Duff on Hospitality Law

As you can see from our short list of stories below, it was a relatively quiet week in the online travel world.  I hope you enjoy:

• • DerbySoft Moves Into Airline Industry.  Hotel distribution connectivity provider, DerbySoft, announced plans last week to acquire China-based Pkfare.  Pkfare provides connectivity services for hotels similar to DerbySoft, but also provides those services to approximately 600 airlines (an industry that DerbySoft has not yet penetrated).  Terms of the deal were not disclosed.  The companies plan to maintain their independent businesses, with certain back of house functions integrated. 
  • Expedia Exploring Sponsored Listings for VRBO.  The same sponsored listings (a/k/a advertisements) that Expedia and Hotels.com feature today on their respective websites may soon make their way to VRBO.  In a recent interview, Rob Torres (SVP of Media and Affiliate Solutions at Expedia) identified the listings as something he’d like to change at VRBO.  Airbnb does not currently provide an advertising platform on its site.   
  • Additional Thoughts on Recently Announced Expedia and Amadeus Partnership.  Last week we included the recent announcement by Expedia and Amadeus regarding their newly expanded technology relationship, an expansion that will allow Expedia to offer Amadeus’ New Distribution Capability (NDC) content.  By moving away from the decades old technology offered by the major GDS providers to NDC, Expedia will soon be able to offer its users many of same products and services offered through airlines’ own channels – seat selection, pre-flight services and onboard products and services. 

This week’s Update features two stories from local (Seattle) publications.  The first, from Seattle’s most well-known technology newsletter, Geekwire, provides a local perspective on Steve Singh’s ongoing efforts to create the corporate traveler’s  “perfect trip.”  The second, from our local Business Journal, provides additional details on the management shakeup at Expedia Group.  Enjoy.

• • EU Launches Investigations of DMA Gatekeepers.  This past month, the EU Commission has launched five investigations into gatekeepers’ (Alphabet, Apple and Meta) alleged non-compliance with the Digital Markets Act (DMA).  One of the two investigations of Google parent, Alphabet, focuses on whether Google’s recent changes continue to prefer its platforms and channels (particularly around travel) over those of third parties.
    
    
  • Seattleite Steve Singh Leads Investor Group’s Purchase of Direct Travel.  Former Concur CEO, Steve Singh, and other investors announced this past week the purchase of Colorado-based corporate travel management company, Direct Travel ($300 million annual revenue and 1800 employees).  Following the purchase, Singh will serve as the company’s executive chairman, a role he also serves with other corporate and group travel players, Spotnana , Center and Troop (all of which plan to partner with each other in the future).  The purchase is the fourth piece (of five total) in Singh’s effort to build the “perfect trip.”  According to Singh, the fifth and final piece will focus on tools to better manage hotel inventory and bookings.  Stay tuned.
    
    
  • Expedia and Amadeus Announce NDC Partnership.  Expedia and Amadeus captured much of the industry’s attention this past week with their announced 1-year technology partnership under which Amadeus will provide much of its NDC content to Expedia, allowing Expedia to offer travelers additional supplier products and services (e.g., airline seat selection). 

This week’s Update features multiple stories and perspectives on AmexGBT’s newly announced acquisition of CWT and Booking.com’s decision to drop its own sustainability ratings.  I hope you enjoy.

• • AmexGBT Set to Acquire Rival Travel Management Company CWT.  First the details . . .  According to AmexGBT CEO, Paul Abbott, the $570 million acquisition will allow AmexGBT to grow its corporate customer base by 4000 customers and will increase AmexGBT’s transaction volumes and revenues by 45% and 33%, respectively.  Other announced benefits include growth in certain key customer segments (energy, resources, marine and media, among others) and growth in AmexGBT’s small and medium sized enterprise (SME) business (a focus historically for both AmexGBT and CWT).  Increased automation and the leveraging of the AI technologies behind CWT’s myCWT platform are also among the other proposed benefits.  So what does this proposed merger between travel giants mean for others in the travel industry?  What about Expedia (which currently owns 16% of AmexGBT and has a 10-year lodging supply agreement with AmexGBT) and Booking.com (whose corporate travel program is a current partner of CWT and powers CWT’s SME business)?  Will the combined company only source inventory through one major OTA?  Only time will tell.  For direct travel suppliers, the additional leverage will make historically challenging negotiations even more difficult.   

