Priceline Group CEO Faults Hotel Association for False Allegations

Priceline Group CEO Glenn Fogel is good with numbers, and the folks at the American Hotel & Lodging Association know their way around an Excel spreadsheet, too, but when it comes to assessing the health of the U.S. travel market and competition, they come up with totally different equations.

The news broke a week ago that the lodging association, which includes major hotel chains as members, was planning on lobbying the Trump administration, and readying an advertising campaign, to show that Expedia Inc. and the Priceline Group are a duopoly that harms U.S. competition.

Asked Tuesday during the Priceline Group’s earnings call to share his thoughts on the lobbying effort, Priceline’s Fogel argued that his company wields merely a “mid-single-digit-percentage” market share of the hotels that are available on its sites.

When considering the $1.3 trillion global travel industry, the Priceline Group accounted for less than 1 percent marketshare as it generated $10.74 billion in revenue in 2016.

“One, as I think we have talked about before and you can do by just doing some math on the numbers that we’ve revealed, we have a mid-single-digit percentage market share in this business,” Fogel said Tuesday. “There are a couple implications to that. One is we got a lot of landscape in front of us. There’s a lot of room for us going forward.”

Fogel scoffs at the notion that Priceline and Expedia have some kind of “monopoly.”

“Second thing I’d say is in that news item, I heard them use the word like monopoly, and I just point out that I have never heard the word monopoly used in the same sentence about somebody who has a mid-single-digit share. We’ve done a very good job with our partners since I’ve come here 17 years ago. And we will I believe continue to do so going forward.”

Fogel contends that the hotel association is geared toward driving more direct traffic to  hotels’  own websites, and that’s a notion he can understand.

“Every company wants to try and have customers come to them direct and lower the marketing distribution cost as much as possible,” he said. “We get that. Well, we’d like to do so ourselves. Believe me, I’d love for our customers to just call us and not have to pay any marketing at all to get them to come.

“But that’s not the way the competitive world works, and you have to pay to get people to come and notice you and pay for them to come continuously and come back. That’s the way it works. I don’t fault anybody for wanting to try and bring people to their business directly.”

Fogel draws the line, though, at what he characterizes as “misstatements” or untrue “allegations.”

“I do fault anybody who makes misstatements or allegations that aren’t true,” Fogel said “Enough said.”

Hotels Look at Competition Issue Differently

The American Hotel & Lodging Association looks at the matter entirely differently and from its perspective, the most important number is 95 percent — that’s its estimate of Priceline and Expedia’s share of the U.S. online travel agency market.

After all, Expedia Inc. owns brands including Expedia.com, Hotels.com, Travelocity, Orbitz, HomeAway, Hotwire and Trivago, to name a few. The Priceline Group owns Booking.com, Priceline.com, Kayak, Agoda, Rentalcars.com, and OpenTable, and has a pending deal to buy Momondo and Cheapflights.

“This is an issue around competition or lack of it, which we believe always hurts the consumers who stay at our hotels as well as deceptive practices that compound that harm,” said lodging association spokeswoman Rosanna Maietta.

“Consumers are operating under the illusion of choice, thinking they are comparing between multiple brands, but in reality we’re talking about two companies: Priceline or Expedia. And just look at the brands under each of their umbrellas: besides owning Kayak, Priceline.com, and Booking.com, the Priceline Group have just acquired Cheapflights.com and Momondo.com.”

The lodging association, which opposed Expedia’s 2015 acquisitions of online travel agency Orbitz Worldwide and vacation rental platform HomeAway, contends that increased consolidation among online travel agencies is taking place and harming consumers.

“Though online travel agencies are an important partner to our industry, AHLA has been out front in expressing our concerns about the negative consequences of increased consolidation within the online travel agency (OTA) marketplace,” Maietta said. “Indeed, we have publicly opposed such consolidation with the Justice Department and outlined how the Expedia and Priceline duopoly hurts consumer choice and the small businesses in our industry, which represent some 60 percent of the all hotels in the U.S., who are struggling to compete as a result of the gouging commission rates charged by the OTAs.”

The hotel group views it as its part of its mission to lobby the federal government about online travel agency actions, including trickery by some of their affiliates, that harm competition.

“With Expedia and Priceline controlling some 95 percent of the U.S. online travel agency market, it is incumbent upon AHLA to ensure the public and policymakers have a clear picture of how consumers are hurt by the OTAs misleading advertising practices that punish guests and hotels,” Maietta said. “With some 500 online hotel bookings occurring every minute, it is imperative that AHLA lead the way in advocating for our industry and our guests to ensure a competitive marketplace with ample transparency, consumer choice and confidence throughout all online booking channels.”

Two Years Ago, DOJ Saw a Competitive Marketplace

In 2015, the U.S. Justice Department declined to get in the way of Expedia acquiring Orbitz Worldwide, saying there was no proof that consumers would pay higher fees or that hotels would be harmed.

In the interim, there has been a lot of hotel consolidation, as well, including Marriott’s acquisition of Starwood.

 In Marriott’s first quarter earnings report this week, CEO Arne Sorenson said hotels’ commission paid to online travel agencies would be reduced as more legacy Starwood properties transition onto Marriott contracts.

Meanwhile, in a fun fact, Sorenson said he was unaware of the American Hotel & Lodging Association’s new campaign to press federal authorities about the Priceline-Expedia “duopoly.”

Said Sorenson: “I’m not sure what the AH&LA is doing there.”