Duff on Hospitality Law

This week’s Update features two stories on Booking Holdings’ pending acquisition of eTraveli, which remains under EU review.  Enjoy

1. Booking Holdings’ eTraveli Acquisition Remains Under Review.  It’s been a few weeks since we last updated the status of Booking Holdings’ long proposed acquisition of flight platform, eTraveli.  With the month of August rapidly coming to a close, it is crunch time for both Booking Holdings and the EU Commission regulators who are scrutinizing the proposed transaction.  Regulators are expected to issue their decision at the end of the month.  Regulators have expressed concern that the transaction will further cement Booking.com’s dominant position in the EU, particularly for hoteliers.  In response, Booking has recently proposed offering users who book flights on Booking.com a “carousel” of hotel options – featuring hotels available not only on Booking.com, but other platforms as well.  While some speculate that sister-company Kayak might be source of this alternative hotel inventory, it isn’t clear yet where the additional inventory might be sourced (e.g., competing hotel platforms, hotels’ own booking channels, etc.).
   
   
2. Hopper Launches Hopper Cloud for Airlines and Announces First Airline Partner.  On Wednesday this past week, Air Canada announced that it was partnering with Hopper to offer passengers booking on Air Canada’s website the option to purchase policies allowing them to cancel their flights at any time for any reason on eligible fares.  Hopper referred to the new partnership as the launch of Hopper Cloud for Airlines, extending the full array of fintech products and services to airline partners. 
   
   
3. Major Accommodation Platforms Increase (Again) Quarterly Sales and Marketing Spend.  It has been a refrain often repeated in our weekly Updates.  Another quarter, and another quarter of increased spending by the major accommodation booking platforms on sales and marketing.  While spending increased for each of the big three platforms (Airbnb, Expedia and Booking) for various reasons, all three were quick to point out the growing percentage of bookings coming through lesser expensive direct channels – loyalty programs, mobile applications, etc.    

It was another relatively quiet week in the industry other than news late this past week that the Texas AG had filed suit against Booking Holdings over its platforms’ deceptive display of resort fees. Some highlights from the past week:

Takeaways from Expedia’s Latest Quarterly Update.  I’ll let those much smarter than me comment on Expedia’s quarterly financials.  Items that caught my attention in reviewing the earning’s call transcript (copied) included the following:

1. Loyalty, loyalty, loyalty.  Expedia CEO, Peter Kern, could not say enough about Expedia’s recent launch of its combined loyalty program, One Key, and the value of a robust loyalty program.  Loyalty has clearly become a key focus of Expedia for the near term.  During the second quarter, Expedia enjoyed its highest number of active loyalty members – up 15% percent year over year.  Peter Kern estimates that the program now has 70 million members.  The One Key program offers users multiple tiers of program membership, with each progressively higher tier enjoying greater discounts.  Discounts are funded by supplier partners (not by Expedia (unlike Booking.com)).    
2. B2B Business Continues to Grow.  The strength of Expedia’s B2B program drove Expedia’s record gross bookings for the second quarter.  Revenue for Expedia’s B2B business grew 32% YOY in the second quarter.  Expedia announced two new B2B business partnerships this past quarter – Mastercard and most recently, Walmart. 

Takeaways from Booking Holdings’ Latest Quarterly Update.  Here are my takeaways from the latest quarterly earning’s update. 

1. Disparate Uses of Generative AI.  Booking Holdings’ use of artificial intelligence varies by platform – all in an attempt to ascertain the most beneficial use of the emerging technology.  Priceline employs generative AI in the form of “Penny,” a travel assistant that is intended to assist travelers at the “end-of-the-funnel” while making their booking.  In contrast, Booking.com’s use of the technology is at the “top-of-the-funnel” to assist users in their initial trip planning.  Kayak, unlike its sister companies, is currently exploring the use of AI internally for coding and other similar purposes. 
2. Alternative Accommodations Continue to Grow.  Approximately 34% of all Booking.com room nights were with alternative accommodations.  Global listings of alternative accommodations reached 7 million at the end of the quarter (an 8% increase YOY).
3. Mobile Application Use Continues to Grow.  Approximately 48% of all room nights were booked through Booking Holdings’ mobile applications in the second quarter (a 6% increase YOY). 
4. Payments Platform Grows.  Approximately 48% of Booking.com’s gross bookings were processed through Booking.com’s payments platform (versus 38% in the second quarter 2022). 

