Opinion ID: 2786941
Heading Depth: 3
Heading Rank: 1

Heading: The OTC-hotel contracts

Text: In a contract between an OTC and a hotel, the hotel grants the OTC the right to offer room occupancy to the public out of the hotel’s inventory. The hotel contractually delegates to the OTC numerous “day-to-day” responsibilities the hotel would otherwise perform itself, including the marketing, pricing, tax collecting, payment processing, legal contracting, accounting, and customer service functions. The OTCs maintain that they do not have the right or the ability to control or take possession of any hotel rooms; they do not buy, resell, or rent rooms or blocks of rooms; and they bear no risk if they fail to arrange room reservations at any hotel. The OTC-hotel contract establishes the rate the hotel will charge the OTC for a room (net rate). The net rate is typically not a fixed amount, but floats, based on a discount from the hotel’s “best available rate” offered to the public. An OTC independently sets the price the transient is charged for the room based on the net rate under the OTC-hotel 6 The OTCs also enter into transactions that the OTCs refer to as “agency model transactions” and the Director refers to as “Hotel-Controlled Sales,” in which the OTCs operate as a “traditional travel agent.” “Agency model transactions” or “Hotel-Controlled Sales” are not at issue in this case. - 6 - FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER contract. That room price is made up of the net rate, plus two other elements set by the OTC: a “mark up” and a “service fee.” The mark-up added to the net rate equals the “retail rate” the OTCs charge the transient for the room. In addition to the mark-up, the OTCs charge transients a service fee. The OTCs set the amount of the service fee.