• Distribution casualties

Two online brand names have recently been consigned to history, as both Room Key and HomeAway have been taken off the roster of internet distribution platforms.
For Room Key, the final step in its demise was announced with barely a whisper, as the site was reduced in May 2020 to carrying the message “Roomkey.com no longer provides hotel search.
Roomkey is in the process of redefining our business operations”, with a hyperlink to the home websites of the six founders.
At Expedia, the company said it would retire HomeAway US, in favour of its subsidiary brand Vrbo – on the basis the latter, less pronouncable name has greater resonance with consumers.
Room Key had been launched in 2012 by Choice, Hilton, Hyatt, IHG, Marriott, and Wyndham at a time when the big brands had major concerns that the online travel agents were making most of the progress in internet hotel bookings. The site listed up to 70,000 hotels in 159 countries, and was intended to challenge the OTAs head-on, with such strong inventory.
But the site never gained real traction, despite a considerable combined investment. In less than three years it was gaining most of its clicks from delivering pop-under ads, delivered as consumers quit the websites of the major brands – in a further bid to capture their booking.
The big hotel groups have not entirely gone off the idea of working together online. In 2019, Marriott, Hilton, IHG and Accor between them invested USD50m in Groups360, a platform designed to more effectively market meeting venues.
At the launch, Brian King, head of digital, distribution, revenue strategy and global sales at Marriott commented: “Our customers have told us that the current shopping and booking process for small groups is out of sync with their day-to-day digital shopping habits.”
At Expedia, the demise of HomeAway comes as the group looks to refocus its business, partly in response to coronavirus, but also as the fallout continues from the December 2019 disposal of its CEO and CFO.
“Through the years, the Vrbo brand has consistently outperformed HomeAway with family travelers,” said Peter Kern, CEO at Expedia. “Unifying our vacation rental brands under Vrbo allows us to focus our energies on providing the best travel experience for families everywhere.”
Consumers will be redirected to Vrbo sites and apps, as the presence of HomeAway fades. “Travelers will not experience any changes to their vacation rental bookings or login details as Vrbo serves every use case that HomeAway previously did,” insisted Expedia. The move follows a decision in 2019 to use Vrbo as the preferred brand when launching into new country markets, while a subtle rebrand also took place in other markets. As a result, Vrbo is now present in 15 country markets, across the Americas, EMEA and Asia Pacific.
What is not entirely clear, is when the presence of HomeAway in other regional markets will be scaled back. Currently, the brand is still being used in the UK, but the direction of travel is evident as Expedia says it “will continue to introduce the Vrbo brand globally”.
The HomeAway website was launched in 2006 and saw growth with USD250m of backing from a number of venture capital investors. The company went public in 2011, a year in which it achieved revenues of USD230m. Vrbo – or Vacation Rentals by Owner – was acquired by the company in 2006, among a slew of acquisitions as the business grew.
The group was bought out by Expedia in 2015 for USD3.9bn, at which point the group claimed more than a million listings, in 190 countries. It was a time in which Expedia was aggressively buying to expand, having recently acquired Travelocity, Orbitz and Wotif.
Also in the distribution space, Radisson Hotel Group has signed a preferred partnership with Hotelbeds. The move will see the bedbank promote the group’s portfolio of over 1,100 hotels via its network of 60,000 B2B travel buyers, as well as retail distribution worldwide through Bedsonline. Radisson’s chief commercial officer Eric de Neef said he expects the agreement to grow incremental, high-value bookings.

HA Perspective [by Chris Bown]: They say a camel is a horse designed by a committee. So it was that the hotel majors, realising their own carthorses of websites were barely plodding at internet speed, decided to design their own camel. Which worked just as well.
What went wrong? Was it the reticence to spend enough to promote Room Key as a high profile online booking brand? Was it the building of a big team, when a smaller one would have moved faster, broken things but delivered a more agile product? Perhaps one day the story will be told. In the meantime, the OTAs continue to deliver, the battle between them and the brands has subsided and the pair now co-exist as frenemies.

Additional comment [by Andrew Sangster]: Could this time be different? In both major recessions since internet distribution became a thing (2001 and 2008), the winners have been the aggregation platforms.
This time, however, it is hoteliers that seem so far to be holding the cards. Elsewhere this week we report on Huazhu’s results. Analysts at Bernstein took a look and said that the evidence from the financials supported their view that large branded hotel groups can deliver guest to hotels in the system without needing to lean on the OTAs.
The evidence Bernstein cites is that despite the mother of all demand downturns, the OTA share as the business recovers is declining. In May, for example, OTAs has 15% in 2019 but just 11% in 2020. This compares to the central reservation system that had 52% in 2019 and 55% in 2020. The picture is similar for the other two months (March and April) of the recovery.
What is interesting is that as more room nights were sold to non-local markets (but still largely domestic Chinese), the CRS continued to outperform OTAs. It is too soon to know if this is a trend that can be maintained or repeated outside of China but the omens so far are good.
My own bet is that OTAs are sufficiently adaptable to ensure survival but they will no longer be the money making machines they have been historically. I suspect there will be a significant repricing, particularly of Booking Holdings and Airbnb (if it does IPO).
Expedia has already taken a battering and it is perhaps better placed to take on the role of the service provider it should be, facilitating the aggregation of travel and accommodation for customers. Its decision to adopt the ugly Vrbo rather than the more elegant HomeAway moniker for its holiday rentals business looks odd.
The demise of RoomKey was predicted by Hotel Analyst from its inception. The only surprise is it took so long. To work, it needed a huge marketing budget and why would hotel groups fund that rather than their own? And now with OTAs wounded, it has no relevance.

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