• • Booking.com Drops “Travel Sustainable” Program.  Following criticism from the Netherlands Authority for Consumers and Markets (ACM), Booking.com announced last week that it had removed its Travel Sustainable accommodation scores from its booking platform.  According to the ACM, Booking.com’s presentation of the program was misleading and wrongly gave travelers the impression that travel is sustainable.  Booking.com now intends to rely on third party certification programs and will provide properties a label when they have received a third-party sustainability certification.

• • DOJ and FTC File Statement of Interest in Algorithmic Price Fixing Case.  This past week the U.S. Department of Justice and Federal Trade Commission filed a joint statement of interest in a pending case against major casino hotel operators alleging that the operators violated U.S. antitrust law by agreeing to use a third party computer pricing algorithm to set room prices.  According to the agencies, hotels cannot use algorithms to engage in conduct that is otherwise illegal if done by a real person.  The statement clarified two important aspects of U.S. anti-trust law as it relates to the use of pricing algorithms.  First, claimants do not need to prove that competitors spoke directly, particularly when an algorithm provider that works with the competitors is alleged to be acting in concert.  Second, an agreement among competitors to use a pricing algorithm is unlawful, even if the competitors retain some pricing control.  This isn’t the first time that one or both agencies have intervened in cases involving pricing algorithms.  In recent cases involving the real estate industry and meat processing industry, the agencies challenged competing firms’ use of pricing algorithms.  A copy of the agencies’ joint statement is linked to our story below.

This week’s Update features a variety of topics, including Italy’s newly announced investigation of Booking.com, American’s ongoing battle with ASTA and Qantas’ new TMC portal:

• • Italy Launches Investigation of Booking.com.  Just weeks ago, Booking Holdings announced as part of its fourth quarterly earnings release that Spanish competition authorities were considering levying an unprecedented $530 million fine against its Booking.com platform.  Now, Italy is joining the fray.  On Friday, the Italian Competition Authority announced that it had opened an investigation into Booking.com and its alleged abuse of its dominant market position.  At issue are the alleged advantages given to hotels that participate in Booking’s Preferred Program in exchange for higher commissions and Booking’s automated price matching tool (the so-called “Booking Sponsored Benefit”).   According to the Authority, the two practices could have the effect of excluding competing online travel agents from the market.  The investigation was triggered by complaints from Italian hotel associations. 
  • ASTA Launches PR Campaign Against American Airlines.  As the war between ASTA (American Society of Travel Advisors) and American continues over American’s campaign to transition advisors to NDC (and thereby reduce overall distribution costs), ASTA has taken its position to lawmakers and the public via a new ad campaign and consumer-facing website.  New ads running in Politico direct readers to ASTA’s new website, which includes messages for both travelers and travel advisors and encourages both groups to contact their legislators.  Both sections also encourage a congressional investigation into American.   
  • Concur Travel Expands Hotel Offerings.  This past week Concur SAP announced that it was making several changes to its booking and travel management platform, Concur Travel.   The changes include expanded hotel content (via new integrations with Amex GBT, CWT, Flight Centre and HRS), rail content, emissions data (hotels, air, rail and rental car options) and itinerary sharing.  
  • Qantas Launches New TMC Booking Platform.  Travel management companies and agencies have a new platform (Qantas Distribution Platform) for booking Qantas flights using NDC content.  Access to the platform is limited to TMCs that have an existing commercial agreement with Qantas and are connected to one of Qantas certified technological partners, including Sabre, Travelport and Amadeus.  Users of the platform will have access to special offers, discount pricing and shopping capabilities not otherwise available through traditional channels.  According to the Qantas website, the new portal is best “suited for simple bookings” with complex customers and system requirements best supported through Qantas’ certified technology partners.  Sounds like a statement intended to calm Qantas’ legacy GDS partners’ concerns as Qantas seeks to move customers to a new alternative platform.

This week’s Update features a variety of topics including the latest on Indonesia’s efforts to regulate OTAs, Spotnana’s new “event” travel booking tool and new record marketing spending by the largest OTAs (no surprise).

