For years, travellers have been drawn to online sites such as Expedia, Travelocity, Orbitz and Priceline to find and reserve hotel rooms, flights and rental cars.
Hotels welcomed the system -- or at least learned to live with it -- even though the business came at the cost of substantial commissions. But now they are fighting back.
With the online giants consolidating and potentially tightening their hold on travel bookings, major hotel chains are offering a host of benefits to lure travellers to book with them directly: digital check-in, free meals, Wi-Fi and even the ability to choose a specific room.
At the same time, the industry has been outspoken with regulators this year in an attempt to block a merger of two of the largest online booking companies, Expedia and Orbitz.
The financial stakes are high. Cutting out the intermediary not only saves on commissions, but also puts the hotel chains in direct communication with their guests. That translates to building customer profiles of preferences and spending habits to help attract guests on future trips.
Competing against online travel agencies on price alone is not easy. A traveller might assume that hotels could offer lower rates to guests who book directly. But generally they are barred from doing so, both by their contracts with the online booking sites and by government regulators that enforce price transparency for published rates.
"Many times there is a rate-parity clause, which is designed so they can't undercut the online travel agencies, and vice versa," said Naved Khan, senior vice president for internet equity research at Cantor Fitzgerald. "So this fight is not really about pricing. It's about sweetening the pot with other benefits."
Hilton has introduced a number of services for guests who book directly, including a digital check-in option that eliminates waiting in line. Quickly adopted by its customers, the app is now used by over one million people each month, according to Geraldine Calpin, who oversees Hilton's worldwide digital efforts.
Hilton also offers direct-booking guests the ability to choose their exact room, a feature similar to an airplane's seat-map function.
"The guest can see the plan of each floor and click on the room they want," Calpin said.
Loyalty programmes also help steer consumers toward booking directly with hotels, with rewards points and "elite" level benefits such as concierge lounges, free meals and upgrades.
"We see people who will book directly just to get their rewards points," said William A. Crow, an analyst and managing director at Raymond James & Associates. "They don't want to give that up, and so it can be a powerful lure."
He said some hotel companies were having front-desk employees take on the delicate task of reminding rewards members who book with third-party sites that they will not get points for their stays.
Such efforts show early signs of paying off. The travel marketing firm MMGY Global's 2015 survey of nearly 3,000 leisure travellers found that while third-party sites remained popular for comparing vacation hotels and prices, there was a noticeable drop compared to 2014 in how often respondents actually booked rooms through the sites.
Ellen Lee, vice president for e-commerce at the Hyatt chain, said the company had seen "huge growth" in direct digital booking since it started introducing new features such as room selection.
Some chains are also trying to beat online travel agencies at their own game. Marriott has arranged for some rooms to be booked directly through the travel review site TripAdvisor. TripAdvisor gets a commission, but only about half what Expedia would charge.
"It's a highly dynamic space," said Khan at Cantor Fitzgerald. "Hotel operators are not sitting idle; they're also innovating."
That said, sites such as Expedia, Orbitz and Priceline remain powerful forces in hotel booking -- a primary reason the hotel chains do not simply abandon their relationships with them. And nowhere has the hotel industry's worries about competition crystallized more clearly than in Expedia's $1.3 billion deal to merge with Orbitz.
The deal has drawn Justice Department scrutiny, and, Khan said, "It's probably going to be tough to convince the regulators on this one."
An undated handout photo of Hilton's hotel app, which allows direct-booking guests to have the ability to choose their exact room. Hilton Worldwide via The New York Times
Expedia has been on a takeover binge this year: In January, it snapped up Travelocity for $280 million, and last year it acquired a popular Australian site, Wotif.com.
Its proposed takeover of Orbitz would give the combined company control of roughly 75% of the entire domestic market for third-party online booking, according to the research firm Phocuswright, potentially giving it enormous leverage over the commissions that hotels pay for their listings.
The concern extends beyond the hotels: Consumer advocates, as well as several influential lawmakers, say the bigger problem is that consumers will ultimately pay the price.
"It's a potential detriment for consumer pricing," said Senator Amy Klobuchar of Minnesota, the top Democrat on a crucial Senate antitrust panel.
"The whole idea of cheaper hotels is very good, but if it all starts to come under one company, you can easily foresee the situation where they can charge higher commissions that are then passed on to consumers."
Klobuchar, along with the chairman of the Senate Judiciary antitrust subcommittee, Senator Mike Lee, R-Utah, recently sent a letter to the Justice Department raising concerns about the Expedia-Orbitz merger.
"Increased consolidation among online travel agencies could transform a market that has benefited consumers into one that stifles competition," the senators wrote, adding that "we believe that you should closely scrutinise this merger."
The advocacy group Consumer Watchdog filed an objection with the Justice Department on Aug 10, saying the deal would "give the combined company monopolistic control of the online booking market, enabling it to impose higher fees on hotels, which would inevitably mean higher costs for consumers."
The hotel industry's trade group, the American Hotel and Lodging Association, sent its own letter to the Justice Department in August, asserting that the merger would squeeze not just large chains, but also smaller and more budget-oriented hotels that "have become increasingly reliant on an ever-shrinking number" of online booking sites.
The sole remaining large player, Priceline, maintains about 20% of the market. A merged Expedia-Orbitz and Priceline would have control of more than nine out of 10 third-party online bookings.
Expedia is vigorously defending its deal. The company says it believes regulators should take a broader view of online travel sites, defining the market as including dozens of sites where consumers can search for rooms, but not book them.
"The $1.3 trillion global travel market is more fiercely competitive than ever, as evidenced by the sheer number of ways in which people shop for and book travel," said Sarah Gavin, Expedia's head of communications.
"We compete with a host of regional and global online and offline travel agencies, meta-search sites such as TripAdvisor and Google Hotel Finder, search sites like Google and Bing, and the travel suppliers themselves, who are aggressively seeking to induce consumers to book directly with them."
Not long ago, Expedia was on the other side of an antitrust argument: challenging Google's proposed acquisition of ITA Software, a company that made airfare comparison software.
That merger ultimately received Justice Department approval in 2011, with conditions. But it also defined the online travel world fairly narrowly.
David A. Balto, a former antitrust official with the Federal Trade Commission, said that precedent, and Expedia's role in it, could make it challenging for the company to fight back against the Justice Department if it rejects the company's takeover of Orbitz.
"If they do go to court, the first exhibit by the government will be everything Expedia submitted in the ITA merger," he said. ©2015 The New York Times