Hilton, Expedia Agree On Merchant Model Limits, Direct Connection

Expedia Inc. today said it has entered into a two-year agreement to stop undercutting Hilton Hotels Corp. rates and to reduce its margin on Hilton merchant-model rooms in exchange for the establishment of a flexible, direct-booking connection with Hilton that will save the cost of faxing merchant-model bookings.

Tom Keltner, Hilton Hotels Corp. president of brand performance and franchise development group, would not confirm the terms of Hilton's new agreement with Expedia, which the Wall Street Journal today said included a reduction in the premium Expedia earns to 18 percent from 28 percent. "We are recommending people use Expedia when they need to use third-party sites because we've negotiated a favorable agreement on the margins Expedia charges," Keltner said, referring to Hilton's owned, managed or franchised properties. He said Travelweb is the other non-Hilton site the company prefers.

An Expedia spokesperson was unable immediately to comment on how the deal may affect the Bellevue, Wash.-based agency's corporate program.

Asked how the hotel company is dealing with complaints from corporate buyers that their negotiated rates are sometimes undercut by merchant-model rates, Keltner said, "We haven't solved that one."

Beginning this summer, Expedia said, Hilton's reservation system will connect using XML standards into Expedia's database, giving Hilton properties access from their property management system to Expedia's dynamic pricing and inventory tools. The capabilities came with Expedia's acquisition, announced last year, of Newtrade Technologies Inc.