• Booking.com and Expedia May Face Indonesian Bans.  As of this past week, several large OTAs (including Booking.com and Expedia) had still not complied with Indonesia’s requirement to register as Private Scope Electronic Systems Operators (PSE).  The requirement is part of a regulation passed in November 2020 that requires digital platforms to obtain licenses to operate in Indonesia.  Recently, Indonesia has stepped up enforcement efforts around the regulation including blocking PayPal and other gaming websites temporarily in 2022.  Earlier this month, the remaining unregistered travel booking platforms (Airbnb, Agoda, Expedia, Booking.com, Trivago and Klook) received letters from Indonesia’s Ministry of Communication and Information asking that the platforms complete their registration by the end of the month.  Airbnb and Agoda have since registered.
• Spotnana Releases “Spotnana Events,” a Group Travel Booking Tool.  Despite its name, Spotnana Events isn’t a meeting booking tool.  Users of the platform won’t be able to book meeting rooms and associated food and beverage.  Instead, the new corporate tool allows users – both profiled and, notably, unprofiled - to book travel that is tied to a particular event, event dates, event booking parameters, etc.  The new technology will be made available to both regular corporate users of the Spotnana travel management tool as well as standalone users.  The tool will also be made available to channel partners and as a white label solution.
• OTA Annual Sales and Marketing Records Are Broken, Again.  In 2023, Expedia Group, Booking Holdings, Airbnb and Trip.com spent collectively $16.8 billion in sales and marketing (which represents a 20% increase over their 2022 combined total).  Of the four, Trip.com saw the largest spending increase – increasing 2022 amounts by 117% (and roughly equally pre-pandemic amounts).  Not surprisingly, the two largest spenders were Expedia Group ($6.9 billion in sales and marketing (including B2B commissions under its growing B2B platform)) and Booking Holdings ($6.8 billion for marketing).  For Expedia, the amounts spent on sales and marketing equate to 54% of total revenue.  For Booking Holdings, its expenditures represent 32% of total revenue.

This week’s Update offers two differing industry perspectives on Google’s DMA compliance efforts.  We also update the status (demise) of TripAdvisor’s much criticized subscription program, TripAdvisor Plus.  Enjoy.

• • Perspectives on Google’s Gatekeeper Efforts.  This past week (March 7) saw D-Day arrive for those platforms designated as “gatekeepers” under the Digital Markets Act (DMA).  On the day before, EU Travel Tech, whose members include most major leisure and managed travel platforms, issued a letter to the European Commission criticizing Google’s changes and complaining that the changes continued to feature Google’s own products and services over those of its members.  According to the industry group, Google’s efforts “fall significant short of compliance, potentially rendering the new rules ineffective.”  At the same time, organizations representing hotels, airlines and restaurants issued their own statements, warning that the changes could drive users away from their members and to large online intermediaries (i.e., OTAs).  According to one statement, several of the industry’s groups could lose as much as 50% of their online traffic to intermediaries.  As it begins its review of the many changes proposed by Google and other gatekeepers (and considers possible enforcement efforts), the EU Commission will have some difficult decisions to make. 
  • TripAdvisor’s Latest.  A few weeks ago we included a story detailing the steps taken by TripAdvisor to evaluate possible future transactions.  This past week, we learned that TripAdvisor’s first possible suitor is John Malone’s Apollo Global Management, a private equity firm with a long history in the travel world (Expedia, AmexGBT, Oceania, Norwegian Cruise Lines and Diamond Resorts).  Last week also marked the official demise of TripAdvisor’s subscription program, TripAdvisor Plus.  Readers of our Update will recall the many stories featured over the past few years (the subscription service was  made widely available in June 2021) detailing the program and suppliers’ (and my) general poor view of the program. 

This week’s Update features a wide variety of topics – Hopper, Capital One vacation rentals, Expedia layoffs and Hilton campgrounds.

