Marriott’s Arne Sorenson Upended Travel Distribution

Online Travel This Week

In travel distribution, Arne Sorenson’s Marriott, along with Hilton and others, led the way in recent years in driving direct bookings with the enticement of discounted rooms for loyalty program members, and reducing — but not eliminating — the chains’ historic reliance on online travel agencies.

However, Sorenson, who served as Marriott’s CEO for nearly a decade and died Monday after fighting pancreatic cancer, was not one to dismiss the importance of online travel agency distribution for price-conscious travelers, who generally aren’t loyal to a brand.

AllianceBernstein analyst Richard Clarke cited the “ground-breaking” agreements Marriott struck with online travel companies Expedia Group in 2019 and Alibaba’s Fliggy two years earlier as hallmarks of Sorenson’s legacy of redefining hotel-online travel agency relationships.

“The Expedia deal turned the poacher into a gamekeeper,” Clarke said.

While I don’t agree that Expedia in particular and online travel agencies generally are “poachers” when they take hotel bookings, Clarke’s quote indeed reflects a changed dynamic that Sorenson helped create.

You have to recall the venomous relations that often characterized hotel-online travel agency relationships in the early 2000s — and sometimes still becomes evident — to appreciate the significance of Sorenson and then-Expedia Group CEO Mark Okerstrom  coming to terms in 2019 and finding a way for their companies to be useful to one another.

This doesn’t bar hyper-competition, lawsuits or rancor in the future, but In 2019, Marriott and Expedia signed a new multiyear agreement that seemed to take the parties past historic enmities.

Under Sorenson’s reign, Marriott entered into several technology partnerships with Expedia, letting Expedia power flights and packages on Marriott Vacations, and assigning Expedia as the designated distributor of Marriott’s wholesale rates.

The 2017 Marriott-Fliggy joint venture in China, which was part of Sorenson’s plan to spur direct bookings, marked the first time a Western company debuted “a shop within a shop,” or storefront, on Fliggy, according to Clarke.

Sorenson took over responsibility for a hotel chain that before the Starwood acquisition in 2015 wasn’t as global as it could be, and faced the prospect of “OTAs (online travel agencies) threatening to destroy the value of the brand,” Clarke said.

Clarke said Marriott under Sorenson handled online travel agency relationships better than any other global chain, led the way in extracting commission reductions at certain junctures, but also “leaned into” online travel agencies with the Expedia and Fliggy deals.

“Arne Sorenson led the industry in challenging traditional distribution norms, from being a founder of Roomkey to driving new and innovative agreements with OTAs,” said Flo Lugli, founder of technology and hotel consultancy Navesink Advisory Group.

Lugli said Sorenson understood that scale was key to creating an effective distribution platform, and that under his leadership, Marriott “set the standard for other hotel companies to follow.”

Not all of Sorenson’s initiatives were successful. For example, Roomkey, which had loose parallels to when the airline industry banded together to form Orbitz, no longer operates. The Marriott-Starwood data breach was a low point.

“Even if some of these initiatives were less than successful, being willing to take risks in an otherwise risk-averse industry resulted in great learnings that can continue to be leveraged going forward,” Lugli said, referring to Roomkey.

Speaking of being willing to take risks and embrace change, Sorenson didn’t publicize it, but in 2014 he brought members of his leadership team to Airbnb headquarters, as recounted by Airbnb advisor Chip Conley, to get a better handle on the burgeoning short-term rental industry.

While Hilton Worldwide CEO Chris Nassetta has declined to enter the alternative accommodations’ sphere in any meaningful way, Sorenson’s Marriott International tested and then launched Homes & Villas, a vacation rental platform leveraging Marriott’s Bonvoy loyalty program.

Less than a month ago, Sorenson interviewed Uber CEO Dara Khosrowshahi, who previously sat across the negotiating table with him as the Expedia boss, and the banter between the two seemed to reflect a warm relationship.

From a shareholder perspective, Sorenson was solid. Since 2012, when he became CEO, Sorenson nearly doubled Marriott’s revenue and almost tripled EBITDA (earnings before interest, taxes, depreciation and amortization), according to Clarke, and led Marriott “through the toughest crisis the company has ever faced. He leaves the biggest, most profitable hotel company around.”

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