April 3, 2018 / 2:53 PM / 3 months ago

Marriott aims to cut commissions for online agencies: CEO

BENGALURU (Reuters) - Marriott International Inc (MAR.O) is looking to lower the commissions it pays to online travel agencies starting with Expedia Group Inc (EXPE.O) when it renegotiates its contract with the company later this year, Chief Executive Officer Arne Sorenson said on Tuesday.

Marriott Chief Executive Arne Sorenson speaks during an interview with Reuters in a hotel in Berlin, March 3, 2015. REUTERS/Fabrizio Bensch

Online travel agencies, already dealing with tight margins, are facing more pressure from hotel chains seeking to shift customers to book directly on their web and mobile platforms by providing incentives like free wifi and discounts.

“We would certainly like to pay less. We will have to see how the negotiations go,” Sorenson told Reuters on the sidelines of a press conference in Bengaluru.

Marriott will be renegotiating contracts with major online bookers for the first time since its merger with Starwood Hotels in September 2016 and the lower commissions could likely boost Marriott’s revenue per room, but may hurt the travel agents.

Expedia’s would be the first major renewal with the current deal expiring later this year. The company will renegotiate its contract with Booking Holdings Inc (BKNG.O) sometime in 2019.

The Marriott chief was in India’s global outsourcing capital Bengaluru to open the company’s 100th hotel in the country, the Sheraton Grand Bengaluru Whitefield.

Marriott currently pays a commission of upwards of 10 percent to online travel agencies, which currently contribute about 12 percent to Marriott’s overall bookings.

The bulk of company’s bookings come from direct channels, including its mobile application and website.

“We have seen significant growth in all digital channels...What has declined a bit would be travel agents, in part because people are moving online and doing things themselves,” Sorenson said.

The world’s biggest hotel chain is benefiting from strong economic growth in Asia Pacific region, led by China.

Sorenson said that Marriott’s partnership with ecommerce company Alibaba (BABA.N) had driven a “few million” new members to sign up for its loyalty programs in China since the deal was inked in 2017.

Marriott generates roughly 55 percent of its business from loyalty members.

The company said on Tuesday it plans to expand its presence in India where it has more than 50 signed projects in its pipeline.

The Bethesda, Maryland-based company expects to introduce three new brands, namely Moxy, Delta and Tribute in the coming few years in India, which is its second biggest market in Asia after China.

The growth in India would raise its room inventory to more than 30,000 units, up from about 22,000 currently, Marriott said without providing a timeline.

Expedia’s shares were down nearly 1 pct at $106 in late afternoon trading on Tuesday.

Reporting by Ankit Ajmera in Bengaluru; Editing by Shailesh Kuber

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