The deal between Marriott International and Expedia Group which makes the OTA the exclusive global optimised distributor of Marriott’s wholesale rates, availability and content to a network of global travel providers is a clear move by the hotel chain to tighten the leakage of wholesale rates and rate parity on the web.
Whether it will completely stop it is another thing, but this first industry agreement, effective October 15, is a game-changing moment in the OTA-hotel relationship, making it more collaborative than competitive.
It’s certainly a big deal for Expedia Group which has been investing in its platform technology to enable it to be a better partner for its hotel partners. It is also a big deal for Marriott Group to commit to such an arrangement with one OTA partner and shows the magnitude of the problem that can only be solved by scale, tech and a different cooperative mindset.
Comments on social media applaud Marriott for being willing to take the first step towards solving a global, industry-wide problem. With its network of more than 5,700 hotels and 1.1 million rooms in over 110 countries across the globe, Marriott is in the best position to tackle this problem globally.
A media statement says that “with the launch of the optimised distributor model, Marriott is introducing changes to how it approaches the redistribution of the company’s wholesale rates and availability among third-party travel providers. Through this agreement, Marriott will leverage Expedia Group’s industry-leading technology and enterprise-level service to create a single gateway for the redistribution of Marriott’s wholesale inventory.
“The optimised distribution model, provided by Expedia Group’s B2B arm, Expedia Partner Solutions, will eliminate the complexity and inefficiency of today’s wholesale redistribution model for Marriott hotels. This single gateway solution will also provide a consistent and reliable shopping experience for travellers, ensuring accurate display of hotel descriptions, room rates and fees through known and trusted third party travel providers.”
The leakage of wholesale rates onto the web has long been the bane of hoteliers and the problem has been aggravated by the emergence of, and competition among, more OTAs and bed banks – from global brands to regional players and local startups.
In Asia, the problem is particularly acute with the independent, fragmented hotel market, and even hotel chains struggle to contain the problem because some of their managed properties are in destinations which are highly leisure-driven and controlled by wholesalers, and different hotel owners have different agendas.
Earlier this year, Pierre Charles Grob, managing director of D’Edge Hospitality Solutions, called out the urgent need for hoteliers to address the net rates situation by moving contracts onto dynamic pricing and commissions.
“A price war will start soon if it hasn’t already. OTAs is such as Agoda, Ctrip and trip.com now have access to net rates and if these net rates are displayed on their websites, it will be a complete disaster for hotels and it will compromise the pricing integrity of hotels.”
Predicting that the problem will escalate in the coming months, Grob said, “Everyone is just waiting for the first move if it hasn’t already happened, and therefore hotels must make their move to dynamic pricing now. The independent and medium-sized chain hotels have been a bit slower in addressing this issue and it is imperative that they address it now.”
A handful of hotel groups in the region have been trying to introduce dynamic pricing group-wide but again it’s a question of enforcement – the corporate office may wish it, but local hotels in the group who have local targets to meet may not desire it.
With the Asia market growing in importance for Marriott and its increased coverage in the region, this is certainly a move that the trade in Asia will watch carefully.
The media statement observed that “the wholesale distribution landscape today is fragmented and complex; hotels need to navigate an intricate web of third-party redistributors and technology standards.”
With the new agreement, redistributors will no longer receive access to Marriott rates and inventory directly from Marriott but may contract with Expedia Partner Solutions to obtain access, provided such redistributors comply with Marriott’s distribution standards.
Tour operators who access wholesale rates from Marriott directly continue to have this option, in addition to leveraging Expedia Partner Solutions as the optimised distributor for Marriott International wholesale rates. For Marriott hotels, the new optimised distribution model will reduce the cost, complexity, and consumer issues associated with the current redistribution marketplace.
“At Marriott, our highest priorities include enhancing service and transparency for consumers while driving profitability for owners and franchisees,” said Brian King, Global Officer of Digital, Distribution, Revenue Strategy & Global Sales, Marriott International. “With this truly innovative solution from Expedia Group, we can increase our reach to leisure travel providers while solving distribution challenges and improving profitability for our hotels around the world.”
“We believe in unlocking the power of the Expedia Group platform for our partners so that they can benefit from our significant investments in technology, support services and industry expertise. This agreement with Marriott International is a great example of putting this ethos into practice,” said Christian Gerron, senior vice president. Enterprise Solutions, Expedia Partner Solutions, Expedia Group.
Phocuswire, reporting on the agreement, quoted Gino Engels, co-founder and chief commercial officer at OTA Insight, as saying this is a “big, strategic move by Marriott” that shows it is willing to tackle the issue of wholesalers undercutting rate parity.
OTA Insight’s Annual Hotel Parity Review 2019 found parity loss on non-contracted channels ranging from 24% for major chains in North America and 36% for major chains in Europe, with rates of 41 to 47% for independent and local chains in those regions, respectively.
It also quoted Phocuswright’s senior research analyst for lodging and leisure travel, Robert Cole, as saying the deal made sense for both parties. “With this move, Expedia is acquiring more traffic, while simultaneously restricting both supply and demand from its competition. An interesting aspect is how much information sharing will be taking place between Marriott and Expedia regarding B2B business sources and the guests they generate.
“It will be intriguing to see if Expedia will be required to share booking source and guest information prior to guest arrival so Marriott can appropriately recognise the guest upon arrival.”
Note: The Hotel-OTA Relationship will be on the agenda at WiT Singapore 2018, in a session featuring Melissa Maher, senior vice president, Marketing & Innovation, Expedia Group and Louise Daley, Deputy CEO, Accor APAC. Check out the programme here and sign up here.