Hotel Owners, Managers & OTAs

At the recent Dallas Hotel Conference, there was an excellent panel that included Monty Bennett of Ashford, John Scott of Rosewood, Mike Deitemeyer of Omni and the ever-present and always quotable Tom Corcoran of FelCor, moderated by Dave Johnson of Aimbridge. These guys gave a more granular “view from the top” than we customarily see at ALIS or NYU.

Quite fascinating was Monty’s outburst about President Obama (the words “left wing lunatic in the White House” come to mind) and his final statement on this topic… "and Tom Corcoran voted for him!” Tom quickly changed the subject to the AH&LA’s success, so far, in marshalling Congressional forces against the Employee Free Choice Act and his particular concern about the OTA’s (online travel agencies) in the context of the now-resolved Expedia-Choice donnybrook. 

Tom made a half-hearted (but he may have been totally serious) call for a summit meeting among hotel owners, with the caveat that it should occur only if it could be done legally, to discuss and deal with OTAs. (I am not and never was an anti-trust lawyer, but I have two thoughts on this: one, it can’t be done legally; and two, isn’t that why we attend these conferences in the first place? But, I digress.) 

As Tom railed against OTAs (and found common ground with Monty), I wondered how the operators on the panel felt about this approach. After all, the managers (which include among their ranks both Omni and Rosewood and, for that matter, Aimbridge) are the ones using the OTAs for distribution and pricing; the managers have the authority, generally, to set the rates for their operated hotels and to undertake yield and revenue management. Using the OTAs is part of that authority. As I see it, the OTAs are used to attempt to get occupancy through channels other than brand marketing, Web sites, etc., and to find new business where it did not previously exist.

No one can deny that hotel companies have been wrestling with the proper deployment of OTAs over the last 10 to 15 years, and no one can deny that the results of getting the industry’s arms around this usage has been a challenge. Still, the OTA is a legitimate distribution tool in the hands of the managers.

I wonder a bit about the Choice/Expedia brouhaha. Is dealing with the OTA globally really in the franchisor’s bailiwick? At a time when hotels are struggling for revenues, should a franchisor really tell its franchisees that it cannot give rooms to a distribution channel? I suppose that, in the case of Choice and its franchisees, the franchisor wields the power of volume with the OTA, perhaps enabling it to drive a better deal. Still, if one franchisee bucked the franchisor, would that be a problem under its franchise agreement?

And, I could not help but think about how a management company would take a direction from an owner that said, “Stop using the OTAs; don’t give them inventory.” I will be the first to quote chapter and verse on the laws of agency as they apply to hotel management agreements (OK, I can think of several lawyers and their law firms who would beat me to it if they thought they could use it to default a manager), but a directive from the owner to “stop using OTAs” would be squarely contrary to the broad provision of authority granted to the manager to set rates and prices. Would the manager’s refusal – and the ensuing argument about any applicable performance standard – be a refusal to act strictly in accordance with the principal’s manifestation of conduct or to obey the principal, both obligations taken straight from agency law? What would happen if the use of the OTA was brand standard for the management company in question? In this instance, if an owner was prepared to lose the revenue stream derived from OTAs (and to provide performance standard relief to its management company), should a manager resist such a directive?

We’ll leave that discussion to Tom Corcoran’s meeting among owners, if it could be legally constituted; surely, the owners’ lawyers would be present. I’d like to attend as a reformed-lawyer-turned-consultant-fly-on-the-wall.