NB: This is an article by Patrick Bosworth, CEO and a co-founder of Duetto
I read, with great interest, recent headlines declaring negotiation wins for Hilton Worldwide over online travel agencies. Now, I’m hearing rumors of a very similar deal by Marriott. CEO Chris Nassetta said Hilton achieved its goals in reducing margins paid to OTAs, securing the ability to break parity with special offers to loyal customers, and the elimination of last room availability requirements. If the rumors are true, Marriott just signed a very similar contract.
The reduced margins aren’t a huge shock—there’s always an ebb and flow and commission rates tend to decline during periods of rapid growth. I’m not sure Hilton needed to negotiate the ability to offer loyalty members special deals—I’d be surprised if they weren’t already doing so through fenced and emailed offers.
Either way, these are definitely wins, no doubt, but the elimination of last room availability would be huge. This could signify a shift in the balance of power between hotel companies and OTAs like Expedia and Booking.com.
As those two companies, the Duopoly, have gobbled up most of the other smaller and still significant OTAs and as the percentage of bookings have continued to shift toward OTAs, I find it hard to believe the balance is now tilting the other direction.
In the company’s recent earnings report call, Nassetta said Hilton had achieved its goals in those three pillars, but he didn’t detail to what extent. I don’t doubt what he said is true, but what might Hilton have conceded to earn those wins? The devil, as they say, is in the details.
I would be surprised if companies like Expedia and Booking.com would accept those terms, even at the threat of Hilton pulling its inventory, as others have tried before. Did the OTAs also get a reprieve from price parity, following the path already being paved in Europe? Could they now be getting net rates from Hilton and allowed to charge anything they want for those rooms? Could this be the beginning of the Wild West here in the U.S.?
Last room availability has allowed OTAs to continue selling rooms as long as they are available at the hotel. Hotels, even when they knew they’d sell out, could not completely close those channels and sell their remaining inventory directly for higher profit margins.