• • AirAsia Adds Cancel for Any Reason.  AirAsia announced this past week that users of its platform (both website and application) can now cancel bookings of non-refundable fares through an integration with Hopper’s B2B Division – HTS (Hopper Technology Solutions).  HTS offers a wide variety of ancillary products and services (e.g., travel portals, fintech products) to its corporate users.  AirAsia currently offers flights from over 700 airlines.  With the addition of HTS’ ancillary cancellation product, fares that were once non-refundable (presumably a material term or condition of each airline’s offered fare) are now fully cancelable for any or no reason.  It would be interesting to know how these now “fully cancelable” fares offered through AirAsia comport with each effected airline’s own terms and conditions and those of any applicable distribution agreement.  
  • Capital One Adds Vacation Rentals.  Capital One announced last week that its Capital One Travel portal will soon feature vacation rentals from AvantStay, Boutiq and other property management companies (including eventually, Inspirato).  The rentals will be part of Capital One’s “premium” hospitality offerings. 
  • Quantas Offers Price Guarantee to Drive Platform Bookings.  A lot can be learned from the airline industry. Quantas has announced a new price guarantee that guarantees fares for up to five days when travel agents book through Quantas’ own distribution platform.  The guarantee is one of the first for the airline industry (and the only offered by an Australia or New Zealand airline).     
  • Hilton Campgrounds Coming Soon.  So why include a story about Hilton’s newly announced partnership with campground operator, Autocamp?  According to the recent announcement, Autocamp’s Airstreams, cabins and tents will soon be bookable on Hilton’s direct channels – presumably call centers, website, mobile application, etc.  It will be interesting to watch how Hilton and its channels (which until now have featured primarily traditional hotel products) will treat these very untraditional products.  It will also be interesting to see how long it takes these new products to make their way to large third-party channels (whether unintentionally through existing parity commitments or intentionally), if at all.    
  • Google’s DMA Changes Continue to Draw Criticism.  Review site Yelp is the latest to raise concerns with Google’s planned search results changes for flights, trains, hotels and restaurants in the EU.  According to Yelp, the proposed changes, which are required to help smaller companies gain more traffic from Google, are having the opposite effect (driving users to Google products).   

Booking Holdings’ recent earnings release garnered much of the industry’s attention this past week for a variety of reasons, including legal. It will be interesting to watch how important changes to the legal landscape affect the company’s primary booking platform and its many supplier partners.

• • Trip.com Enjoys Strong Fourth Quarter and Year. Trip.com reported stellar fourth quarter and full year (2023) results this past week.  Highlights include (i) full year net revenue of $6 billion (122% growth YOY), (ii) full year accommodation booking revenue of $2.4 billion (133% growth YOY) and (iii) total full year sales and marketing expenses of $1.3 billion.  By segment, annual revenues broke down as follows:  39% accommodations, 41% transportation, 7% packages and 5% corporate travel.
  • Legal Updates Featured Prominently in Recent Booking Holdings’ Earning Release. This past week’s fourth quarter and full year earnings release from Booking Holdings featured two important legal updates.  First, Booking announced that in the fourth quarter the Spanish National Markets and Competition Commission had levied an “unprecedented” $530 million dollar fine against Booking.com in a draft opinion.  The fine stems from Booking.com’s infringement of Spanish competition law.  According to Booking.com’s CFO, David Goulden, the Company plans to appeal the decision if it becomes final (which could take years to resolve) but in the near term, the Company will have to make changes to some business practices in Spain.  Second, and perhaps more significantly, Booking reiterated its plans to notify EU regulators early this year of its “gatekeeper” status under the EU’s Digital Markets Act (DMA) (which our readers know effectively means the end of existing contractual parity provisions in the EU).  These two important legal updates are in addition to a ruling by a Netherlands’ appeals court finding that Booking.com is indeed a travel agency (and no longer a technology company now that it collects and processes payment) and that as a result its employees must be enrolled in an industry-wide pension fund. 
  • Still Think That AI Will Solve Everything? Air Canada Might Think Otherwise. A recent small claims court ruling provides an important reminder (and salient advice) to anyone thinking about using an AI powered chatbot.  The case stems from allegedly incorrect advice given by Air Canada’s website’s chatbot over the airline’s bereavement policy.  In response to a traveler’s claims that it had received incorrect advice from the chatbot, the airline sought to defend the claims by arguing that it could not be held liable for the chatbot’s incorrect advice (somehow the chatbot was a separate legal entity responsible for its own advice).  What?  The judge disagreed with the airline’s position and found the airline responsible for not taking reasonable care to ensure that the chatbot’s advice was correct.

TripAdvisor’s rumored sale garnered most of this past week’s headlines, though reaction to Expedia’s recent earnings release and in particular, Peter Kern’s announced departure, came in a close second. Salacious headlines out of Expedia’s HQ’s bathrooms featured prominently at the end of the week, but we won’t be “viewing” those stories; this is a family publication after all.

