Marriott and Expedia have completed contract negotiations and have signed a new multi-year deal.
It is the first agreement the companies have signed since Marriott bought Starwood for USD$13 billion in 2016.
The previous deal expired in November 2018, and the pair had since been negotiating a new agreement, temporarily extending the current arrangement in the meantime.
“Under the new, expanded relationship, Marriott and Expedia Group have reached mutually beneficial economic terms that advance each company’s strategic objectives,” said Marriott and Expedia in a joint statement.
Marriott is the world’s largest hotel company, and just this week it opened its 7000th property, with another 1,700 targeted to open by the end of 2021.
Its negotiations with Expedia were being eagerly watched by other hotel companies to see how the world’s biggest hotel brand would deal with the biggest online travel agency.
Marriott CEO, Arne Sorenson had made a point last year that Marriott was trying to cut commission rates for OTAs.
In its last deal with Expedia, Marriott had negotiated a 12 percent commission rate. This deal’s commission rate and other fine details have not been disclosed yet; however early reports from CNBC suggested Marriott had managed to lower the deal to 10 percent this time, however that report has since been removed.
The deal does include other elements worth looking further into though. For instance, Marriot hotel owners now do not have to offer the same rooms to Expedia as it does through Marriott's own channels. Marriott will also continue to keep offering its guests special room rates and of course providing offers for loyalty members through its new programme Bonvoy.
Marriott and Expedia have plans to launch a distribution arrangement in Q4, which they described as “an innovative distribution arrangement beyond transient retail bookings,” in a shared statement.
A letter sent by Marriott to its hotel owners, obtained by Skift, reaffirmed that message, explaining that the deal “redefines our relationship with Expedia beyond transient retail bookings by leveraging Expedia as a technology provider.”
The full extent of this plan is unclear; however, it does reveal that Expedia is potentially willing to make deals and possibly break commissions for those will to make technology deals or up their marketing plans with Expedia.
This is good news for smaller chains who do not have the scale or bargaining power of Marriott’s 7,000 properties.
Smaller chains unhappy with Expedia’s commission rate should remember the cases of Hyatt and Choice Hotels before trying to throw their weight around.
Choice Hotels similarly pulled away from Expedia in 2009, before signing a new deal three months later.
Describing Choice Hotels’ departure, Expedia’s CEO at the time Dara Khosrowshahi (now CEO of Uber) told analysts on an earnings call “as far as the financial impact, it is minimal to none”.
Hyatt threatened to break away from Expedia in mid-2017 before signing a new deal in August that year.
“As we continue to build the value proposition for our guests who book directly with Hyatt, we also work with third-party distributors to reach guests who might not be frequent travellers or who otherwise have a reason to book through these sites,” said a spokesperson for Hyatt.
Exact details of Marriott and Expedia’s contract are expected to be revealed officially in the coming weeks.