs might not be exactly replicated by everyone else but can be used as a starting point in conversations.
Marriott and Expedia have come to an agreement concerning Marriott’s wholesale and promotional room rates that now sees Expedia as exercising a monopoly on them.
The agreement, which was thrashed out in April but made public this month, does not change the relationship some third-party firms have with Marriott, but my understanding is that most firms’ will see changes.
Wholesalers provide a revenue stream that places the risk on themselves, not hotel firms, which in today’s complicated world of distribution might be considered as too high a revenue loss for those hotel companies.
The agreement probably also means that Marriott bean-counters will spend less time poring through the Internet for rogue rates and leakage from their own P&Ls.
How it works, I think, is that hoteliers provide discounted rates to wholesalers, which buy in volume and promise to cover the cost of the rooms. For this risk, the wholesaler increase the rooms’ rates and sells them on to the online travel agents, who, of course, sells them on the final guest for an additional mark-up. The wholesaler only charges the OTAs for the rooms the OTAs sell, the rates varying depending on the OTA.
The wholesaler is the classic middle-man business, and business has always loved dispensing with such services that—so would the accompanying marketing blurb state—would result in lower prices and added value for guests.
It also has the benefit that there will be, to some degree, fewer different rates floating around, which usually only become known to the hotel at the front desk when a guest might complain about what they see as less value due to the hotel not jumping up and down in the air to greet a guest who has booked via a wholesaler.
No loyalty points will be granted, too, which could be the first ripple of guest discomfort.
At almost every industry conference I have attended this year, and maybe also into the last few months of last, when there has been a representative of one of the major OTAs present, the conversation at some stage has reached to the point that OTAs now are the best friends of hotel firms.
No longer are we the enemy, but a partner, is the rhetoric I have heard that surely for attendees has now become a bit of a cliché, but as with all clichés maybe with a grain of truth.
Keep your friends close and your enemies closer, right?
“And what will happen if Amazon, Facebook and Google decide to enter the picture?” said Alex Dragan, director of global analytics at Four Seasons Hotels and Resorts during this year’s Hotel Data Conference in Nashville, referring to the possible new bogeymen. For a wonderful “conversational” article in our pages on this new dynamic, here is Accor CEO Sébastien Bazin in conversation with Expedia CEO Mark Okerstrom.
Marriott has the clout to say to wholesalers, “Follow our rules or be excluded,” but it will be really interesting to see where this all goes, for how rates are disseminated and what happens to other OTAs to adapt to what is a new page in the saga.
Last week’s Brexit nonsense
The United Kingdom Prime Minister Boris Johnson went to Luxembourg to discuss Brexit with European leaders and decided not to attend a press conference with Luxembourg Prime Minister Xavier Bettel reputedly due to the constant booing when he walked around the capital Ville de Luxembourg.
Johnson, showing the most decent form of British affability, said he did not attend the press conference because to have done so in the face of all that booing would have been very impolite to Bettel, although I am guessing the booing might have ceased temporarily if Bettel was speaking.
The conference went on with two podiums but only one speaker.
Some people said this was rude of Bettel, as such a “stunt” could have no effect other than to embarrass Johnson, his guest.
Meanwhile nothing happened that anyone could say has moved us all closer to any end.
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