Hilton drops distribution bombshell

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Herzog: corporate agreements will be “re-examined” to make way for dynamic pricing.

Corporate agreements are likely to come under the microscope at Hilton Hotels if president, Middle East & Africa, Jean-Paul Herzog has anything to do with it.

He told ATN that all hotels needed to "re-examine their corporate agreements" and that dynamic pricing needed to "come into play".

"At present, a contract will contain 25 pages of text, but it's basically just a rate agreement. A corporate agreement in the future has to be less about the rate and more about availability, dynamic pricing, and how the two companies work together," said Herzog.

"When the rate is fixed at a higher rate than the current market price, then we are not complaining, but of course, when you have given a rate and you know you have other customers that will pay three or four times that amount [at certain times of the year], then we are not happy. Dynamic pricing is required."

Herzog also noted that Hilton's Best Rate Guarantee - a "defensive measure" against "gangster third parties" that "undercut and cheapened" Hilton's inventory - was working: "I think Hilton and InterContinental have put an end to this [practice of undercutting], although there is a way to go," he said.

"Most of the larger players (distributors) have been able to sign agreements and are now co-operating. It is understood that we need them as much as they need us. All the big battles have been won; it's just a case of cleaning up."

Herzog was speaking the same week it was announced that Hilton Hotels Corporation had entered into a definitive merger agreement with US firm The Blackstone Group in an all-cash transaction valued at approximately US $26 billion.

The acquisition will bring together Hilton's family of brands, which include Hilton, Conrad Hotels & Resorts, Doubletree, Embassy Suites, Hampton Inn, Hilton Garden Inn, Hilton Grand Vacations, Homewood Suites by Hilton, and The Waldorf=Astoria, together accounting for more than 2800 hotels in 76 countries, and Blackstone's extensive portfolio of hotels and resorts.

The company currently owns more than 100,000 hotel rooms in the US and Europe, ranging from limited service properties such as La Quinta Inns and Suites to LXR Luxury Resorts and Hotels.

Blackstone said it intended to invest in Hilton properties and brands globally to "enhance and grow the business for the benefit of owners, franchisees and customers."

The impact on Hilton Hotels' Middle East strategy is yet to be unveiled and Dubai-based Herzog stressed it was "business as usual."

"The transaction is subject to approval by our shareholders as well as customary closing conditions - this is expected by end of this year. We will keep you informed as we progress," he said.

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