Hyatt and Expedia Formally Sign New Deal

Hyatt confirmed it formally signed a new contract with Expedia, definitively putting to rest any doubts about whether the two companies would renew their distribution agreement.

A spokesperson for the Chicago-based hotel company issued the following statement Friday:

"Our formal agreement with Expedia is complete. The team at Expedia worked quickly and productively with us, and we are pleased to continue our long-standing relationship without interruption to Hyatt hotel distribution on all Expedia platforms. As we continue to build the value proposition for our guests who book directly with Hyatt, we also work with third-party distributors to reach guests who might not be frequent travelers or who otherwise have a reason to book through these sites.

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"These recent agreements with both Booking.com and Expedia allow us to achieve our goal of making Hyatt hotels available where many guests are booking while also reducing costs and improving flexibility."

Expedia issued the following statement: "We are pleased to have progressed our partnership with Hyatt Hotels Corporation to a place where individual hotels have the freedom and flexibility to work with Expedia and utilize our suite of tools and technology to drive demand and reach brand agnostic and incremental consumers."

The Hyatt spokesperson's comments echo what Hyatt CEO Mark Hoplamazian said during a recent second quarter earnings call with investors.

"We agreed, in principle, in terms that optimize how we go to market and enhance our partnership with Expedia," Hoplamazian noted. "We recognize the value of online travel agencies keeping Hyatt top of mind for customers," he also added, mentioning Hyatt's new contract with Booking.com as well as the company's then-pending agreement, in principle, to continue its partnership with Expedia.

Hoplamazian was careful to emphasize Hyatt's partnerships with online travel agencies like Expedia, while also reminding those companies and investors of the "preference our customers have for our brands" and that "owners are demonstrating their preference for Hyatt because they understand the value that can be created with Hyatt-branded hotels."

The reference to property owners preferring Hyatt comes as Expedia has tried to build a wedge between Hyatt and its owners, arguing that their total costs and fees would be lower for an Expedia booking. That's a premise that Hyatt disagrees with.

In his prepared remarks, Hoplamazian also took the time to explain the company's distribution channel strategy, which is to "drive bookings through Hyatt channels so we can build stronger relationships with our guests." He noted that the company has also expanded its discounted room rates for loyalty members, added new features to the mobile app, and "optimized the Hyatt.com booking path."

Hyatt and Expedia's rocky road to a new deal began earlier this year when Hyatt notified its hotel property owners of the possibility that their hotels may not be distributed via Expedia if the two companies were unable to reach a favorable new agreement.

Hyatt also quietly signed a new and restructured distribution agreement with Expedia's biggest rival, Booking.com, as a hedge against a potential impasse with Expedia.

However, on July 31, the deadline for Hyatt and Expedia to sign a new deal, both companies announced they had reached an agreement in principle.

Had both companies not signed a new contract, it would have been interesting to see how Hyatt would have fared without distribution on Expedia and its numerous online travel agency sites, and it could have, potentially, set a precedent for how other hotel companies establish their relationships with those companies.

Either way, the Hyatt-Expedia contract negotiations process was emblematic of the tension that exists between hotels and online travel agencies, as hotels pursue more direct bookings to avoid paying commissions to those sites.