The argument of Priceline Group CEO Darren Huston is that chains are shooting themselves in the foot -- and their properties aren't happy -- when the chains offer lower rates on their own websites because then their listings on Booking.com won't convert as well as they should. But as Huston says in a different context, perhaps the hotels would reply that they are "playing the long game."
With hotel chains such as Hilton Worldwide and Marriott International making a major push for direct bookings and offering loyalty program members lower rates than they give to online travel agencies, Priceline Group CEO Darren Huston isn’t happy about some of these moves.
“I don’t appreciate some of the actions that are taken on a chain level sometimes … ” Huston said during Priceline’s fourth quarter earnings call February 17. However, Huston characterized Booking.com’s relationships with hotels as “tight.”
The comments came in response to a question about Hilton Worldwide getting more aggressive in its marketing and chains becoming more stingy in giving sites such as Priceline’s Booking.com last-room availability.
In fact, Hilton Worldwide this week launched an advertising campaign, Stop Clicking Around, which it called the largest in the chain’s nearly 100-year-old history, promoting direct booking. [See Hilton video/commercial embedded below.] iSpot.tv estimates that Hilton has spent $1.3 million on the television commercial, which has had 49 national airings from February 15 to 17, in the U.S. with much more to come.
Differing Views From Chains and Properties
Huston, who said that 10-15 percent of Priceline’s business comes from global and regional hotel chains, pointed to a frequent split between the desires of chains and the owners of individual properties.
Many property owners are “agitating to get their fair share” of bookings and most want to “lean into” the Booking.com model because otherwise their volumes won’t grow and bookings will go to competitors, Huston said.
Huston said some chains never gave Booking.com last-room availability although many do. He said Booking.com’s “take rates” are stable despite the moves by some chains.
On the question of rate parity and most favored nation clauses, which have been weakened by new laws in Europe and negotiations between the chains and online travel agencies, Huston said rate parity is still important so Booking.com doesn’t undercut chains on margins.
Hotels need to offer great pricing to enhance conversion as customers don’t want to overpay, Huston said, adding that the marketplace will dictate some of these issues regardless of the rules.
Asked about the impact of a new law in France that undercuts rate parity, Huston said: “Parity in France is at least as, if not more, healthy that most of our markets in the world.”
Added Igloos and Shared Apartments
Huston said the Priceline Group added 200,000 properties in 2015 from igloos and shared stays to apartments and hotels.
Booking vacation rentals and apartments industrywide have traditionally had a lot of “friction” for consumers as they worry about whether the property is actually available and where they are sending their money, Huston said.
Booking.com is emphasizing instantly confirmable bookings without travelers’ fees, which is a model that will win over the long term, Huston said.
“We are playing the long game,” he said.
Booking.com is still adding lots of properties in Europe, although they are smaller properties, Huston said.
For example, Booking.com is adding 100 properties per day in Italy, Huston said, although most have a small number of rooms.
In China, the Priceline Group added nearly 30,000 properties in 2015, bringing its total to 35,000.
India “seems to have unending potential for us,” Huston said.
One day in the future the Priceline Group will have relationships with virtually all the hotels in the world, he said, but smaller properties, including apartments and shared rooms, will have an almost unlimited supply, Huston said.
“That space is growing faster than our core business,” Huston said.
The following is Hilton Worldwide’s new TV ad.
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Photo credit: Priceline Group CEO Darren Huston isn't happy that chains such as Hilton Worldwide are offering consumers lower rates on their sites (shown above) than they give to online travel agencies. Hilton