Duff on Hospitality Law

As evidenced by the stories in this week’s Update, this past week was a relatively quiet week in online travel.  Not surprisingly, many of this past week’s headlines featured the recent report by Phocuswright suggesting that the online booking channel pendulum has once again swung back in the OTAs’ favor.   Enjoy.

• • How Do You Attract and Convert More Online Bookings?  Act Like a Retailer, Not a Hotelier.  A recent survey conducted by Travelport revealed that travelers, particularly younger travelers, want the same “simple, easy and supportive experience” they receive from every other online sector (other than travel).   So how do hoteliers address these issues?  Provide simplified and intuitive shopping experiences, easy support and transparency.  Other key takeaways from the 2000 consumer survey include (a) 59% of consumers report that getting exactly what they want is more important than price, (b) 84% of younger (18-41) consumers want human led customer support (so much for ChatGBT) and (c) 49% of consumers would pay more for travel to save on carbon emissions. 

• • TripAdvisor Releases Biennial Review Transparency Report.  TripAdvisor has released its biennial Review Transparency Report.  According to the Report, of the nearly 30 million reviews received by the online review platform, 4% of the reviews were determined to be fake or fraudulent in 2022.   TripAdvisor’s fraud detection process identified 72% of the fraudulent submissions before they were posted online.  TripAdvisor also reported that it removed more than 24,000 reviews as originating from paid review companies and imposed ranking penalties on more than 33,000 businesses for fraud.

• • OTAs Once Again Receive the Majority of Online Bookings.  According to a recent report by Phocuswright, OTAs are again enjoying the majority of online hotel bookings.  Prior to the pandemic (largely driven by hoteliers’ much-publicized direct booking efforts and robust loyalty programs and then favorable public perceptions during the pandemic), hoteliers were able to reduce their reliance on OTAs.  Now, during this post pandemic period, OTAs have taken back some of their lost share.  Prior to the pandemic, OTAs’ share had dropped as low as 49% of online gross bookings, but that number has now rebounded to 52%.  For reference, each percentage point can represent $1B in business (or $100M - $200M in commissions).  So why the shift?  Experts point to OTAs’ advantage in marketing (marketing investments have again ramped up post pandemic) and improving technology.  How a possible 2023 recession might again affect the two sides’ relative market share remains to be seen.

This week’s Update features the obligatory Expedia / ChatGPT story as Expedia garnered most of this past week’s industry headlines with its announced integration of ChatGPT into its iOS application.  For those of you following the evolving competition landscape in the EU, you might find our lead story regarding the EU Commission’s recent release of its 2022 overview of some interest.  For those of you interested, links to the EU Commission’s report and accompanying staff working document (detailing, among other things, ongoing efforts in the travel industry) are available in the featured story. 

• • European Commission Releases Report Summarizing Its 2022 Policy Initiatives.  While the Commission’s report provides a good high-level review of the Commission’s 2022 initiatives, the accompanying Commission Staff Working Document provides much greater detail about many of the Commission’s initiatives broken down by both “competition instruments” and industry specific enforcement efforts.  Of particular interest is the Working Document’s discussion of the lodging industry (found on page 92 of the Working Document), highlighting the Commission’s 2017-2021 study of hotels’ distribution practices following several member states’ adoption of so-called narrow parity requirements and suggesting that the study and possibly the DMA (hello Booking.com) would continue to play a role in the Commissions’ future monitoring and enforcement in the industry.  For those of you wanting more information about the 2017-2021 study, we included the study in an earlier Update and a copy of the study’s results is available here.
    
    
  • Lufthansa’s Innovation Hub Launches Meetings Booking Platform - Cloopio.  In an effort to better leverage the WFH and hybrid work models, Lufthansa’s Innovation Hub (LIH) has launched a new booking platform designed to promote “curated team off-site packages.”  Cloopio’s offerings (initially around Berlin) include transfers, accommodations, meeting rooms, catering and team building activities.  Cloopio is the second small group booking platform launched by LIH. 
    
