Hotel chains such as Hilton Worldwide (HLT) and Marriott International (MAR) are chipping away at discounts offered by online travel agencies (OTAs) Priceline (PCLN), Expedia (EXPE) and TripAdvisor (TRIP), Cowen analyst Kevin Kopelman said Tuesday.
No. 1 OTA Priceline is least exposed, with only 10%-15% of its business stemming from the U.S., where the online donnybrook is mushrooming. Half of TripAdvisor's and 52% of Expedia's sales are tied to the U.S., he said.
"These (hotel chain direct) discounts are in addition to loyalty program points and other offers/benefits being provided to customers only when they book direct with the hotel," Kopelman wrote in a research report.
Direct discounts range between 2% and 20% cheaper than booking with OTAs, Kopelman wrote. He estimates 50% and 40% of Expedia and TripAdviser's sales are exposed to hotel chains. Only about 15% of Priceline is exposed.
Importantly, he said, the direct-booking trend threatens to undo the reputations of OTAs like Priceline and Expedia which offer "Best Price Guarantees" that don't appear to cover the new "member rates" by hotel chains.
"If the chains are successful in getting the message out that their own sites carry cheaper rates, they may be able to train customers to check the hotel website first before booking, decreasing OTA conversion rates," he wrote.
But consumers largely aren't loyal to specific hotel chains, and most hotel chains have yet to buy in on the direct-booking game, Kopelman wrote. Plus, Expedia has a series of popular loyalty programs.
On the stock market today, Priceline erased small losses to close up 0.6% at 1275.03. Expedia stock closed down 1.65% to 105.93. TripAdvisor stock dipped 0.5% to 64.30.
Hilton shares lost 2.2% while Marriott fell 1%.
