Duff on Hospitality Law

This week’s Update features a variety of stories, including the latest news on the new cottage industry of resort fee litigation and Amazon’s growing (yet understated) significance in the travel industry. Enjoy.

• • Hyatt Faces Class Action Over Resort Fees.  Late last week, consumer advocacy group, Travelers United, filed a class action in Washington D.C. superior court over Hyatt’s alleged resort or destination fee practices.  This lawsuit is the latest in a string of lawsuits brought against hoteliers (e.g., Hilton and Hyatt) and OTAs (Booking Holdings) over their alleged failure to properly disclose mandatory fees.   

• • Amazon’s Growing Understated Influence in the Travel Industry.  Thought you knew everything about Amazon’s pursuit of the travel industry? Think again.  While many of us get caught up in Amazon’s latest efforts in Indian rail passes or virtual tour offerings, Amazon has been quietly growing its role in the travel industry – largely through its cloud computing offering, Amazon Web Services.  Amazon’s cloud customers include Travelport, ATPCO, Lonely Planet, Ryanair and Trip.com.  In fact, AWS and Trip.com have formed a joint innovation lab focused on, among other things, flight business, hotel business and artificial intelligence. 

This week’s Update features two stories on Booking Holdings’ pending acquisition of eTraveli, which remains under EU review.  Enjoy

1. Booking Holdings’ eTraveli Acquisition Remains Under Review.  It’s been a few weeks since we last updated the status of Booking Holdings’ long proposed acquisition of flight platform, eTraveli.  With the month of August rapidly coming to a close, it is crunch time for both Booking Holdings and the EU Commission regulators who are scrutinizing the proposed transaction.  Regulators are expected to issue their decision at the end of the month.  Regulators have expressed concern that the transaction will further cement Booking.com’s dominant position in the EU, particularly for hoteliers.  In response, Booking has recently proposed offering users who book flights on Booking.com a “carousel” of hotel options – featuring hotels available not only on Booking.com, but other platforms as well.  While some speculate that sister-company Kayak might be source of this alternative hotel inventory, it isn’t clear yet where the additional inventory might be sourced (e.g., competing hotel platforms, hotels’ own booking channels, etc.).
   
   
2. Hopper Launches Hopper Cloud for Airlines and Announces First Airline Partner.  On Wednesday this past week, Air Canada announced that it was partnering with Hopper to offer passengers booking on Air Canada’s website the option to purchase policies allowing them to cancel their flights at any time for any reason on eligible fares.  Hopper referred to the new partnership as the launch of Hopper Cloud for Airlines, extending the full array of fintech products and services to airline partners. 
   
   
3. Major Accommodation Platforms Increase (Again) Quarterly Sales and Marketing Spend.  It has been a refrain often repeated in our weekly Updates.  Another quarter, and another quarter of increased spending by the major accommodation booking platforms on sales and marketing.  While spending increased for each of the big three platforms (Airbnb, Expedia and Booking) for various reasons, all three were quick to point out the growing percentage of bookings coming through lesser expensive direct channels – loyalty programs, mobile applications, etc.    

It was another relatively quiet week in the industry other than news late this past week that the Texas AG had filed suit against Booking Holdings over its platforms’ deceptive display of resort fees. Some highlights from the past week:

Takeaways from Expedia’s Latest Quarterly Update.  I’ll let those much smarter than me comment on Expedia’s quarterly financials.  Items that caught my attention in reviewing the earning’s call transcript (copied) included the following:

1. Loyalty, loyalty, loyalty.  Expedia CEO, Peter Kern, could not say enough about Expedia’s recent launch of its combined loyalty program, One Key, and the value of a robust loyalty program.  Loyalty has clearly become a key focus of Expedia for the near term.  During the second quarter, Expedia enjoyed its highest number of active loyalty members – up 15% percent year over year.  Peter Kern estimates that the program now has 70 million members.  The One Key program offers users multiple tiers of program membership, with each progressively higher tier enjoying greater discounts.  Discounts are funded by supplier partners (not by Expedia (unlike Booking.com)).    
2. B2B Business Continues to Grow.  The strength of Expedia’s B2B program drove Expedia’s record gross bookings for the second quarter.  Revenue for Expedia’s B2B business grew 32% YOY in the second quarter.  Expedia announced two new B2B business partnerships this past quarter – Mastercard and most recently, Walmart. 