    
  • Kayak Abandons Plans to Become Lifestyle Hotel Operator.  Anyone surprised by this announcement?  We’ve featured several stories over the past year or two about Kayak’s robust ambitions to launch a lifestyle hotel business.  Kayak CEO and co-founder, Steve Hafner, recently confirmed the news first reported by Skift, that Kayak late last year shuttered its lifestyle hotels business (laying off its development team in the process).  Hotels currently operating under the “Kayak” brand will drop the name as leases for those hotels expire.  Notwithstanding the change in direction, Kayak still plans to build out a hotel technology business, leveraging its ongoing relationship with hotel operator, Life House. 

This week’s Update features an important update from my partner Eryn Hoerster on recently proposed federal legislation designed to reign in alleged drip pricing abuses.  Readers of our Update know that we’ve featured several stories over the past year detailing efforts at the federal and state level to address these so-called junk fees, including efforts at the FTC, state enforcement efforts and proposed state legislation (by both Republicans and Democrats).  Expect many more stories on this evolving issue in the months ahead.  Enjoy.

• • Senators Introduce The Junk Fee Prevention Act.  On March 23, 2023, Senators Richard Blumenthal (D-CT) and Sheldon Whitehouse (D-RI) introduced federal legislation seeking to eliminate “excessive, hidden and unnecessary fees” (including hotel resort fees)  that are imposed on consumers.  Details of the bill are available in Eryn’s update below.  Fortunately, as drafted, the bill targets not only hoteliers, but also third parties that advertise rates for short-term lodging (i.e., OTAs).
    
    
  • Adaptive Content to Redesign Booking.com Search Results.  In an interview last week at Skift’s Future of Lodging Forum, Booking.com’s Senior Vice President and Chief Technology Offer, Rob Francis, offered attendees a glimpse of changes that might be coming to the OTA via the introduction of ChatGBT or other similar AI technologies.  According to Francis, this new technology will allow the platform to deliver search results reflective of the type of user doing the search and the user’s intent (versus one or more potentially misleading search terms).  Francis believes that Booking.com will have a distinct advantage against its competitors in leveraging these new AI tools given its long history with AI and dedicated AI work force. 
    
    
  • American Airlines Forces Adoption of NDC.  What better way to get travel agents to embrace your new preferred connectivity solution than limiting certain (preferred) content to only that solution?  On April 3, American Airlines moves forward with its controversial plan to make certain content available only through NDC connections.  While agents may still view these preferred fares via their legacy GDS connections,  agents will be forced to use an NDC connection to make the booking. 

On March 22, 2023, Senators Richard Blumenthal (D-CT) and Sheldon Whitehouse (D-RI) introduced a bill “to limit and eliminate excessive, hidden, and unnecessary fees imposed on consumers.”  In response to President Biden’s call for legislation, the “Junk Fee Prevention Act” was referred to the Senate Committee on Commerce, Science and Transportation for consideration. 

The Junk Fee Prevention Act targets fees and pricing disclosures in the lodging, ticket, and to a limited extent, the airline and communications industries.  With respect to the hotel and lodging industry, the proposed legislation could result in a reset in the market for hotels that charge a resort or amenity fee, and provide a level of uniformity between price disclosures made by hotels directly and those made by third-party applications used to advertise and book hotel rooms.

Specifically, the legislation would apply to both hotel/lodging providers as well as any third-party that “advertises rates or the purchase of short-term lodging.”  Such covered entities would be required to display – at the first time any price is shown – the “total price” of the lodging, including any “mandatory fee” that is either required, not reasonably avoidable, or not expected by a reasonable consumer to be included in the price.  Violation of the Junk Fee Prevention Act would amount to an “unfair or deceptive act or practice” pursuant to the Federal Trade Commission Act.  Enforcement would be provided by the FTC as well as State Attorneys General. 

The Junk Fee Prevention Act is the latest legislative proposal aimed at targeting resort fees, following the February 2023 announcement of AB 537 in California. Similar bipartisan legislation was introduced in September 2019 in the US House of Representatives but was not enacted.

Click here to access the contents of the bill.

This week’s Update features two anti-trust / competition law updates from the EU (the Netherlands) and South America (Chile).  Enjoy.

