REPORT FROM EUROPE—Industry insiders are unimpressed with the recent announcement that Expedia will follow Booking.com’s decision to amend rate-parity agreements with hoteliers in Europe to allow them to post cheaper rates with other third-party online travel agencies. Sources told Hotel News Now that the landscape is fundamentally unchanged as Booking.com and Expedia dominate the market.
Markus Luthe, CEO of the German Hotel Association, told HNN “the alleged commitments from Expedia and Booking.com just turn out as another bluff in an unspeakable parity poker with the competition authorities.”
Luthe said nothing has been altered.
“The given commitments to antitrust authorities … for more competition are reduced to absurdity by the positions taken by Booking.com and Expedia. Booking.com allows the hotel to offer a lower price on Expedia than on Booking.com but not on the hotel website. Expedia allows the hotel to offer a lower price on Booking.com than on Expedia but not on the hotel website,” Luthe said.
“In practice, the familiar parity-grid is set in stone for the hotelier by the two giants. Under this regime it is obviously not very likely that competition mechanisms are restored in the hotel online-booking markets,” he said.
Jonathan Raggett, managing director of Red Carnation Hotels, with 13 of its 17 hotels in Europe, said both OTAs’ changes were made “in the knowledge of there being little likelihood the majority of their partner hotels would offer something online to another OTA that is cheaper or in some way more preferential than a hotel’s own brand site.”
“I do not think the changes are as seismic as some initially anticipated when investigations commenced,” Raggett said.
“As Expedia do also work extensively with ‘nett’ rates, that they mark up to equal (best-available rates) if sold as non-packaged rates, then for me there is a small amount of concern that they could ask for a clause in the contract which states something along the lines of them not being obliged to fully mark up the nett rate and take a hit in commission to offer a cheaper rate to the end guest,” Raggett said. (A “nett” rate is the lowest rate a hotel can charge and still make a profit.)
Raggett is meeting with Expedia soon to discuss agreement changes.
Tom Magnuson, CEO of Magnuson Hotels, which in September will merge its distribution platform with that of France’s Louvre Hotels Group, said the issue seems overblown.
“It’s all turned into nothing and stopped having meaning. I don’t know a hotelier alive who likes rate parity,” Magnuson said, who added his goal always is to increase guest loyalty.
“Combining with partners to have one loyalty plan opens up different opportunities and countries, and it’s definitely more profitable,” he said.
Expedia said its policy relates to all rates, conditions and availability clauses for a period of five years; applies to all hotels in Europe; and affects consumers booking via Expedia’s sites worldwide. Booking.com’s new rules began on 1 July, while Expedia’s changes will start 1 August.
Expedia told HNN that it had no comment beyond its 1 July news release.
Looking to the UK
Pressure is building for change in the United Kingdom, too.
In a news release on 2 July, the British Hospitality Association’s legal and policy director Jackie Grech, who has since left the organization, wrote: “With both German and now French governments setting precedents we encourage U.K. regulators and government will take up the issue to put the power back into customers’ hands as they shop around online for the best deals.”
BHA representative Julia Svetlosakova said little is being done by the U.K.’s Competition and Markets Authority.
“It seems not to be of interest to (it), perhaps because we’re just past (U.K. general) elections. No one is against OTAs, but (customers) do not understand the margins hotels are working with,” Svetlosakova said.
Fiona Cincotta, senior market analyst at consultancy Finspreads, said the tussle between OTAs and hoteliers might “possibly (lead) to exasperated price wars affecting the margins of hotels and, in the end, affecting the quality of the offer. … Expedia and Booking.com are so ingrained as the cheapest options for the customer that it will take a lot of enticing and a serious change of consumer habit to encourage customers to search elsewhere for the cheapest price.”