Hospitality Attorney Greg Duff on OTA Agreements and Paid Search

sam.engel Sep 11, 2014

Credit: Flickr

It's no secret that we've been focusing a lot on the topic of partner bidding this month at BrandVerity. Posts so far have discussed important issues such as when partners should or should not be allowed to bid on your brand terms, the dangers of partner bidding, as well as the potential confusion and friction that partners can create.

To this point, our posts have primarily highlighted reseller issues in online retail. But partner bidding affects brands in many industries beyond that. So, to expand the discussion, we decided to highlight the hospitality/travel industry as well. For insights into how these issues affect that industry, we turned to attorney Greg Duff—hospitality industry expert and founder of the Hospitality, Travel and Tourism group at Garvey Schubert Barer.

Remember, these are opinions and insights only—you should always speak to your attorney for advice about your specific legal matters. Without further introduction, here are BrandVerity's questions and Greg's responses:

When it comes to hotels' agreements with Online Travel Agencies (OTAs), is there anything that hotel brands should be more conscious of?

GD: Just about every OTA agreement (and most distribution agreements generally) contain a few key terms that hotels should review and consider carefully. First, what affiliates or third party partners of the OTA may the OTA use for distributing the rates and inventory made available by the hotel? Relatedly, what control, if any, does the hotel have over these affiliates or third party partners, particularly when an affiliate or partner is using the rates and inventory in violation of the agreement? We are seeing a number of traditional static rate wholesalers making rooms (with discounted packaged rates) available on consumer channels on a standalone basis, which is causing a lot of concern.

Second, what commitments is the hotel being asked to make with regard to parity—rate party, availability parity, loyalty program parity, keyword parity, etc.? Third, what, if any, contractual limitations is the OTA willing to consider regarding use of the hotel's trademarks as keywords on search engines? Will the OTA limit its use of the hotel's trademarks? Better yet, will the OTA consider use of negative keywords? Fourth, how and by whom are room taxes being calculated, collected and remitted? Is the hotel able to collect (either from the OTA or guest upon checkout) the taxes it needs to satisfy its state or local tax obligations? Will the OTA provide indemnity protection should the OTA take an aggressive stance on taxes?

When getting ready to re-negotiate its terms with an OTA, what should a hotel brand have prepared?

GD: The response largely depends on the relative sizes of the hotel and OTA (and relatedly, the bargaining positions of each). Smaller OTAs are often willing to work with hotels on each of the items noted above and other items as well. Larger OTAs are often unwilling to provide much of any relief. Hotels need to have reasonable expectations going into any OTA discussion and must be able to identify those issues or items that are "must haves" (e.g. connectivity, payment, etc.) vs. "nice to haves."

In paid search, what should brand-conscious hotel brands do to restrict the use of their brand terms?

GD: The best strategy (though often hard to obtain with the larger OTAs) is to use a combination of keyword restrictions (identify those hotel trademarks or service marks that the OTA cannot use for SEO/SEM purposes) and negative keywords (those few trademarks or service marks that the OTA must purchase on a negative, phrase match basis). Remember, that absent some contractual agreement on this issue, trademark law often affords OTAs broad discretion in purchasing and using a hotel's trademarks and service marks for SEO/SEM purposes.

How can a hotel brand ensure that its agreements are both A) followed and B) enforceable (if not followed)?

GD: Once the agreement is signed, the real work begins. Our clients use a combination of approaches to monitoring OTAs' performance under the distribution agreement. Some clients don't monitor at all and simply rely on someone bringing an issue to their attention. Other client have dedicated employees who monitor compliance—both on rates and keyword provisions. Others use services like BrandVerity to automate the process.

What's the next marketing channel that hotel brands should be watching?

GD: Great question. The answer to this question varies from week to week as channels come and go. Tingo is one of the more interesting ones that we've come across recently. I expect to see a lot of development in the group travel segment in the future, with platforms like Groupize and others gaining traction.

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