• • Google Offers Price Guarantee.  Late last week, Google announced it was re-launching a pilot program to guarantee the prices of select U.S. flights; if travelers find a lower airfare prior departure, Google will refund them the difference.  Google piloted a similar limited guarantee in 2019, but ultimately terminated the pilot with the arrival of COVID.  For those flights that benefit from the guarantee, Google monitors the price of the flight until the scheduled departure.  If the price does drop, Google refunds the traveler the difference in Google Pay that can be used for other online purchases or ultimately refunded.  Refunds are capped annually at $500 for up to three guaranteed bookings. 
    
    
  • Chilean Authorities to Examine Online Platforms in Travel Industry.  The Chilean competition authority announced last week its plan to launch a detailed study of the hospitality industry, including  online digital platforms that advertise and facilitate the booking of accommodations.  According to the authority, a preliminary survey of the market found it necessary to examine whether the existing regulatory structure was adequate to ensure competition.  The study is expected to be complete in December, with a final report issued in March 2024. 
    
    
  • Dutch Court Releases Decision Referring Booking.com’s Contract Clauses to Full EU Court.  Readers will recall the significance of this case and the Dutch’s court’s decision to refer the case to the higher EU Court.  At stake are not only Booking.com’s contractual parity provisions, but more importantly, the correct methodology to be used when defining the online travel market.  If the market is narrowly defined (i.e., online sellers of travel products and services only), then Booking.com most certainly will be determined to have a large share of the market and likely subject to greater anti-trust scrutiny (including the Digital Markets Act (DMA)).  Although the linked decision is entirely in Dutch, it contains English commentaries throughout.
    
    
  • Yet Another Story on the Growing Influence of Social Media in Travel Marketing.  Ten thousand dollars ($10,000) a month and a $7500 travel allowance to travel the world and stay at Blueground’s U.S. and European properties, sign me up.  I think I’d make a great travel influencer.  This story follows up on a recent story we featured emphasizing the growing importance of social media platforms in travel marketing.

This week’s Update features a heavy dose of online group booking platforms and an interesting report on the growing importance of social media and in particular, travel influencers. Enjoy.

• • Wyndham Adopts Groups360’s Online Booking Platform. Wyndham is the latest large hotelier to announce its adoption of GroupSync, Groups360’s booking platform that allows users to view, select and book blocks of guest rooms and meeting space online or via Groups360’s so-called “Smart RFP.” Wyndham properties will soon be available via Smart RFP and later this year via GroupSync’s online platform. Marriott made a similar announcement earlier this year.
    
    
  • CVENT Set to Go Private – Again. Well, its official, the rumored purchase of group booking lead generator and booking platform, CVENT, by Blackstone is happening. Blackstone announced last week that an affiliate (along with minority investor, Abu Dhabi Investment Authority) is acquiring CVENT for approximately $4.6 billion. The purchase price represents roughly a 52% premium for existing shareholders. According to Blackstone, the purchase provides another example of Blackstone’s continued belief in (and investment focus on) the recovery of the events and travel industries. From my perspective, it will be interesting to see whether this change in ownership results in any meaningful improvements in CVENT’s sometimes strained relationships with its largest hotel operator customers, particularly as Groups360 (partially owned by many of these same customers) continues to announce corporate-wide partnerships with the industry’s largest players. Stay tuned.

Finally, we’re thrilled to announce the arrival of our newest hospitality team member, Erin Snodgrass. Details about Erin and her practice can be found here, but in short, Erin rejoins our hospitality team after a 20+ year hiatus forming and leading her own women-owned law firm. While at her firm, Erin represented a number of hospitality and travel industry clients (Starwood, Expedia, Egencia, Amex GBT and others) and technology clients (Microsoft and Amazon). Erin’s addition will add much needed capacity to our team in the areas of privacy, sales and marketing, distribution and procurement. Please join me in welcoming Erin.

This week’s Update features another heavy dose of earnings-related stories, including details from last week’s Booking Holdings release.  If you are interested, we’ve linked below a copy of the transcript from Booking.com’s earnings release call.  Enjoy. 

