On 22 April, the Competition Authorities in France, Italy and Sweden agreed to commitments offered by Booking.com following a series of investigations into their market dominance. The commitments allow Booking.com to prohibit hotels from marketing and offering hotel rates at a discounted rate on their own websites.
In response to this decision by EU competition authorities to enforce rate parity with on-line travel agents, Jackie Grech, Legal and Policy director at the British Hospitality Association commented:
“The industry is deeply concerned that online travel agents (OTAs) are stifling competition through high commissions, rate and service parity, and by manipulating search results and star ratings to attract customers to book the hotels that benefit the OTA’s own commercial interests rather than leaving the choice up to customers.
“Hotels, especially small independents, must either sign-up to sell rooms through OTAs and fork out up to 35% of their total room costs or face invisibility online.
No return of freedom to the market
“Customers and hotels alike will benefit from transparency and fairness. The authorities’ decision yesterday to uphold rate parity was not a meaningful solution and doesn’t return freedom to the market.
“We all benefit from an open market, especially customers who will see lower prices and greater innovation if fairness is restored to the online hotel booking market.
“While we acknowledge the effort of the competition agencies to consider this area, these commitments fall short of progress and will not benefit customers or hospitality businesses in a meaningful way. We all want the same thing: a competitive and innovative market for hospitality and tourism, these commitments missed the mark in aiding that goal.”
Background
90% of online travel begins with a search. The primary travel agents, Expedia and Booking.com, have grown so powerful over time that they have the ability to control the search results. They have the funding to purchase keyword searches, meaning that when customers search for a hotel by characteristics (i.e. “small hotel, London”) or by the hotel name, the top search result isn’t the hotel itself but rather the online booking agent. As a result, a growing majority of customers are driven to book through the online agent’s sites rather than through the hotel’s own website.
As a consequence of this need for hotels to use online travel agents, hotels are bullied into accepting expensive conditions, many of which are also expensive to the customer.
Power to impose high commissions
Online travel agents have the power to impose high commissions, sometimes in the 35% range, for every booking made through their sites. That is a 35% increase on the real cost of your hotel room just for using their services. What’s worse is hotels are not allowed to offer the room to customers who book directly at a lower rate. Hotels are required by the travel agent not to give the customer a lower rate, better service, or benefits for booking with the hotel directly. As a result, the hotel has little ability to attract customers to book directly which would save that 35% commission and lower room prices for all.
The result is higher prices and less option to negotiate better deals with customers.
The situation is in need of a solution that benefits customers and businesses, ensuring online travel agents offer one-stop shopping for customers, but at a price that both hotels and customers find acceptable. 35% of a room booking is too costly, and losing the right to offer discounts and specials to customers who book directly is not in guests’ best interest.
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