Hilton's CEO's statements that the chain achieved three key goals in negotiations with major online travel agencies show that the parties' standard ways of doing business are evolving. If Nassetta's statements are to be believed, then Hilton won some tools for improving its economic position and winning back some direct traffic.
Hilton Worldwide completed a series of negotiations with major online travel agencies over the last quarter and wrangled important economic and marketing concessions, according to CEO Chris Nassetta.
Nassetta said Hilton Worldwide won the right to lower the commissions it pays to online travel agencies such as Expedia and Booking.com.
In Nassetta’s telling, Hilton Worldwide also won concessions that amount to a further withering of standard hotel chain-online travel agency contracts, including rate parity and most-favored nation clauses.
Hilton Worldwide managed to eliminate last-room availability clauses and won the right to offer preferential pricing — lower rates than it gives to online travel agencies — to certain members of the hotel chain’s loyalty program, Nassetta said.
“We had three pillars in our negotiations with all our OTAs,” Nassetta said. “We are now done.”
The three pillars of Hilton’s negotiations included getting rid of last room availability for online travel agencies, securing the opportunity to offer preferential pricing to Hilton’s most loyal customers, and lowering margins to more reasonable levels.
“We are done with all of our OTA negotiations, and we achieved our goals in every one of those pillars,” Nassetta said.
Nassetta did not speak to the specifics of each goal, but Hilton may reveal some aspects about pricing and what the deals mean to certain HHonors members later this month or early next year.
As it stands, the deal likely bodes well for elite HHonors members who may benefit from discounted rates and other perks. This could also entice non-members to join the HHonors program.
Hilton’s ability to offer preferential pricing to its most loyal customers means that the company can now offer certain Hhonors members lower rates than the chain distributes to online travel agencies, a potentially important factor in increasing direct booking as well as customizing and personalizing the guest experience.
Hilton also negotiated diminishing or eliminating last room availability, giving Hilton the opportunity to offer its last available rooms directly to its customers without having to also make them available to online travel agencies.
“We are very focused over the next year or two in making sure that our customer understands the value proposition that we offer them to drive even more of a direct relationship in terms of booking with us,” Nassetta said.
The online travel agencies haven’t talked publicly about their Hilton Worldwide contracts.
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Photo credit: Hilton Worldwide secured deals with online travel agencies that may translate to big opportunities for the hotel company. Pictured is a Hilton property in New York City. Hilton / Hilton