• • Highlights from Booking Holdings’ Latest Earnings Release.  While Booking posted strong financial results in its latest quarterly (and year-end) earnings release (quarterly and annual revenue, room nights and gross bookings were up considerably against 2021 numbers and showed solid increases over 2019), these were my takeaways from the recent release:
    • Payment Platform.  Booking.com processed 42% of its gross bookings in the fourth quarter on a merchant model basis through Booking.com’s payment platform.  This number is consistent with the third quarter numbers.  I expect to see this number climb considerably over the course of 2023 as more hoteliers consider moving to the platform.
    • U.S. Market.  Both Priceline and Booking.com continue to do well in the U.S. market (room night growth and gross bookings now exceed 2019 levels), with growth believed by Booking to be outpacing the market’s recovery overall and resulting in increased market share (look out Expedia).
    • Mobile Application.  45% of rooms nights were booked through Booking Holdings’ mobile applications (a 13% increase over 2019).  As we have reported in previous Updates, Booking.com’s app was the most downloaded OTA app globally in 2022 and reached the number one spot in the United States in 2022 for the first time (look out Expedia).
    • Merchandising (a/k/a discounting).  According to Fogel, offering “attractive” prices to travelers is critical to providing value to Booking’s customers.  These attractive prices are the result of obtaining competitive rates directly from Booking’s supplier partners and “building up” the ability to offer discounts and other incentives (i.e., merchandising).  Booking reports that it has been pleased with the results achieved from merchandising in 2022 (in fact, the cost of these merchandising efforts in 2022 were much higher than in 2019 and offset any take rate increases seen from increasing revenue from payments) and has plans to continue its use (“selectively”) going forward.  Question whether these merchandising opportunities are the result of Booking’s contracting efforts or leveraging ongoing changes in EU competition law.
    • Year Ahead.  If Booking’s January results are a harbinger of what is to come for Booking in 2023, it looks to be a good year.  In January, Booking booked 95 million room nights, a new monthly record by approximately 10 million.  The increase in bookings reflects a 60% year-on-year increase and a 26% increase over the same period in 2019. 

• • IHG Seeing Benefits of Technology Strategy.  Last week we featured a story that highlighted Marriott’s recent successes with its digital platform.  This week we include a similar story on IHG.  In its recent earnings release call, CEO Keith Barr highlighted IHG’s many digital efforts, which began back in 2015 when IHG partnered with Amadeus to develop an entirely new global reservation system.  According to Barr, the new GRS has been critical to IHG’s more recent efforts (and successes) with loyalty, IHG’s mobile app and IHG’s updated web presence.  In its most recent earning release, IHG reported that 58% of all digital bookings at IHG come through mobile devices, which makes it IHG’s fastest growing revenue channel.  IHG also reported that mobile app revenue for the year increased 30% over 2019 levels. 

Our weekly Online Travel Update for the week ending February 17, 2023, is below.  This week’s Update features a number of stories coming out of last week’s quarterly earnings releases by several of the largest online travel platforms.  We’ve also attached transcripts from the recent earnings calls for both TripAdvisor and Airbnb.  Enjoy.

• • Intermediaries Regain Ground in Latest Hotel Booking Trends Report.  SiteMinder has released its latest annual Hotel Booking Trends report detailing 2022 online booking trends.  Highlights from the latest report include:   
    • OTAs were ranked in the top two positions in 79% of SiteMinder’s Top Twelve Lists (versus 37% in 2021)
    • Booking.com was the most popular booking channel across SiteMinder’s Lists (Expedia Group websites were second)
    • Direct bookings were down against 2021 numbers in 42% of the markets surveyed (though on par with 2019 numbers)
    • GDS bookings were up in 47% of the markets surveyed as corporate travel began its rebound
    • Airbnb continued to gain strength and made 89% of the Lists (compared to 28% in 2019)

• • Airbnb’s Chesky Rejects Need for Traditional Loyalty Program and Seeks to Expand Traditional Hotel Inventory.  During last week’s earnings call, Airbnb Brian Chesky rejected the need for Airbnb to offer guests a traditional points-based program like its distribution competitors.  According to Chesky, “the best loyalty program is building a product people love so much that they want to come back.  We don’t have to pay them to come back.”  Although Chesky may not be interested in emulating his competitors’ loyalty program offerings, he is interested in adding more of their traditional product types, specifically hotels.  Adding more traditional hotel inventory, Chesky noted, would allow Airbnb to better position itself as a traditional booking platform.  Chesky’s apparent re-embrace of traditional hotels represents a thawing of Airbnb’s previous pandemic-induced “freeze” on traditional hotels.  Could we soon see corporate wide direct distribution agreements between hoteliers and Airbnb?   
  • Marriott Increasing Digital Investment in 2023.  Yes, hoteliers too can sometimes be featured in our weekly Update . . .  In its recent earnings call, Marriott shared that product innovation, particularly through Marriott’s Bonvoy mobile application and other digital products, remains a priority for Marriott entering 2023.  According to Marriott CFO, Leeny Oberg, the newly planned investments will “transform” users’ experience on Marriott’s mobile application – for both Bonvoy members and the Marriott employees who serve them.  Marriott’s investment in its digital channels appears to be producing positive results as Marriott mobile app usage grew by 32%, digital room nights grew by 27% and digital revenue grew by 41% (year over year) this past year. 

