Hotel chains battle travel agents over online bookings

The clash between online agents and direct hotel booking services is changing the risk profile for hospitality accounts

Hospitality

By Allie Sanchez

Major hotel chains are out to take down the middle man by offering deep discounts to clients who book with them directly.

Operators such as Hilton Worldwide Holdings and Marriott International have been offering as much as 25% off room rates to get around double-digit commissions paid to online travel agents such as Expedia and Priceline.

These discount programs are usually exclusively available to clients who are signed up to their loyalty programs, allowing hotels to cut online agents out of such deals.

Online travel agents cornered 15% of US net bookings last year, up from 11% in 2010. Hotels account for 19% of bookings from direct transactions on their websites and mobile apps.

As consumers embrace online travel agents, hotel chains are caught between a rock and a hard place—they need the sales the third-party sites bring in, but the hefty commissions paid to these online agents are cutting into their profitability.

In a securities filing, Starwood Hotels and Resorts noted that these intermediaries are “commoditizing” hotel rooms by focusing on price and general quality indicators (such as star ratings) “at the expense of brand identification.”
 

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