BHA responds to decision by EU competition authorities to enforce rate parity with on-line travel agents

Legal and Policy Director at the British Hospitality Association said: “The industry is deeply concerned that the online booking companies 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 their own commercial interests rather than leaving the choice up to customers. Hotels, especially small independents, must either sign-up to sell rooms through online Travel Agents (OTAs) and fork out up to 35% of their total room rate and also agree to incredibly unfavourable terms on how to operate their business or face invisibility online.

"Customers and hotels alike will benefit from transparency and fairness. The authorities decision yesterday to uphold rate parity against hotels was not a meaningful solution and doesn’t return freedom to the market. The decision does little to help customers or hotels. Online travel agents serve a benefit to the travel community."

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. The online travel agents have a useful product which will succeed in a free market without pressuring hotels and customers into unfavourable terms and stifling prices available to customers.

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."

On April 22nd, the Competition Authorities in France, Italy and Sweden agreed to commitments offered by OTAs following a series of investigations into their market dominance. The commitments allow OTAs to prohibit hotels from marketing and offering hotel rates to the public at a discounted rate on their own websites.

Background:

90% of online travel begins with a search. The primary travel agents have grown so powerful overtime that they have the ability to control the search results. They have the funding to purchase key word 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.

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 a 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. We will continue to together to ensure online travel agents  offer one-stop shopping for customers, because it's a good tool for customer just like platforms that sell clothes from various shops or theatre tickets,  but at a price that both hotels and customers find acceptable.

Rate parity has led us to a place where these agents are charging those small, independent who have the least bargaining power, with up to 35% of a room booking and buying rights to use their intellectual property, prevent them from offering innovative service without matching the service by giving it to the OTA and in some cases benefits like free wifi and breakfast for booking directly.

It is too costly and one sided at this point. Losing the right to offer discounts and specials to customers who book directly is not in our guests best interest. We need to work out a better and more reasonable solution for all parties.

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