Our weekly Online Travel Update for the week ending February 10, 2023, is below.  This past week saw the beginning of quarterly earnings releases by the major platforms, with Expedia and its meta search platform, Trivago, being the first.  Expect more details about these 4^th quarter releases in future updates.  Enjoy.

• • Expedia’s Loyalty Program Posts Strong Gains.  While Expedia posted reasonably strong fourth quarter and full year (2022) financial results this past week (see attached earnings release transcript for more detail), it was the growth in Expedia’s loyalty program that garnered much of the attention.  During the fourth quarter, the number of Expedia customers who became loyalty program members grew by 60% over the same period in 2019.  With those increases, Expedia entered 2023 with more active loyalty program users than ever (more than 10% higher than the previous peak).  According to Expedia CEO, Peter Kern,  the number of Expedia loyalty program members and number of active Expedia app users (which also grew over the past quarter) are the two primary factors that Expedia uses when evaluating progress against its goal of maintaining long term its highest-value customers. 
  • Trivago Targets Direct Bookings.  In recent correspondence accompanying its fourth quarter and full year (2022) earnings release, Trivago highlighted its ongoing efforts to grow hotel direct bookings.  According to Trivago, direct bookable rates are now available on the meta search site for properties that receive 50% of click outs (and increase from 38% prior to its direct booking push).  Trivago hopes to get that number to over 80% by the end of the year.  Direct bookings are now possible in 8 of Trivago’s markets. 

Have a great week everyone.   

Our weekly Online Travel Update for the week ending February 3, 2023, is below.  This week’s Update features of number of stories detailing the Biden Administration’s growing efforts to address “unfair” fees, including hotel resort fees.  Enjoy.

• • Biden Calls for Legislation Limiting Unfair Fees.  Add ticket agency fees (thank you Taylor Swift) to the growing list of “unfair” fees being targeted by the Biden Administration.  In comments at last week’s meeting of the White House Competition Council, the President called on Congress to pass legislation (the Junk Fee Prevention Act) limiting fees in several industries, including an outright ban on “surprise resort and destination fees.”  The likelihood of any substantive legislation coming out of Congress – particularly given the strong business interests that will likely line up to oppose any such legislation and the general divisive (dysfunctional) nature of Congress – is very low.  While federal legislation may be a remote possibility, the same headwinds may not hinder similar efforts at the federal regulatory level (FTC) or individual state level.  This week’s news of possible federal legislation on the issue comes as several clients are hearing rumblings or actually receiving written notice of increased efforts to reign in resort fees at the state level. 
  • Google’s Overall Advertising Revenues May Be Down, But Not for Travel.  While overall Google’s parent, Alphabet, saw a fourth decline in overall advertising revenue, travel advertising revenue actually increased over the latest quarter.  
  • Rising Interest Rates Increase Value of Merchant Bookings.  With Expedia reported to have earned $20 million in interest income in the third quarter of last year, in part, on funds held as part of prepaid guest bookings, it is no wonder other platforms are getting into the payments business (yes, we recognize that there are many other benefits as well).  Airbnb earned $58 million in interest income. 
  • Event Platform, CVENT, Reportedly for Sale.  If a sale does occur, it won’t be the first time the platform is taken private.  This time, private equity heavy weight, Blackstone, is the rumored suitor.  Will a sale mean changes to the platform’s management (and impossible contracting practices)?  Likely not, as CVENT’s management stayed largely intact through CVENT’s many prior transitions. 

Have a great week everyone.