ChinaTravelNews - Huazhu Hotels Group (also known as China Lodging Group – Nasdaq: HTHT) announced that it would terminate its partnership with three OTAs –Qunar, Ctrip and eLong – for breach of contract terms. The trouble between CLG and the OTAs has actually been brewing for some time and the flare-up is indicative of a greater conflict between China’s OTAs and the hotel industry.
China Lodgings jerks the rug out from under misbehaving OTAs
“Qunar, eLong and Ctrip have been ignoring the terms of our contract for a long time by setting promotional room prices without giving us any prior notice. This behavior has been detrimental to our pricing system and undermines the preferential status of our official website,” CLG claimed in a notice issued on April 28.
CLG said the partnership termination covers all direct online links and offline cooperation. Its hotels in all regional markets will also cease all transactions with the OTAs.
Shock and awe tactic gets results
Unlike the case of the Tuniu boycott by 17 tour operators, CLG’s “blitz” has achieved maximum impact, as the spokespeople of all three OTAs were unaware of the incident when ChinaTraveNews contacted them for comments.
After getting to grips with the facts, eLong seemed contrite “We are actively discussing this matter with CLG and hope to restore our booking partnership as quick as possible,”it said.
One more battle in a protracted war
One industry observer said CLG is showing its resolve, indicated by strong wordings such as “resolutely implement” the cut-off and the length of the contract termination will largely depend on the OTAs’reaction”.
Another analyst said CLG is testing the waters on how much the contract termination will affect its sales. Meanwhile, CLG has also quietly launched its own OTA-style hotel alliance online sales platform, H world, to reduce its dependence on OTAs.
ChinaTravelNews has found that cash-back sales tactics and high commissions remain major sticking points in the business negotiations between many hotel groups and hotel alliances with their OTA partners.
Last September, we reported that China’s three major economy hotel chains CLG, Home Inns and Jinjiang Hotels jointly demanded OTAs to stop offering cash-backs. The OTAs quickly caved in to the hotel groups’ demands.
In 2013, Plateno Hotel Group’s CEO Alex Zheng prophetically told ChinaTravelNews: “In the future, hotel groups will not compete against each other. They will compete against OTAs. Although there won’t be direct competition for the time being, but we will vie over customer sources with the online platforms that are closest to the customers, so we must be ready.”
(Reporting by Xianhao Zeng)
(Translation by David)