• • News of a Potential Sales Overshadows TripAdvisor’s Recent Earnings Release. It was a busy week for TripAdvisor.  Last Monday, the company announced it had formed a special committee and retained a strategic advisor to evaluate proposals for a potential transaction.  Just two days later, TripAdvisor released a solid fourth quarter and full year earnings report highlighted by record annual revenues and strong growth in its experiences and activities platform, Viator.   Analysts speculate that the potential sale (together with a sale of TripAdvisor’s controlling shareholder, Liberty TripAdvisor Holdings) is likely to a private equity company (and not an established OTA or booking platform).  As for the earnings release, highlights include (i) total annual revenue of $1.78 billion (up 20% YOY and 10% greater than previous high point), (ii) total annual EBITDA of $334 million (up 13% YOY), (iii) Viator annual revenue of $737 million (up 40% YOY and now accounts for 40% (previously 33%) of overall company revenues) and (iv) total annual selling and marketing costs of $940 million (up 20% YOY).
  • Priceline’s Penny Is Getting Smarter. Following six month of intense on the job training, Priceline’s generative artificial intelligence chatbot, Penny, is getting an upgrade.  Leveraging the intelligence she (it?) has gathered from the millions of customers who have used the chatbot, Penny is now expanding beyond hotels to flight, car rentals and vacation packages and can be used for planning, booking and modifying trips.  New functionality will allow users to use Penny to save coupons, airline credits, etc. and to monitor and report changes in airline fares.
  • Travel Platforms Seek Changes to Pending FTC Junk Fees Regulation. Earlier this month, the Travel Technology Association (members include OTAs, GDSs, etc.) submitted comments in response to the FTC’s proposed junk fee regulation.  While supportive generally with the FTC’s effort, the Association advocated that intermediaries be absolved of liability when travel suppliers (mostly hotels) fail to provide accurate, complete and timely mandatory fee information so long as intermediaries make reasonable efforts to collect such information.  According to the Association’s comments, hoteliers don’t always provide the information necessary to ensure compliance with the proposed transparency requirements.

The big news last week of course was Peter Kern’s announcement that he is stepping down as Expedia Group CEO in May. Peter’s announcement came as part of an otherwise robust quarterly earnings release for Expedia. What Peter’s departure means for Expedia and its many partners remains to be seen.

• • Expedia’s Peter Kern Is Out and the Numbers Look Good Too. Peter Kern’s announced departure as Expedia Group CEO took front stage during last week’s quarterly earning call.  Peter’s announced replacement is Ariane Gorin.  Ariane has been with Expedia for over 10 years serving in many executive roles, most currently as President of Expedia for Business.  While the planned leadership change featured prominently during last week’s call, Peter and team also presented some strong (even record breaking) results . . .  For calendar year 2023, Expedia generated $104 billion in total gross bookings ($74 billion of which was in lodging bookings (growing 18% year of year)), $12.8 billion in revenue and $2.7 billion in EBITDA (at a margin of 21%).  Last year also marked the strongest year yet with Expedia’s B2B business, with top and bottom lines growing by 33%.  For the fourth quarter, total gross bookings were $21.7 billion (6% increase year over year), and revenue totaled $2.9 billion (a record breaking quarter).  For those of you wanting additional detail about the recent earnings release or call, we’ve attached a copy of the earnings transcript. 

• • Expedia Must Face Competition Claims of Former Swiss Booking Platform. A Washington federal court judge refused last week to dismiss the claims of former booking platform Amoma against Expedia.  According to Amoma, Expedia Group’s metasearch site, Trivago, made changes to its site that decreased Amoma’s presence on the site and increased its cost to display rooms.  The changes resulted in Amoma’s advertised lower rates being obscured from users of the meta search site.  According to federal judge, Barbara Rothstein, Amoma made plausible allegations that Expedia abused its market power to harm a competitor.

• • Another Week, Another Announced Settlement on Resort Fees. On Wednesday last week, Colorado Attorney General, Phil Weiser, announced that it had settled claims against Marriott, Weiser’s third such settlement with a national hotel chain (Omni and Choice).  Like other previously announced settlements, this latest settlement requires that total price (rate plus mandatory fees) be the most prominently displayed price in any advertisement or offer.  Online search results sortable by price must also display total price.  The settlement also requires that Marriott require third party managers operating Marriott hotels to comply with the settlement and for Marriott to take actions to enforce the settlement if such managers do not comply. 

• • Google Ends Two Hotel Ad Products. Beginning in October of this year, Google will be canceling its COVID era Commissions Per Stay and Commissions Per Conversion advertising products.  According to Google, the cancellations are due in part to Google’s planned phasing out of third-party cookies later this year.