The American Hotel & Lodging Association has no love lost for Expedia, other online travel agencies and their affiliates, and will likely welcome the squabbling and any additional exposure the affiliate issue gets from this lawsuit. Expedia has to move fast to protect its reputation among partners.
An Expedia affiliate partner, Reservation Counter, has filed a lawsuit against Expedia Inc. alleging that the company stole Reservation Counter’s confidential search engine marketing data and provided it to a direct competitor, leading to the near-demise of Reservation Counter’s business.
The lawsuit also alleges that Expedia covered up the breach rather than informing the plaintiff of the alleged transgression.
The lawsuit, filed Friday in a federal court in Utah by TravelPass Group on behalf of its Reservation Counter subsidiary, alleges that the data theft caused $61 million in damages to Reservation Counter. The company, part of Utah-based PartnerFusion, is asking the court to award it treble damages.
The Expedia Affiliate Network has partners ranging from airlines and travel agencies to non-travel corporations and other booking sites. Expedia agrees to provide them with hotel inventory and commissions in exchange for booking revenue. Partners include Sabre, Hotelplan Suisse, MCI, Travel.ch, Almundo.com, The Travel Network Group, Travelport, and CarTrawler, for example.
Some affiliate partners of online travel agencies have fairly straight-forward white label businesses selling hotel stays to their customers while others have been attacked by the American Hotel & Lodging Association and their chain members for tricking consumers into thinking they are making a booking directly with a hotel when in fact they are transacting a reservation with a third-party site unaffiliated with the hotel. Along these lines, Reservation Counter, the plaintiff in the lawsuit, has been called out by ABC News and The New York Times for questionable practices.
Still, in 2014 — when the alleged data theft took place — and until last week, Reservation Counter was an Expedia Affiliate Network partner. Reservation Counter alleges that in early 2014 then-Expedia senior account manager Brian Hungria accessed Reservation Counter’s proprietary search engine marketing data in Expedia’s system and furnished the data to three employees of a competitor, RoomStays.com.
Two Roomstays employees, Yatin Patel and Sherman Distin, allegedly took the pilfered data, which supposedly cost Reservation Counter some $30 million to develop over the years, and formed another competitor and Expedia affiliate, Reservations.com. Patel is the founder of Reservations.com and Distin became a member of its search engine marketing group, according to the federal lawsuit. [Distin, meanwhile, told Skift April 21 that he “never worked with or for Reservations.com.]
[Update May 11, 2018: TravelPass confirmed that Sherman Distin has never worked for or had any relationship with Reservations.com.]
In the lawsuit, Reservation Counter describes what’s involved with its search engine marketing “playbook:”
“Reservation Counter employs a data science team to develop data sets, which include data such as hotel booking volume, hotel cancellation rates, locations of relevant hotels, types of hotels, hotel booking volume by time of year, and booking window by hotel (collectively the ‘Trade Secret Data’ or the ‘Data’). This Data constitutes Reservation Counter’s ‘playbook,’ and analysis of this information is used to successfully bid against other OTAs in keyword auctions. This Data is the key to Reservation Counter’s success as a business, as it allows the company to efficiently advertise in key markets while strategically targeting only certain keyword terms in underutilized markets to achieve maximum profits.”
Reservations.com then basically got a free ride by avoiding the expense of having to develop such search engine marketing data itself and within a year of its launch in 2014 achieved the milestone of 1 million hotel bookings, the suit alleges.
On the other hand, the alleged data theft led Reservation Counter to lose most of its business, nearly 90 percent of its value and impeded its efforts to raise funding, the suit alleges.
Rather than informing Reservation Counter of the breach, Expedia allegedly “covered it up” and “actively concealed it,” the suit alleges.
The lawsuit also faults Expedia for alleged lax data protection methods that enabled account managers to access data from any partners and not just the ones they managed.
Expedia declined to comment on the lawsuit Sunday, citing a policy of not commenting on pending litigation.
At issue is the nature and value of the data that allegedly was stolen and whether the breach had the adverse impact on Reservation Counter’s business to the degree that the lawsuit purports.
One question for Expedia, too, is whether it would be adversely impacted if Expedia Affiliate Network partners lose confidence in its practices, including its data protection safeguards.
The case is Case No. 2:17-cv-00246 in District of Utah, Central Division.
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Tags: affiliates, expedia, hotels
Photo credit: Reservation Counter, an affiliate of Expedia, is suing the online travel agency for theft of marketing data. Reservation Counter