December 3, 2015 Owner & Franchise Communications, Distribution Strategy

Announcing Marriott’s New Three-Year Distribution Agreement with Expedia

On October 17, we informed you that we had agreed on terms for a new distribution agreement with Expedia that satisfy Marriott’s key distribution principles, including:

Improved control of room rates and inventory;
Expanded differentiation of Marriott’s direct channels;
Lower overall distribution costs; and
Stronger control of where the rates and inventory for Marriott hotels are displayed.

Over the past several weeks, we have worked hard to finalize the legal contract and we are pleased to announce that Marriott’s new three-year distribution agreement with Expedia is now complete. Since we started the contract renewal process earlier this year, we have worked very closely with Expedia to identify new strategic opportunities and establish new business terms that are more beneficial to our hotel owners and franchisees. We look forward to the many opportunities this new agreement with Expedia will provide to help Marriott (a) maintain a healthy balance of direct and indirect channels, and (b) achieve it’s long-term growth and profitability objectives.

The new agreement terms will go into effect as early as December 4, 2015 and the set-up of all hotels should be updated within a couple of weeks. No action is required by hotels to implement the new financial terms.

Please find below an overview of the key aspects of the new agreement:

Access to Rooms and Inventory: Hotels maintain full control of the rooms and inventory they make available to Expedia, and they are no longer required to offer the same rooms and inventory to Expedia compared to Marriott Direct Channels. However, hotels are required to provide Expedia the same access to rooms and inventory as they provide to any Expedia competitor (generally defined as OTAs, but not metasearch sites). Please be sure to comply with this provision across all existing major OTA contracts.

Rates: Public, non-qualified rates made available to Marriott Direct Channels should be made available to Expedia, with the exception of any Marriott Rewards offers/amenities. Under the new agreement, Marriott Rewards offers/amenities can be offered and marketed through Marriott Direct Channels, or through any other channels that link to Marriott.com to complete the booking (e.g., metasearch channels such as Kayak and Trivago). As with previous agreements, stays booked through Expedia or any other OTA are not eligible for Marriott Rewards points or benefits.

Compensation:
- Compensation for Expedia Collect and Hotel Collect bookings will decrease by 200 basis points (bps) over the term of the agreement, starting with 100 bps immediately, 50 additional bps in Year 2, and 50 additional bps in Year 3 of the agreement. The exact schedule, including the details of how the compensation reduction is recognized at the hotel level, is available on MGS.
- The base Package compensation globally is set at 25% off BAR. Package business remains fully yieldable. Package discounts can be adjusted upwards by hotels based on local business imperatives. Hotels are requested to review their Package discounts in HPP.
- The annual hotel-level marketing rebate will be discontinued; the historical value of this rebate (approximately equal to 0.1-0.3%) has been included in the new overall compensation reduction. The last annual marketing rebate will be processed before the end of 2015.

Marketing: Marriott continues to participate in Expedia marketing programs that support Marriott’s overall distribution strategy objectives. We are encouraging all hotels to continue with their planned Expedia marketing activities (display advertising, TravelAds, etc.) that hotels may have put on hold while we worked through the agreement renewal process.

Strategic Initiatives: Marriott and Expedia agreed on testing/engaging in new initiatives that could position Expedia as a strategic marketing partner to drive (a) demand to Marriott Direct Channels, and (b) customer loyalty to Marriott brands through increased marketing and data partnerships. This could represent a significant shift in our relationship with Expedia, and may be a potential breakthrough in our new agreement. We will provide updates as we progress with these initiatives.

Onward Distribution Control: Expedia and Marriott agreed to follow a mutually established process to police any Expedia affiliate website that engages in behaviors that violate Marriott’s official Channel Standards.

Initial Opt-Out: All Marriott-managed and franchised hotels currently participating in the Expedia agreement are automatically considered to be Participating Hotels under the new agreement, unless any of these hotels elect to opt out by sending a written opt-out notice to echannels@marriott.com by December 20, 2015. We encourage all hotels to continue to participate in the new Expedia agreement.

Annual Opt-Out: On an annual basis, Marriott-managed and franchised hotels will have the option to cease participating in the Expedia agreement for a minimum period of 12 months by sending a written opt-out notice to echannels@marriott.com. The first annual opt-out period will be between November 20-30, 2016.

More details about the Expedia agreement can be found on MGS. Additionally, this information will be shared with properties globally via the December 7 Weekly Update.

One of our highest priorities is the long-term profitability of your hotels, and we are pleased to be putting our distribution strategy into action in new, innovative ways with Expedia to achieve this goal.

We are grateful for the support and partnership of the owner and franchise community throughout this process.