Tuesday, July 7, 2009

Hotels.com Founders At It Again

For those of you who wax nostalgic and long for the days when the sales staffs of Expedia.com and Hotels.com went after each other with figurative tire irons as they sought one-upmanship in merchant-model hotel deals, your prayers may have been answered.

Tom Botts of the Hudson Crossing Travel Industry Insight blog scooped me again (you gotta cut it out, Tom) and reported that hotels.com founders Dave Litman and Bob Diener have launched hotel website getaroom.com.

You might want to think of Litman and Diener as the E.E. Cummingses of the hotel space as both hotels.com and getaroom.com are lower case.

With their five-year noncompete agreements having expired by Jan. 1, 2009, maybe it is poetic justice that the duo is back in the game.

You have to love it when entrepreneurs sell their baby, in this case in bits and pieces to Barry Diller's USA Interactive (USAI) in 1999 and 2003, and then reconvene years later to compete against their offspring.

Likewise, some of the key players in the early years of SideStep, unhappy about SideStep's dismantling after Kayak bought it, introduced Voyij.com , and are blazing a path that Litman and Diener are following, as well.

Back in the day, when Expedia.com and Hotels.com were consolidated inside USAI, they had such a hold over merchant model hotel deals that one hotel executive told me in 2002 "they've [almost] created their own distribution system."

Today, Expedia Inc., the parent of Expedia.com, hotels.com and Hotwire, still is a dominant player in hotels among the online travel agencies.

How dominant? Consider that when the City of Anaheim, Calif., billed Expedia, Orbitz, Priceline and Travelocity $21.3 million in back hotel taxes and penalties earlier this year, Expedia, hotels.com and Hotwire owed $17.7 million -- and Orbitz, Priceline and Travelocity owed a mere $3.6 million combined.

In getaroom.com, Diener and Litman are approaching the market in a different way, as the website focuses "on a limited number of major destinations and selects the properties in each destination that offer you the very best values. By focusing on a select group of properties, we are able to negotiate better rates for you."

But if that is a new twist, then some aspects of getaroom.com have a familiar ring. hotels.com was founded in 1991 and bookings were made on discounted rooms by dialing a toll-free number.

And, in that tradition, getaroom.com displays a toll-free number at the top of its home page, although online bookings undoubtedly will be the predominant booking method.

Times have changed since the days when hotels.com and Expedia.com were at loggerheads, and even more powerful than they are today. Hotels have reasserted their control over pricing with best-rate guarantees, and the merchant model is under pressure.

Still, it will be interesting to see what kind of mark these two hotels.com veterans can make.

Tire irons, anyone?


Jeff said...

5 Year non-compete? Wow. My boss (who while at Expedia was actually involved in the hotels.com acquisition) only had a 2 year non-compete.

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