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Will a new Marriott-Expedia contract signal a sea change in the direct booking wars?

01/04/2019| 5:40:43 PM| 中文

Until the details are finalized, the jury’s still out on the impact of a Marriott-Expedia agreement. But suffice it to say, these frenemies still depend on one another.

Chad Crandell, managing director and CEO of CHMWarnick, a hotel-asset-management and owner-advisory-services company that represents more than 70 hotels, said he was under the impression that both companies have reached a tentative agreement on Thursday, “but were still sorting through the details.” He added, “My guess is the holidays may have also gotten in the way. Our presumption is the business terms for Marriott have improved, given the leverage they now possess, post-Starwood merger.”

A new Marriott-Expedia pact, if it produces reduced 10% commissions for Marriott, could potentially put pressure on Expedia to make concessions to other brands such as Hilton, Hyatt, and InterContinental, for example, although Marriott is the largest hotel brand.

Michael Bellisario, senior research analyst with RW Baird, said he’d last heard two weeks go that the Expedia-Marriott contract that expired in November had been extended during the ongoing negotiations process.

Both Marriott and Expedia declined Skift’s requests for comment on the negotiations, or to confirm if they had reached a settlement.

According to several published reports, under their current multiyear agreement, Marriott pays Expedia a commission of approximately 12% and is seeking to lower it to the 10% range. There are undoubtedly numerous other issues at play, including Marriott’s direct booking push, its presence — or lack thereof — on Expedia Group sites, and Marriott’s loyalty program.

For example, said Flo Lugli, principal at Navesink Advisory Group, Expedia might be seeking to have its customers gain loyalty points or status when booking a Marriott property on Expedia, and might be willing to trade commission concessions for advertising dollars, or preferred rates and inventory.

Expedia currently powers dynamic packages on Marriott Vacations, and is likely looking to extend its partnership.

On the other hand, Expedia claims to be less dependent on the major hotel chains than it was years ago, and claims that it has replaced the big brands with smaller independent hotels that have not been pushing direct bookings to the extent that the chains have.

DiClemente, however, said this mix shift of inventory appears to be a defensive move from Expedia.

Marriott is likewise reportedly negotiating a new contract with Booking Holdings, as well, although Marriott would seemingly have more leverage with Expedia than Booking, which sees most of its hotel revenue generated from outside the U.S. where Marriott is weaker and independent hotels hold sway.

Expedia’s margins are already considerably lower than Booking’s, which is better-positioned to bargain with Marriott because of Booking’s non-U.S. focus.

Whatever specific details are being ironed out between Expedia and Marriott — and eventually Booking and Marriott — Wasiolek said he doesn’t see that big of an impact on how hotel brands and online travel agencies do business with one another.

“I don’t dispute that the scale of a combined Marriott and Starwood allows for stronger negotiation power,” Wasiolek said. “But I question whether it will have any material impact, given the network advantages that both Expedia and Booking Holdings have.”

RW Baird’s Bellisario said that this could become a familiar negotiation narrative for Marriott and the online travel agencies. “It’s fair to assume that Marriott is now bigger and if they continue to grow every time they renegotiate these contracts every 24 to 36 months, and they continue to grow faster than industry, they should have more bargaining power when they renegotiate with Expedia and booking and others.”

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TAGS: Marriott | Expedia | Booking | direct booking
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