Duff on Hospitality Law

This week's Update includes a story detailing yet another state’s efforts to close existing tax loopholes so that it may collect proper sales/occupancy taxes from OTAs. I hope you enjoy.

Pennsylvania Closes Tax Loophole
("PA Senate Approves Bill to Close Sales Tax Loophole with Online Travel Companies, PA Senate GOP, October 26, 2018)
For years now we’ve read and featured stories about enterprising legal counsel convincing state and local governments to pursue claims against merchant-model OTAs for failure to pay sales or occupancy taxes on the full selling price charged to guests by the OTAs (instead of paying taxes only on the net rate paid by OTAs to the hotel supplier). More often than not these claims ended in decisions against the local governments on the basis that the operable tax statute was not written to apply to the mark-up or margin added by OTAs to the net rates they received (among other things).  Pennsylvania is determined to do something about that. Last week, the Pennsylvania Senate passed legislation making clear that the State’s sales tax applies to the full selling price charged by OTAs operating in the State. The Senate passed legislation now moves on to the Pennsylvania House of Representatives for further consideration.

Booking Holdings, Expedia Group and...Kiwi? 
("Online Travel Agency Kiwi Has a Plan to Fight the Giants," Skift Travel News, October 18, 2018)
Conventional wisdom says that start-ups in the online travel agent space will never make it far because of the absolute dominance of established platforms, Booking Holdings, Expedia Group, etc.  Kiwi, a Czech Republic based startup, may be proving otherwise. Through a combination of superior guest service, currency arbitrage, diverse demand generators, powerful partnerships and just plain luck, Kiwi is making a name for itself. This past year alone (2017) it processed airline bookings with a gross value of over $925 million. This year it expects to earn over $200 million in revenue. Whether Kiwi can continue its luck streak remains to be seen, but Kiwi is definitely a name to remember.

Google recently updated its trademark policy, and although some believe the changes are cause for concern, citing increased costs per click, that may not be the case. The following aims to bring some clarity to the issue.

Google has consistently expanded its Google Ads policy in allowing trademark keyword bids and the use of trademarked terms in the text of advertisements. The tech giant has always expanded these policies by regions, and just last week, Japan was added to the mix.

Expedia Expands Its Voice-Activation Résumé
("Expedia Brings Voice Bookings, Cancellations and Rewards to Google Assistant," Skift Travel News, October 9, 2018)
It was less than two years ago that we featured Expedia’s introduction of limited functionality (or “skill”) for Amazon’s Alexa devices. Now, Expedia is bringing far more robust functionality to devices powered by Google Assistant. According to Expedia, this new functionality will allow travelers to search hotels and book (or cancel) reservations and access and use their Expedia loyalty program accounts. Although this new functionality will debut for U.S. travelers in English only, additional languages are planned. If you have not already done so, it may be time to update those keyword and negative keyword contract provisions.

Another relatively quiet week in the world of distribution.

Hopper Is Poised for Growth
("Hopper Raises $100 Million More for Airfare and Hotel Rate Prediction," Skift Travel News, October 3, 2018)
We brought you our first Hopper story back in January following its announced launch of Hopper Hotels. The predictive pricing based booking platform was back in the news this past week with its announcement that it had closed a $100 million Series D round of financing (at a valuation of $750 million). According to Hopper, the investment will fund adding market managers in key international markets to secure more direct airline and hotel inventory. Bucking the trend of predictive analytics travel companies before them (think Farecast), Hopper is one of the few booking platforms to successfully leverage its airfare and hotel room rate pricing analytics as a differentiator among other online booking sites.

And You Thought Today’s Health and Safety Requirements Were Tough
("China Prepares Unprecedented Online Tourism Regulation," Stories, September 28, 2018) 
Those of you who have negotiated online travel agency agreements likely recall the dreaded “Health and Safety” provisions mandated by most online travel agencies. As proposed, these provisions allow online travel agencies to reach deep into participating hotels’ operations to evaluate the hotels’ preparedness for handling health and safety emergencies. Those provisions are likely to get much tougher – at least for those of you with properties or other operations located in China. According to a report issued by Bloomberg last week, the Chinese Ministry of Culture and Tourism is poised to issue sweeping new regulations targeting online travel agencies and platforms. According to Bloomberg, the new regulations would require online travel providers to “improve rescue and emergency plans, better vet and manage their on-ground service providers, purchase liability insurance and protect clients’ personal information.” The regulations are likely to take effect later this year following a mandatory 60-day public comment period.

Agoda Homes Seeks To Gain Ground
("OTAs Booking Holdings’ Agoda Takes a Distinctive Approach on Short-Term Rentals," Skift Travel News on September 21, 2018)
For some time now, Agoda has featured short-term rentals on its website and application. The problem is that no one really knew it.  Agoda is now trying to change that as it seeks to bolster its position in the short-term rental arms race. In recent months, Agoda has updated its Agoda Homes branding and has begun offering temporary discounts (5-20%). This is in addition to offering one of the industry’s few short-term rental best rate guarantees. These efforts are apparently working as users seeking short-term rentals are growing 30-40% faster than users booking traditional hotel rooms. As Agoda (and Booking.com) continue to ramp up their short-term rental offerings and historically exclusive short-term rental sites continue adding traditional hotel rooms, it will soon be impossible to distinguish one online booking channel from another.

This week’s Update is one of the largest in some time.

Unprecedented Penalty for Author of Fake Hotel Reviews
("A Peddler of Fake Reviews on TripAdvisor Gets Jail Time," Skift, September 12, 2018)
Last week an Italian court sentenced the owner of Italian company, PromoSalento, to nine months of jail for selling fake reviews to hundreds of businesses, including hotels. According to TripAdvisor, the Italian court’s unprecedented sentence is the culmination of efforts by TripAdvisor dating back to 2015 to put an end to the known fraudulent reviewer. Whether the Italian court’s sentence is a sign of things to come by European, UK and US regulators remains to be seen, though TripAdvisor is keen to garner the support of regulators in putting an end to fake reviews as it continues its efforts to establish and maintain the legitimacy of its core review business.

Job Postings Hint at TripAdvisor’s Growing Interest in Travel Packages
("TripAdvisor Hints at Its Growing Interest in Vacation Package Search," Skift Travel New, September 6, 2018)
Since April of this year, TripAdvisor’s job postings for open engineering positions have included references to “travel packages.” The size of TripAdvisor’s effort and what opportunities the effort might present for suppliers remain to be seen. TripAdvisor has for some time permitted third parties to feature packages for specific destinations and from time to time has included packages in flight search results. To date, however, TripAdvisor has relied on third parties to assemble the featured packages and not tried to create its own packages (which is typically quite difficult and could subject TripAdvisor to a never-before-seen level of EU scrutiny and oversight). With the package industry estimated to represent $71 billion in gross bookings in 2018, it is no wonder that TripAdvisor is considering options for cracking the package code.

Pending the results of a lawsuit challenging the medical requirements under the Hotel Employees Health and Safety Initiative (“I-124”), the City of Seattle has agreed to delay enforcement of Part 3 of that law. Part 3 requires hotels with 100 or more guest rooms to provide insurance at no greater than 5% of medical costs to certain low wage workers, as defined under I-124. If a low wage employee does not enroll in insurance or pays more than 5% of wages toward insurance costs, the hotel employer is required to provide a healthcare subsidy to the employee.