InterContinental Hotels Group last month removed its 3,500 hotels from the inventory of Expedia.com and its business travel arm, Expedia Corporate Travel. The move marks the first time a major hotel company has withheld inventory from an Internet travel management company and follows a three-month review IHG undertook to assess the marketing practices of all the third-party online sites with which it does business.
IHG cited three key issues in its decision: the transparency in how fees are presented to customers, the automation to ensure reservations are confirmed and the methods by which room availability is presented. "A hotel will be listed as sold out and the distributor knows it's not," said Tom Seddon, IHG senior vice president for Americas brand performance. IHG, however, said it would continue to work with Travelocity Business and Priceline. The hotel company's decisions about Orbitz For Business and other third-party sites are pending.
IHG also is withholding inventory from Hotels.com, a site used mostly by leisure travelers that is owned by Expedia's parent, InterActiveCorp.
The IHG decision poses a potential setback for Expedia Corporate Travel, which, like other ITMCs, has struggled to make inroads in the corporate market, though the IHG strategy also could backfire if Expedia becomes a more dominant player in online distribution. An ECT spokesperson declined to comment on the IHG action.
Since the Aug. 16 announcement, no other hotel company has followed InterContinental's lead, either in relation to Expedia or other ITMCs.
"At the end of the certification process, Expedia and Expedia Corporate Travel made it clear that no amount of discussion would make them agree to our criteria," Seddon said. "Therefore, we had no alternative but to pull our entire inventory off their shelf."
Fully removing inventory from the sites will take two or three months. "Right now, we're running down all our obligations since there are different contracts in place," Seddon said. "Some have overlapping dates, so we're running out the notice periods."
Seddon doesn't see the rift being healed anytime soon. "We'd like to be on every shelf. We're in the business of selling hotel rooms, after all. But we'd prefer be out of a channel—rather than in a channel—that damages our customers," he said. "What we're talking about is good business practice. The fact that Travelocity and Priceline agreed to our standards demonstrates that."
IHG's brands include InterContinental Hotels & Resorts, Crowne Plaza, Holiday Inn, Holiday Inn Express, Staybridge Suites and Candlewood Suites.
Travel buyers who have chainwide deals with IHG and want to use Expedia now are at a disadvantage, according to Norm Rose, president of Travel Tech Consulting in Belmont, Calif. "It's hard to understand how Expedia can expect to work with clients who have such arrangements in place because now they can't book these hotels on the site," he said. Expedia users with even one critical IHG property in their program are in the same situation.
"It's also hard to imagine IHG cutting out Expedia as Expedia continues to grow. It's the blanket nature of the decision that's surprising," Rose said.
Even though IHG's owners association promptly signed off on the decision, the company may have trouble controlling its franchisees. "It depends on economic conditions of capacity and demand, whether individual property owners need to boost occupancy and have no choice but to deviate from IHG corporate in order to do it," Rose said.
Hilton Hotels Corp. last year entered into an agreement to provide Expedia special access through its central reservations system, but only for a two-year period
(BTN, Apr. 28, 2003). The agreement expires in eight months. Hilton last week declined to comment on the status of the relationship or the possibility of an extension.
Marriott International and Starwood Hotels & Resorts Worldwide take different approaches. "We don't have preferred relationships with any of the online TMCs," said Tom Botts, Starwood vice president for distribution strategy operations. The sites' discount rates, offered in addition to negotiated and global distribution systems rates, are a sticking point. "We're very guarded and concerned about the merchant model moving into the corporate travel space," he said.
Marriott does provide inventory and has no complaints. "Our strategy is to be on as many shelves as possible—to sell the way the customer wants to buy, and there are customers who want to buy this way," said Bruce Wolff, executive vice president for sales and marketing programs. "Customers might choose to go there because they can see across hotel properties or because they have air and car more integrated."
Marriott expects its relationships with Expedia Corporate Travel, Travelocity Business and Orbitz For Business to continue without interruption. "They've met our concerns in the areas that are important to us, namely rate and inventory integrity and automation and they've avoided confusion in their pricing about what are—and are not—Marriott expenses and fees," Wolff said.
Many large program buyers still categorically reject ITMCs as a tool, so the unavailability of IHG inventory is a non-issue. "Our travel policy doesn't allow people to book through that channel," said Frank Melesky, San Jose, Calif.-based travel commodity manager for hotels, meetings and groups at Lockheed Martin Corp. "So far, that policy works for us. We actually haven't had much pushback from travelers on the subject. You either book on the online tool or you go through the approved (offline) agency. So many of the discount rates on these sites have built-in restrictions and inflexibilities that travelers easily can get confused."
Buyers with small and midsize programs have responded more positively since they usually don't have the leverage to be able to get discount rates of their own. Expedia Corporate Travel client Bill Kammerer of Salesforce.com in San Francisco is an example.
"We have a negotiated rate at a hotel near our headquarters and a rate in New York, but otherwise we tell travelers to use the rates Expedia offers," Kammerer said, indicating that the choice of a particular chain or hotel company matters less to his company than price. "The whole process of negotiation and then pushing employees toward specific providers we find counterproductive, as well as costly in terms of administration."