Takeaways from Booking Holdings’ Latest Quarterly Update.  Here are my takeaways from the latest quarterly earning’s update. 

1. Disparate Uses of Generative AI.  Booking Holdings’ use of artificial intelligence varies by platform – all in an attempt to ascertain the most beneficial use of the emerging technology.  Priceline employs generative AI in the form of “Penny,” a travel assistant that is intended to assist travelers at the “end-of-the-funnel” while making their booking.  In contrast, Booking.com’s use of the technology is at the “top-of-the-funnel” to assist users in their initial trip planning.  Kayak, unlike its sister companies, is currently exploring the use of AI internally for coding and other similar purposes. 
2. Alternative Accommodations Continue to Grow.  Approximately 34% of all Booking.com room nights were with alternative accommodations.  Global listings of alternative accommodations reached 7 million at the end of the quarter (an 8% increase YOY).
3. Mobile Application Use Continues to Grow.  Approximately 48% of all room nights were booked through Booking Holdings’ mobile applications in the second quarter (a 6% increase YOY). 
4. Payments Platform Grows.  Approximately 48% of Booking.com’s gross bookings were processed through Booking.com’s payments platform (versus 38% in the second quarter 2022). 

Texas Attorney General Files Suit Against Booking Holdings.  “Duped”  “Misled” and “Deceived”  - All three words appear in the Texas AG’s recently filed complaint against Booking Holdings to describe Booking’s offending conduct.  Similar to previous complaints filed against Hyatt and Hilton, this latest complaint targets Booking’s failure to include mandatory fees in the rates displayed on its websites.  Even when the fees are finally disclosed at checkout, the small font and inconspicuous placement of the disclosures make them unlikely to be seen.  According to the complaint, Booking further misleads consumers by grouping mandatory fees together with taxes in a single line item “Taxes and Fees” at checkout.  The complaint not only highlights the effects of Booking’s practices on Texas consumers, but also on Booking’s “honest competitors” that are put at a competitive disadvantage by appropriately including mandatory fees in their displayed prices (the complaint points to recent settlements with Marriott and Omni and Marriott’s total price displays).  We will continue to monitor and report on this case as it moves forward.

After several slow weeks in the industry, this past week featured a number of important updates, including earnings releases and calls from Booking Holdings and Expedia Group.  Transcripts from the two companies’ earnings calls are attached.  Enjoy.

• • Expedia Scores a Win with Walmart + Travel.  While Expedia may have lost an important relationship with its recent termination of Hopper, Expedia was able to make up for some of that lost B2B traffic with a newly announced partnership with Walmart.  According to the companies’ announcement, Expedia will be providing the retailer with hotel, airline, rental car and activities inventories.  Walmart members who use Walmart to book travel will receive Walmart cash (up to 5% for hotels) back.  Users of Expedia’s B2B platform (or any other similar B2B platform) should give some thought as to how changes like the recent Hopper termination and now Walmart addition might affect their traffic through the platform and their performance against any contracted performance metrics.
    
    
  • AH&LA Voices Support for Proposed Federal Resort Fee Legislation.  By now, most everyone is familiar with recent federal legislation proposed by U.S. Senators Klobuchar (D-Minn.) and Moran (R-Kan.).  If you’ve not read the proposed legislation, click here to view an early initial draft.  To many pundits surprise (several suggested that hoteliers would never get behind the legislation), the American Hotel & Lodging Association has come out strongly in favor of the Act.
    
    
  • Expedia Group and Bookings Holdings Enjoy Strong Second Quarters.  Both Expedia Group and Bookings Holdings reported strong second quarter results last week.  Even with record levels of gross travel bookings in the second quarter, Booking Holdings expects that it may see even better results later this year (based on July hotel booking activity that represents a 20% YOY increase). Expedia also enjoyed a record breaking quarter (gross bookings and revenue), though revenues fell short of analysts’ expectations.  Earnings calls provided insight into a number of ongoing initiatives within both companies, including ongoing B2B efforts (Expedia), the launch of a single, unified loyalty program (Expedia), the introduction and use of Artificial Intelligence (both) and the connected trip (Booking).