BHA Lobbies on the Digital Agenda

Representatives from hotels across the industry attended the recent BHA ‘special breakfast’, kindly hosted by Berwin Leighton Paisner. The focus was the digital economy and the continuing dominance of online platforms, especially online travel agents and home sharing platforms.

Present positon

OTAs

Across the hotel industry the key issue is the lack of bargaining power when negotiating agreements with online platforms, which results in unfavourable contract terms such as:

  • MFNs clauses and parity
  • high rates of commission
  • lack of transparency in search results and ratings;
  • the use of hotels’ IP to steer customers away from hotel’s own websites.

These agreements reinforce the wealth and power of online platforms, which consolidate their position by using their huge marketing funds to control the online market place, for customers and hotels alike.

Sharing Economy Platforms

These platforms are no longer seen simply as a welcome addition to the hospitality industry, enabling individual home owners to share their homes and local culture with guests.  ‘Sharing’ has become big business with ‘hosts’ acting as ‘landlords’ in all but name. Single owners in London let multiple properties and are able to operate with minimal overheads by avoiding health and safety, food safety and planning regulations. 

Recent Activities

The BHA reported on its efforts to draw government attention to these issues in its recent submissions:

  • BHA submission to the Competition and Markets Authority on Online Reviews and Endorsements 25 March 2015 and CMA Report, 19 June 2015
  • BHA written evidence to the House of Lords EU Internal Market Sub-Committee for the Digital Economy, with reference to online travel agencies, 16 October 2015
  • BHA Supplementary Evidence to the Department for Business Innovation and Skills Committee Oral Evidence Session: the Digital Economy, 12 January 2016
  • Written submission to the House of Lords Home Affairs Committee on Housing, again with reference to the sharing economy, 21 January 2016.

In these submissions the BHA calls for an end to rate parity and for transparency on the part of OTAs, citing the increase in prices for consumers and misleading information provided by OTA websites.

Within the home-sharing economy the BHA calls for greater regulation and enforcement of health and safety and food standards, as well as compliance with the maximum 90 days a year letting allowed in London, without planning permission. The BHA proposes that platforms restrict hosts from letting beyond 90 days and notify the relevant authorities (HMRC, local government) of hosts with multiple properties.

Recent BHA press releases and articles include:

  • a joint press release from the BHA and French, German, Italian, Dutch and Spanish National Trade Associations on the sharing economy on 13 November 2015
  • Bloomberg article on Online Platforms 2 December 2015
  • Financial Times article on Online Platforms 6 December 2015
  • BHA press release on The Sharing Economy 12 January 2016
  • The Times article on The Sharing Economy 13 January 2016
  • BBC Newsnight coverage on 13 January 2016 (available online at bbc.co.uk)

The BHA continues to work with European colleagues, the most recent example of direct European action being a bill in France, which has passed its first reading in the National Assembly and provides for sanctions of €25,000 for hosts and €80,000 for online platforms which fail to verify that the host is owner of the property before listing.

Legal Update

James Marshall of BLP gave a brief update on the OTA competition position in Europe:

  • In Germany MFN clauses between HRS and German hotels were found to be anti-competitive (20 December 2013) and this decision was upheld by the Higher Court (9 January 2015).
  • The FCO (Federal Cartel Office) found that Booking.com pricing clauses were harmful and Expedia is under investigation by the FCO.
  • In France the Macron law prohibits price parity clauses in agreements between hotels and online OTAs (6 August 2015).
  • In Italy a similar bill is in the process of being ratified by the Italian Senate, allowing hotels to have lower room rates on their own websites.
  • In the UK on 16 September 2015 the Competition and Markets Authority closed its investigation into the Skyscanner case on “administrative priority grounds”. The CMA is, however, continuing to monitor MFNs in the hotel market for a year, before deciding whether action should be taken.
  • The European National Competition Authorities and European Commission working group is monitoring the effects of the different approaches taken by the EU countries to regulating OTAs. Meanwhile, many NCAs have decided to drop their investigations. The picture is fragmented with some countries maintain Commitments for “narrow parity” and others banning all parity.
  • In the UK, the CMA is cooperating with the EC and NCAs working group, in particular the monitoring of MFNs.

Next steps

It was agreed that the BHA, with its members and partners, should develop a 12-month strategy to provide a high-profile and vigorous response to the issues discussed above, including:

  • working with BHA members to collect and develop data and case studies and development of the 12 month plan
  • continued press and lobbying to increase pressure on online platforms to pay taxes, to be transparent in their activities and to take responsibility for aspects of their services which facilitate illegal activity
  • continued BHA submissions to relevant Inquiries, in particular providing evidence to the ongoing CMA monitoring of MFNs in the OTA market in the UK over the coming months
  • Action in the EU, where there may be greater sympathy for regulation of the digital economy and a recognition of the importance of the tourism industry in the digital sector
  • working with European colleagues, who have had some success against anti- competitive behaviour by OTAs and have introduced regulation in cities across Europe, in the home sharing economy
  • developing education for hoteliers in how to drive more direct bookings and use OTA resources better, such as data and trends.

Great concern at the Chancellor’s announcement of the ‘National Living Wage’ for over 25s, an extra 50p from April 2016 (£7.20 an hour) rising to £9.35  (Office for Budget Responsibility estimate) by April 2020. This cumulative 7 per cent per annum rise for ages 25+ contrasts with OBR forecast of 4 per cent annual rises for other NMW rates. We gave evidence to the Low Pay Commissioners on 5 November, pressing (among other things) for a higher accommodation offset. Discussions in hand with Resolution Foundation experts on impact of NLW on hospitality. Government information on paying NLW placed on BHA website.

 

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