Contract negotiations between Choice Hotels International and Expedia have reportedly broken down, with the Choice brands being removed from Expedia controlled websites. Max Starkov of Hospitality eBusiness Strategies authored a recent blog post on the topic, describing the hotel industry’s relationship with the Online Travel Agencies as an example of the “Stockholm Syndrome” when the kidnapped victims (hoteliers) fall in love with their kidnapper (OTAs.)
photo credit: BrymoChoice Hotels Franchisees, looking for business during an economic downturn, may need to weigh brand allegiance against online sales
As opposed to a hostage situation, the hotel industry and the online travel agencies need to realize that each plays an important role in business mix of the other. Attractive hotel margins are available for OTAs while still providing consumer value, and without hotels jeopardizing operating profitability. However, as the pendulum of negotiating power swings to favor the OTAs, hotel brands will need to maintain discipline to maintain equilibrium on terms that are mutually beneficial.
In many ways, the situation with Choice looks similar to the contentious Expedia – InterContinental Hotels negotiations of 5 years ago.
In 2004, Expedia tested the mettle of InterContinental franchisees and the control of its hotel brands by asking the question “What is more important to a hotel, its Brand, or Expedia?”
Jim Young of InterContinental was miraculously able to gain alignment with corporate management and the franchise groups to ensure uniform rate and distribution integrity across the InterContinental portfolio. As a result, InterContinental made the strategic decision to sacrifice as much as 30% of its online sales volume and terminate its distribution relationship with Expedia. continue reading →