Texas Attorney General Files Suit Against Booking Holdings.  “Duped”  “Misled” and “Deceived”  - All three words appear in the Texas AG’s recently filed complaint against Booking Holdings to describe Booking’s offending conduct.  Similar to previous complaints filed against Hyatt and Hilton, this latest complaint targets Booking’s failure to include mandatory fees in the rates displayed on its websites.  Even when the fees are finally disclosed at checkout, the small font and inconspicuous placement of the disclosures make them unlikely to be seen.  According to the complaint, Booking further misleads consumers by grouping mandatory fees together with taxes in a single line item “Taxes and Fees” at checkout.  The complaint not only highlights the effects of Booking’s practices on Texas consumers, but also on Booking’s “honest competitors” that are put at a competitive disadvantage by appropriately including mandatory fees in their displayed prices (the complaint points to recent settlements with Marriott and Omni and Marriott’s total price displays).  We will continue to monitor and report on this case as it moves forward.

After several slow weeks in the industry, this past week featured a number of important updates, including earnings releases and calls from Booking Holdings and Expedia Group.  Transcripts from the two companies’ earnings calls are attached.  Enjoy.

• • Expedia Scores a Win with Walmart + Travel.  While Expedia may have lost an important relationship with its recent termination of Hopper, Expedia was able to make up for some of that lost B2B traffic with a newly announced partnership with Walmart.  According to the companies’ announcement, Expedia will be providing the retailer with hotel, airline, rental car and activities inventories.  Walmart members who use Walmart to book travel will receive Walmart cash (up to 5% for hotels) back.  Users of Expedia’s B2B platform (or any other similar B2B platform) should give some thought as to how changes like the recent Hopper termination and now Walmart addition might affect their traffic through the platform and their performance against any contracted performance metrics.
    
    
  • AH&LA Voices Support for Proposed Federal Resort Fee Legislation.  By now, most everyone is familiar with recent federal legislation proposed by U.S. Senators Klobuchar (D-Minn.) and Moran (R-Kan.).  If you’ve not read the proposed legislation, click here to view an early initial draft.  To many pundits surprise (several suggested that hoteliers would never get behind the legislation), the American Hotel & Lodging Association has come out strongly in favor of the Act.
    
    
  • Expedia Group and Bookings Holdings Enjoy Strong Second Quarters.  Both Expedia Group and Bookings Holdings reported strong second quarter results last week.  Even with record levels of gross travel bookings in the second quarter, Booking Holdings expects that it may see even better results later this year (based on July hotel booking activity that represents a 20% YOY increase). Expedia also enjoyed a record breaking quarter (gross bookings and revenue), though revenues fell short of analysts’ expectations.  Earnings calls provided insight into a number of ongoing initiatives within both companies, including ongoing B2B efforts (Expedia), the launch of a single, unified loyalty program (Expedia), the introduction and use of Artificial Intelligence (both) and the connected trip (Booking). 

This week’s Online Travel Update is below.  With summer now in full swing, it is no surprise that last week was another relatively quiet week in the online travel world.  Speculation continues around the Expedia / Hopper termination and the possible fallout for the entire online travel industry.  For those of you interested in learning more about the recent split, we’ve included a link to Skift’s recent podcast on the issue.  Enjoy.

• • Sabre Records Win in Competition Between Major CRS Platforms.  Hyatt announced last week that it was partnering with Sabre for its new central reservation system to be rolled out in 2024.  Hyatt’s selection of Sabre breaks the long string of victories by Sabre competitor, Amadeus, which has previously announced similar CRS platform deals with IHG, Marriott and MGM.    
  • Expedia Cuts Staff in Several Departments.  Word began to spread (unofficially) last week that Expedia had laid off staff across multiple departments (including IT, support, recruiting, marketing and B2B services) affecting Expedia’s offices in the United States and abroad.  In response to inquiries, Expedia stated that the layoffs were part of the company's ongoing reprioritization and simplification of its resources.  Expedia would provide no details on the number of employees impacted. 

This week's Online Travel Update is below.  As evidenced by the number of stories in this issue, it was a busy week in the online travel world, ending with what appeared to be a distributor dogpile on competitor Hopper.  Enjoy.

• • Expedia Terminates Hopper; Kayak Joins Scrum.  Thursday’s industry headlines were dominated by news of Expedia’s termination of its hotel and vacation rental supply agreement with industry upstart Hopper (and by extension, its many white label B2B partners, including Capital One). While Expedia attributed the termination to concerns over consumer “confusion and anxiety,” Hopper and industry pundits were quick to point to Expedia’s likely growing competition concerns.  Sensing blood in the water, Kayak’s CEO, Steve Hafner, gratuitously jumped into the fray supporting Expedia’s decision to terminate.  Suppliers that rely on Expedia as their exclusive B2B distribution platform (or that are considering such a relationship in the future) must ask what such a termination might mean for them as a potentially important channel is terminated.   
    
