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As HotelTonight allegedly used “increasingly threatening tones,” Kayak filed a lawsuit and the two companies recently entered into a distribution partnership after settling a trademark dispute last year.
In a trademark flap that has received scant publicity, Kayak filed a civil suit against HotelTonight in March 2015 in a Connecticut federal court, seeking a declaratory judgment over whether it was legal for Kayak to use the phrase “Hotel for tonight” in its mobile app.
Kayak claimed that it was “fair use” for the metasearch site to use the phrase “Hotel for tonight” despite HotelTonight’s trademarked name and that there would be no cause for confusion among consumers about the two companies because Kayak used the phrase in tandem with its trademarked and recognized Kayak logo.
On February 25, 2015 HotelTonight sent a letter to the Priceline Group, Kayak’s parent, alleging that Kayak’s use of “Hotel for tonight” violated the HotelTonight trademark, according to the Kayak complaint.
“Despite efforts since that date to try to settle the matter, Hotel Tonight has maintained its contention in increasingly threatening tones that Kayak’s use of the descriptive phrase ‘Hotel for tonight’ infringes its claimed rights in the name ‘Hotel Tonight,’ and the range of its complaints have expanded in scope,” Kayak’s lawsuit stated.
Settlement and Partnership
HotelTonight never filed an answer to Kayak’s complaint and the two parties entered into a confidential settlement. The court then dismissed the litigation, without either party having to pay the others’ attorney fees, in July 2015.
HotelTonight seems to have prevailed against Kayak on the issue as the phrase “Hotel for tonight” does not appear in Kayak’s latest mobile app update.
Instead, as shown at right, Kayak’s app has a hotel area that defaults to “Today” or “Tomorrow.”
The Priceline Group didn’t specifically mention the lawsuit in its annual 10-K filing with the Securities and Exchange Commission but did state:
“From time to time, we have been, and expect to continue to be, subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of third-party intellectual property rights. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources, divert management’s attention from our business objectives and adversely affect our business, results of operations, financial condition and cash flows.”
The Kayak-HotelTonight Partnership
Although it hasn’t received any publicity, HotelTonight and Kayak recently entered into a distribution partnership. This is a rare — if not a first — for HotelTonight as it previously relied solely on direct sales in its apps and mobile website.
The distribution deal, in which Kayak users can select to book a hotel on HotelTonight, comes after HotelTonight laid off 20 percent of its staff, including several account managers, in November 2015, and last week conceded that it needs to renegotiate margins with its hotel partners in a bid to focus on unit economics.
Officials from the now-Boston based Hot hotel app for last-minute hotel bookings argue that third-party distribution — such as HotelTonight’s selling through Kayak — is a sustainable solution while employing account managers to enter into agreements and handle direct-hotel accounts would be a money-losing proposition.
The Hot hotel app can’t claim to compare to HotelTonight’s volumes but Joe Haslam, Hot’s executive chairman, claims some oneupmanship.
“At Hot, we are used to HotelTonight following our lead,” Haslam says. “We used XML to add hotel inventory before them. We offered a lower-price crashpad option before them. We went live with seven-day advance booking before them. So its no surprise they have finally produced an API to sell via third parties, something we have been doing since 2013.”
On the other hand, there’s no disputing that HotelTonight was the first-mover in tonight-only mobile hotel apps, spawning copycats from Hot to HotelQuickly, around the world.
HotelTonight seems to be embarking on ramping up such third-party distribution to supplement its own direct sales.
Asked whether the Kayak deal represents a strategy shift in distribution, a spokesperson for HotelTonight denied it.
“No, this is not a strategy shift,” the HotelTonight spokesperson says. “We’re continually testing and evaluating different marketing channels and we prefer not to comment on these types of tactics or partners.”
HotelTonight’s Rates Now Subject to Price Comparisons
The Kayak distribution deal opens up HotelTonight to some transparency — price comparisons — that it was not often subject to before.
In a Re/code interview last week, HotelTonight CEO Sam Shank said the rates it offers consumers are 17 percent lower than published rates on average.
Sometimes the price comparisons will be to HotelTonight’s advantage as when it offered a $149 mobile rate on Kayak for a February 19 stay at The Marker San Francisco compared with a $225 rate if the consumer booked the hotel on Kayak.
On the other hand, as can be seen at right, HotelTonight’s $161 per night rate for a March 9-11 stay at the Empire Hotel in New York City is $26 per night higher than Kayak’s mobile rate.
Nevertheless, HotelTonight CEO Sam Shank has a long history with Kayak. He founded Travelpost and sold it to Sidestep in 2006. He became vice president of business development at Sidestep when Kayak acquired it in 2007.
The distribution agreement between HotelTonight and Kayak signals that their trademark dispute over “Hotel for tonight” is apparently relegated to the rearview mirror.
Here’s the Kayak complaint: