The Expedia-Choice battle could be a tipping point for the hotel industry and online travel agencies as hotels seek to retain control of their inventory and Expedia, the most powerful U.S. online hotel distributor, desires to get access to as much of that inventory as possible at the highest margins in anticipation of the years ahead when consumer demand likely will recover.
Five years ago, after InterContinental pulled its inventory off Expedia websites and best-rate guarantees came into being, the hotel industry and OTAs found themselves at a sort of grudging comfort level after an earlier era when Expedia and hotels.com dictated the terms.
"The hotel industry and the OTAs are trying to find a new equilibrium," says Robert Cole, a hotel marketing-strategy consultant for RockCheetah in Milwaukee, Wisc.
With several chain-wide contracts set to expire over the next year or so, Expedia, if reports are true, is trying to get Choice Hotels to cede wide last-room availability (LRA) access to Expedia in the hotels' highest-cost distribution channel.
If Expedia can put on the pressure and get Choice to concede at a time when the economy and diminished demand have knocked hoteliers to their knees, then perhaps it can get other larger chains to do likewise, goes the thinking.
Hotels regularly grant LRA to distributors, but the properties restrict it to certain rate tiers.
Expedia, feeling its oats, apparently is seeking unparalled LRA rights from Choice.
And, Choice, unlike other major chains, could be particularly vulnerable because its properties are entirely franchisees and not Choice-owned or managed.
That's where the letter that Expedia sent to franchisees, which Tnooz published yesterday, comes in.
It wasn't just a nice touch, a clearing-the-air letter, by Expedia.
If Choice doesn't give in to Expedia's demands, then the OTA always has the option to try to strike LRA deals at very attractive margins with individual properties, which need Expedia's distribution and marketing clout. I'm sure the sales calls already are under way.
"Expedia is saying to them, 'the bad guys are sitting in the corporate office. We'll work with you. What do you need?'" Cole says.
Cole sees this dynamic as a flashback to the pre-Internet era of the early 1990s when tour operators and HRN (which became hotels.com) "cherry-picked" deals with individual properties and the distributors asserted inordinate control.
The timing is very favorable for Expedia now because the pendulum has moved in its favor.
"There is no secret bullet for franchisees to turn on a tap and then there's margin," Cole says. "But, Expedia sort of has that now."
Choice, despite the marketing blitz that it has announced, will have a hard time turning on that tap on its own.
And, the outcome could have a lot to say about which parties get the best clauses in upcoming hotel chain-OTA contracts.