AH&LA comes out against Expedia-Orbitz deal

The hotel industry is urging the U.S. government to reject the proposed merger between Expedia and Orbitz Worldwide, arguing the combined company would control the online booking market and be able to impose higher costs on the industry. The Justice Department is reviewing the $1.3-billion transaction, which was announced in February and came just weeks after Expedia completed a takeover of another online travel site, Travelocity.

The American Hotel & Lodging Association cites market research suggesting a merger with Orbitz would give Expedia and its affiliates a 75-percent share of the hotel, airline and rental-car bookings made through all online travel agents, reports the Wall Street Journal.

“With 480 online hotel bookings per minute, the hotel industry welcomes the innovation, convenience and competition that online bookings provide,” said Katherine Lugar, president and CEO of AH&LA, in a statement.  “However, this proposed acquisition would severely reduce consumer choice in the online marketplace. It would result in Expedia, and its numerous associated brands, which would include Orbitz, Travelocity, Hotels.com, Hotwire, Cheap Tickets, and Trivago, controlling nearly 75 percent of the U.S. online travel agency (OTA) business."

That would leave only Priceline — which not only runs its namesake site, but also Kayak.com, Booking.com, and others — as a major competitor in the OTA field. Together, argues the AH&LA, a merged Expedia-Orbitz and Priceline would effectively create a duopoly that controls 95 percent of the market, Consumerist reports.

“The loss of Orbitz could be detrimental for many reasons," Lugar said. "First, as a search platform and potential distribution partner, it would reduce the number of OTAs willing to work on innovative promotional efforts that benefit consumers. Secondly, hotels currently pay Expedia on average 11 percent higher commissions than they pay Orbitz. The acquisition could result in Orbitz raising its rates to that level, further driving up distribution costs for hotel operators. Finally, should this acquisition go forward as proposed, it will result in a duopoly with over 95 percent of the online travel agency bookings in the United States being controlled by two competitors, Expedia and Priceline.

A spokeswoman for Expedia told the Wall Street Journal the company has no plans to raise its hotel commissions if the deal is approved. The company has said consumers have several booking options beyond online travel agents, including traditional travel agents, wholesalers and the hotel websites themselves.

The AH&LA argues that the hotels most directly affected by an Expedia-Orbitz merger would be smaller, boutique operators who often depend on booking sites for reaching consumers, the Consumerist reports.

“We also believe the combination of Expedia and Orbitz will cause small and independent hotels to pay significantly more to advertise online in the increasingly pay-to-play ecosystem of online search,” concludes Lugar. “Taken together, these effects could substantially drive up the cost of doing business for small and independent hotels to the ultimate detriment of consumers.”