    
  • TUI Unveils Package Offerings.  Travelers in the UK have a new (old) hotel booking option.  In June, European tour operator, TUI, known historically for its travel packages, launched a standalone platform in the UK.  By the end of the year, TUI expects to have over 30,000 hotels available on the platform for standalone bookings (together with bookings of other individual travel components).  Suppliers, it is time to review those existing tour operator agreements.     
    
    
  • Priceline Partners with Amazon for Prime Day.  While Booking Holdings has partnered in the past with Amazon to offer Amazon’s prime members discounts or other special benefits, Priceline’s partnership with Amazon to provide Prime members special U.S. Prime Day discounts is a first. 
    
    
  • Finnair Concedes to OTA Discounts.  In response to an ongoing investigation by the Swedish Competition Authorities, Finnair has agreed to no longer restrict how OTAs advertise and sell discounted flights on their websites.   Whether this decision by Finnair is instructive as to how competition authorities might view similar efforts by hoteliers (whose relationships with OTAs are considerably different than airlines’) remains to be seen. 

This week’s “vacation edition” Update features only two stories, the subjects of which have been featured in prior Updates. We will be back with our regular Updates next week!

For those of you in the U.S. and Canada, happy Independence Day. This week’s Update features a number of important legal updates – both in the U.S. and in the EU.  The next 6-9 months should prove to be interesting as the EU moves forward with the implementation of its new digital legal framework – the Digital Services Act (DSA) and Digital Markets Act (DMA).  I hope you enjoy.

• • FTC Identifies Possible Competition Concerns with Generative AI.  This past week, the FTC published a blog post detailing its view of potential competition concerns with generative AI.  Key building blocks identified by the FTC for the successful use and implementation of generative AI (and all favoring large industry incumbents over new industry participants) include (1) data, (2) talent and (3) computational resources.  Identified areas of concerns include a number of “industry standards” seen with prior emerging technologies – control of critical inputs, bundling and tying of products and services and exclusive dealing.  Here we go again.
    
    
  • First Fraud, Now Chargebacks.  Having heard firsthand this past week while at HSMAI’s events in Toronto of hoteliers’ growing frustration with chargebacks, I wasn’t surprised by the results of Outpayce’s (Amadeus payments business) recent survey of travel executives, which, among other things, detailed the travel industry’s growing chargeback challenge.  According to the survey, over two thirds (71%) of the respondents have seen an increase in chargebacks with 33% experiencing a growing number of chargeback disputes over the past year.  According to the survey, respondents attributed the increase to a number of factors - (1) consumers view that the chargeback process is easier (thanks in part to mobile banking apps) than refunds and (2) consumers’ increased awareness of chargebacks generally. 
    
    
  • Booking.com Designated a “Very Large Online Platform” Under DSA.   As many wait to learn Booking.com’s fate under the DMA (i.e., whether Booking.com will be designated a “Gatekeeper”), it is important to remember that Booking.com has already been designated a “Very Large Online Platform” (VLOP) under the DSA.  Back in April of this year, the EU Commission announced its decision that Booking.com satisfied the 45 million monthly active user threshold to be designated a VLOP.  Why is this important?  First, Booking.com’s designation as a VLOP may be a telltale sign of its pending gatekeeper designation.  Second, recent events may provide some indication as to how Booking.com might challenge (and ultimately delay) its VLOP designation or possible future gatekeeper designation.  Late last month, German online retailer Zalando, also a recent VLOP designee, filed suit appealing its designation, arguing that its unique hybrid model (combining both retail and platform businesses) caused it to fall well below the 45 million user threshold.  What effect Zalando’s claims might have on its designation or its eventual compliance with the many VLOP content requirements is unclear, but we may soon see other designees – Booking.com – following Zalando’s example.

For those of you who attended HSMAI’s events this past week in Toronto, it was great seeing so many of you at Monday’s roundtables.  I hope each of you got as much out of our sessions together as I did.  Have a great week.

This week’s Update features a wide variety of stories, including two on the growing influence of fintech products and their suppliers:

• • Google and TikTok Out as Travel Planning Tools?  A recent survey of U.S. travelers by travel publisher Matador Network (and owner of AI powered travel assistant, GeekGuide) revealed that more than a third of travelers intended to use AI to research or plan travel. 

• • Buy Now, Pay Later Becomes Save Now, Buy Later.  Online travel agent, CheapOAir, has launched new fintech tools that allow travelers to save for future travel purchases on the online platform (a/k/a layaway).  Users of the new tool can receive cash incentives of up to 6%.  Fintech company, Accrue Savings, powers the program, and amounts deposited will be insured through Blue Ridge Bank. 

