After a tiff that went public less than a month ago, Choice Hotels and Expedia Inc. reached a new three-year agreement, which should have the hotel franchisor's properties back on Expedia's and hotels.com's more than 80 websites within a week or so.
And, Choice-affiliated properties that want to participate in Expedia's opaque channel, Hotwire, will be able to do so a later juncture, the companies stated.
From all outward appearances, it looks like Choice Hotels, despite its bluster, is the party that blinked in this skirmish, which seemingly revolved around last-room availability and rate parity.
After 10 days to two weeks of public fireworks, the two sides returned to the bargaining table in late October, leading to yesterday's announcement of a new pact.
Clearly, Choice Hotels, with its more than 6,000 hotel franchises in more than 36 countries under economy brands like Comfort Inn, Quality and Econo Lodge, needed Expedia's distribution clout more than Expedia needed Choice Hotels' inventory.
In a conference call with financial analysts last month, Expedia Inc. President and CEO Dara Khosrowshahi said: “As far as the financial impact, it is minimal to none,” adding that Expedia has been able to recapture the volumes from other chains and independents.
He added: “To the extent that Choice doesn’t want to work under those terms, we won’t be doing business with one another."
Choice, in the current economic environment, clearly didn't have the clout to go toe to toe with Expedia.
Here's how Choice summarized its financial results for the third quarter in a 10-Q filing with the Securities and Exchange Commission Nov. 6:
"In the three months ended September 30, 2009, royalty fees revenue totaled $66.4 million, a 13% decrease from the same period in 2008. Operating income totaled $48.1 million for the three months ended September 30, 2009, a $13.7 million or 22% decline from the same period in 2008. Net income decreased $3.1 million or 9% from the same period of the prior year to $32.8 million."
The language of their joint press release about the agreement Nov. 11 tends to support the idea that Expedia prevailed.
Kremlin watchers will note that Expedia comes before Choice in the headline and Khosrowshahi's quote appears higher in the release. Khosrowshahi states: “We’re pleased to be working with Choice in an agreement that respects the guiding principles which we operate under. We welcome Choice back into our marketplace, and look forward to delivering value to their franchisees.”
The words of Stephen Joyce, the president and CEO of Choice Hotels, follow: “Choice Hotels and Expedia worked together to establish a new agreement that is mutually beneficial and enables hotels in the Choice system to effectively manage their businesses."
I asked for details from the two parties and, not surprisingly, came up empty.
Expedia spokeswoman Katie Deines Fourcin says: "We maintain our policy not to comment on specifics of negotiations or contract terms. We are pleased to be working again with Choice. The agreement itself is the result of productive, collaborative discussions. It’s win-win, for Expedia and Choice, their franchisees and our customers."
The economic climate and Choice's relative lack of clout as a franchisor in the global lodging industry didn't transform the dispute into any kind of precedent-setting battle for the hotel industry.
Although perhaps it did enable Expedia to send a strong message to its hotel partners as new contract negotiations with other chains loom.