When Priceline ended traveler fees on airline bookings a decade ago, the other online travel agencies generally followed. Whether Expedia will match Booking.com and start charging hotels commissions on resort fees is a much more complex issue. Part of it depends on how much resistance Booking gets from hotels to its new policy.
With Booking.com making the controversial move of charging commissions on hotel resort fees for the first time this week, rival Expedia Group isn’t ruling out matching the new stance.
“We’re observing, we’re listening,” said Cyril Ranque, Expedia Group’s president of lodging services, who added “we’re trying to get as much information as we can.”
He said Expedia has not changed anything about its commission collection policies, and pointed out, “we are hearing, despair, high concerns from our hotel partners. We’re trying to get as much information as we can.”
Ranque isn’t a fan of resort fees in part because Expedia loses out on commissions because it only collects them on the room rate, and also the resort fees are misleading to consumers.
For example, a deluxe room with two queen beds at the Treasure Island Hotel and Casino in Las Vegas for a June 11 stay goes for a nightly rate of $84, but it’s only when consumers click through to a checkout page on Expedia.com that they see the fine print that there is an additional $42 daily resort fee.
Expedia collects a hotel commission on the $84 nightly rate while Booking.com’s new policy has it collecting commission on the combined $126 rate plus resort fee.
In addition to losing out on the larger commission, Ranque said he doesn’t like resort fees because of “the negative customer experience” in that travelers think they are paying a certain rate when they see the lead-in price, but actually they are often shelling out a lot more.
“They think they had a price,” he said. “They book it and then all of a sudden they get hit by a series of fees that the customer has no choice in paying. So that’s why when we really think about the health of the travel agency business, it’s not really good to not tell the customers in a clear way.”
Vijay Dandapani, CEO of the Hotel Association of New York City, condemned Booking.com’s new policy, and sees value in resort fees for hotel guests.
“Resort and urban fees provide real tangible value to the guest and there is plenty of empirical evidence that a majority of guests have no problem with it, and appreciate the value offered,” Dandapani said. “Booking’s adding a commission to that is akin to tacking on a charge on to a range of other products and services guests consume at a hotel after checking in, and will only increase the cost to the consumer while unfairly penalizing the largest customer base: hotels.”
The U.S. Federal Trade Commission in 2012 warned hotels that they should include mandatory fees in their advertised rates, but the practice of charging these gotcha fees to guests seems only to have grown in the interim.
Skift interviewed Ranque on the sidelines of the NYU Hospitality Conference in Manhattan earlier this week. He addressed resort fees, changing vacation rental business models, Google’s alleged disadvantage, and Expedia’s negotiating stalemate with United Airlines.
Fees Exacerbate Conversion Problems
Asked to comment on Airbnb eliminating guest fees by default in new hotel and alternative accommodations listings, a policy that kicked in Tuesday, Ranque noted that when Expedia signs up new alternative accommodations listing on its own and independent of its Vrbo business, Expedia only charges host fees. Meanwhile, Vrbo, which replaced HomeAway as Expedia lead vacation rental brand, charges both host and traveler fees.
Ranque said Expedia is evaluating which model, namely host-only or host and guest fees, will be the company’s future framework.
Much like the hidden resort fees that some hotels charge, traveler fees that Vrbo and Airbnb still charge, in many cases, give customers a shock when they find out about them.
In the case of vacation rentals, Ranque said, “if you have a traveler service fee in the end, you get a cheaper price in the search results. So you get more traffic to your property page from the search results, but then you get a big hit in the checkout moment.”
With host-only fees the initial vacation rental price looks higher than when a traveler fee is added later, Ranque said, but it’s only a matter of optics. “So it’s actually less traffic but you convert readily at the end,” he added. “And I think our whole view is we are ready to measure these types of positioning and also educate our vacation rental partners.”
Ranque said declined to say whether he thought host-only fees, which is the way the traditional hotel business works, would be the wave of the future in alternative lodging. “I’m not ready to say that,” he said. “I don’t think we have the data to prove that.”
Google’s Alleged Disadvantage
With the U.S. Department of Justice poised to mount an antitrust investigation of Google, regulators might take note that Ranque argues that Expedia has business advantages over Google.
Yes, Ranque would love to see a level playing field in Google search where Google doesn’t make its own travel businesses paramount in search results.
“We welcome any initiative that is pro-competition.”
He added: “We want to make sure there is not preferential treatment of Google products over our own products in a dominant marketplace, that’s one thing,” Ranque said. “Because it is still a wonderful acquisition channel for people who are undecided. We don’t have any issue with that as long as it is a level playing field.”
But Ranque contended that Expedia has an advantage over Google when it comes to targeting the customer with an offer or recommendation iat the appropriate time.
“When you look at what Google has, they have obviously unlimited data on the upper part of the funnel,” he said. “The point is we are uniquely positioned at Expedia. We process, we actually see 2.3 billion interactions between demand and supply every day on our platform. We process 60 million customer service calls per month. We have 6,000 people in the field working with hotel partners.”
Combining data with feedback about partners from the sales team is a wining combination, Ranque argued.
“I think the power of our model is you have the power of data on steroids from the human capital that we are putting into the business. And that’s what makes us unique versus Google and to some extent makes us unique versus our partners on the chains and on on the hotels, which only have one side of the equation. And that’s why we are pretty optimistic about the future.”
Ludicrous if No United Deal
One hot-button issue facing the Expedia Group is its stalled negotiations on a new contract with United Airlines. The current contract expires September 30.
At Skift Forum Asia in Singapore May 27, United President Scott Kirby said the marketplace has changed, and that these days airlines don’t necessarily need online travel agencies for distribution. But Kirby added that it’s possible that United and Expedia will still come to terms on a new deal.
Asked about those prospects, Ranque likened Expedia’s new relationship with hotel chains, typified by its new agreement with Marriott, to the possibility of a new era in airline-online travel agency dynamics.
Ranque said he thinks it would be “ludicrous” if United and Expedia didn’t find a way to put United’s flights in front of 315 million consumers who visit Expedia sites monthly.
“If you look at what we’ve done in the hotel space, look at the health of our relationships with the hotel chains now, which I think is at an all-time high, because we each found our space and we are focusing on delivering value to them.”
Under the terms of the Marriott agreement, for example, it is believed that Expedia might have agreed to somewhat lower commissions in exchange for Marriott committing to additional marketing spend through the online travel agency, and a tighter technology partnership. Details of the next step in that technology partnership will emerge in the second half of 2019, Ranque said.
“I think we found our space in the industry with hotel chains, even the biggest one,” he said. “I mean, obviously Marriott is the biggest example. I can’t see a world where we wouldn’t find such a space with airlines. It’s an important part of the ecosystem. Our customers need to book flights and when they book flights they have access to a ton of other products. So, I’m hopeful that reason will prevail.”
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Photo credit: Pictured is the MGM Grand Hotel and Casino in Las Vegas. Expedia hasn't decided yet whether it will follow Booking.com's lead in charging hotels commission on their resort fees. Håkan Dahlström / Flickr.com