• • Additional Details Emerge Re Regulators Concerns Over Booking Holdings’ Planned Purchase of ETraveli.  Since late 2021, we’ve been covering Booking Holdings’ planned purchase of European online platform ETraveli.  EU regulators expressed concern late last week about the effect of the planned purchase, specifically with regard to hotels as Booking’s growing market position among competing online platforms would lead to higher costs for hotels and ultimately consumers.    

Have a great week everyone.  We will be offline next week as I head out to Toronto for HSMAI’s week of events.  I hope to see many of you there. 

This week’s Update features a variety of stories, including an update on the major online booking platforms’ latest quarterly marketing efforts. Highlights include:

• • Big Three Spend a Combined $3.5 Billion on Marketing in the First Quarter.  Booking Holdings, Expedia and Airbnb spent a combined $3.5 billion on marketing during the first quarter of 2023, almost a billion more than the same period in 2022.  When measured against quarterly revenues, Expedia’s quarterly marketing spend was the largest (63% of quarterly revenue) with Airbnb spending the least (just 25% of quarterly revenue).  Rival Booking Holdings spent 39% of its quarterly revenue. 
    
    
  • Priceline is the Latest Online Platform to Announce Implementation of AI.  This past week, Priceline announced it was partnering with Google Cloud to implement generative AI into multiple areas of the platform’s business.  The planned integrations will be both consumer facing (e.g., a conversational AI powered chatbot to assist users in creating itineraries and selecting accommodations) and internal (e.g., a marketing platform that develops copy and images for use across the company’s channels).  Priceline is only the second travel platform to announce its use of Google’s AI products as the majority of announcements to date by online travel platforms have been for OpenAI, the makers of ChatGPT.
    
    
  • Capital One Continues to Expand its Travel Platform.  Capital One announced this past week that it was acquiring online concierge company, Velocity Black, which will expand the financial institution’s ability to offer experiences to its growing user base. 
  • Expedia’s AI Advantages Short Lived.  Readers of our Update might remember recent statements from Expedia Group’s Barry Diller claiming that Expedia had an advantage over its competitors in the adoption of AI, in part, because OpenAI’s CEO, Sam Altman, was a member of Expedia’s board.  Any advantage that Sam’s presence on the Expedia board might have provided was relatively short lived as Sam announced this past week that he was stepping down from the Expedia board. 

For the first time, our weekly Update delves into the world of artificial intelligence (AI).  We’ve tried for several months now to avoid joining the chorus of voices proselytizing about the likely effects of AI, but as the reality of AI starts to set in and its potential uses become more apparent, it is impossible to avoid.  Expect to see more stories in the future on AI (and its likely legal implications) as curated by my colleague and contributor Erin Snodgrass.  I hope you enjoy.

• • Priceline’s New Head of Accommodations Outlines Her Plans for the Future.  Priceline’s new Senior Vice President and Head of Accommodations, Traci Mercer, shared her thoughts about the future of the Booking.com little sibling in a recent interview with PhocusWire.  Highlights from the recent interview include:
    • 2023 marks Priceline’s 25th year anniversary
    • North America, particularly, the United States is Priceline’s current top priority for growth
    • From a supplier perspective, both Priceline and Agoda will continue to work together – at least in North America
    • Priceline Partner Solutions (Priceline’s B2B offering) will remain a growth opportunity as Priceline seeks to leverage its recent acquisition of Getaroom

• • Expedia Calls Out Agoda’s Abusive Discounting Practices.  While we’ve grown accustomed to suppliers’ complaints over the years about the business practices of online distributors, it has been unusual to see online distributors questioning the practices of their competitors.  In a recent interview, Expedia’s CEO, Peter Kern, openly questioned Agoda’s discounting practices and characterized Agoda as “one of the worst when it comes to this sort of rate abuse.”  Historically, Agoda has acknowledged and even embraced these practices (in the name of the consumer) making clear that it will do everything it can to source any available discounted rates – including via wholesalers, whose practices, Agoda maintains, could always be better managed by their supplier partners.
    
    
  • Hotel Distribution Trends to Watch.  We’ve included in this week’s Update a recent report from IHG’s Andrea Daniels summarizing the recent thoughts and predictions of HSMAI’s Global Distribution Advisory Board regarding the future of hotel distribution. 
    
    
  • Add Hilton to the List of Hoteliers Targeted in Texas for Their Resort Fee Practices.  Just weeks ago, we detailed Texas Attorney General, Ken Paxton’s newest resort fee disclosure claims against Hyatt (following quickly on the heels of his announced settlement with Marriott).  Now, we can add Hilton to the list of hoteliers targeted by the Attorney General.  Many questioned whether the Attorney General’s own political and legal troubles (including a possible impeachment) might slow his solitary campaign, but, at least for now, those troubles do not appear to have any real effect on his approach to resort fees.