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With Expedia Inc.’s pending acquisition of Orbitz Worldwide seemingly sailing toward regulatory approval, the American Hotel & Lodging Association came out against it today, arguing that Orbitz would hike its commissions to loftier Expedia levels.
The commissions that hoteliers pay Expedia are about 11 percent higher than they pay Orbitz, according to the AH&LA.
The Washington-based trade association, which represents many properties and operators within the U.S. hotel industry, stated that the industry consolidation, which would have Expedia owning Travelocity, Orbitz and sub-brands including Hotwire, Trivago, Hotels.com, and many others, would limit consumer choice.
The AH&LA, citing a Skift article, states that Expedia Inc. would control about 75 percent of the U.S. online travel agency market share. In addition, the Priceline Group and Expedia Inc. would emerge as a dominant duopoly, wielding about 95 percent of U.S. online travel agency bookings, according to PhoCusWright.
What the trade association doesn’t mention is that Expedia-Orbitz would still only control a relatively small portion of the overall U.S. travel market when you consider hotels’ own websites, phone lines, and offline options in general.
Cowen & Co. estimated that Expedia’s post-deal share of the U.S. travel market would be about 15 percent when taking hotel sites into account.
“Finally, this acquisition would result in increased concentration among the OTAs that could adversely affect many independent and small hotel owners who rely on OTAs to reach consumers directly,” said Katherine Lugar, CEO of AH&LA. “Indeed, as a result of previous OTA consolidation, as well as this proposed acquisition, the small, economy and midscale hotel segments have become increasingly reliant on an ever-shrinking number of OTAs that have the potential to impose steep commissions and demand restrictive contract provisions.”
“AH&LA believes the proposed acquisition will accelerate these trends, which are likely to increase distribution costs and ultimately reduce value to consumers,” Lugar said. “We also believe the combination of Expedia and Orbitz will cause small and independent hotels to pay significantly more to advertise online in the increasingly pay-to-play ecosystem of online search. Taken together, these effects could substantially drive up the cost of doing business for small and independent hotels to the ultimate detriment of consumers.”
The trade association, picking up on a campaign it has been carrying out in recent months, also argued that Expedia-Orbitz combination, through their affiliate relationships, would exacerbate a trend of online travel sites misleading consumers by masquerading as hotel brands’ websites.
The AH&LA indeed makes a great point about rising hotel commissions as Expedia would be expected to hike Orbitz’s commissions to Expedia’s levels. Expedia did just that in Australia earlier this year after acquiring Wotif a few months earlier.