Consumer/provider protection is long overdue
Online travel agencies spring up like mushrooms in autumn. Unfortunately many also die off just as quickly.
British-based on-line travel agency Travel Click Holidays ceased trading in late July. The company had become the subject of numerous complaints on the consumer forum holidaywatchdog.com during recent weeks, with customers complaining that they had paid for holidays but received no confirmation of their trip. When they complained, staff allegedly responded in a rude manner.
This pretty much mirrored the demise of Australian-based Check-In.com on 21 May.
The cost to accommodation providers (including their reputations) and travellers is generally not massive but any loss (especially to a guest that has parted with money in good faith) is unacceptable.
OTAs, seen as a blessing to accommodation providers a decade ago when times were grim, are no longer the preferred means of selling one’s rooms.
In part, this is due to the unilateral dictates by OTAs as to rate settings, commissions and payment issues that have caused them to loose favour among accommodation providers. The financial collapse of some OTAs, like the recent Check-In.com fiasco, hasn’t helped the cause.
For many accommodation providers it is the dictatorial policies of OTAs that are the big worry. Preferred inventory, no rates more competitive on the accommodation provider’s own website, payment conditions and upwardly variable commission rates are the most prominent complaints received by Resort News.
As an example, Wotif is now moving to a virtual credit card system so properties can process net payments themselves, rather than invoice Wotif at month’s end. A good move, one would think (at least it guarantees payment) although it does shift the cost of credit card merchant fees from Wotif to individual providers. Wotif still collects its $5.50 payment handling charge from each booking yet at the same time has cunningly shifted their merchant expense over to the accommodation provider.
Don’t forget that Wotif is about to increase its commission by 1% to 12% in 2014.
Some accommodation industry associations have taken up the cudgel on behalf of their members as regards to aggressive contracting terms by OTAs. At the forefront is the Backpackers Operators Association New South Wales, concerned for its members about Hostelworld.com’s proposed introduction of new clauses into existing contracts. Hostelworld.com is one of the leading OTAs for backpackers.
The new Hostelworld contract clauses – which have been unanimously rejected by BOA affiliated hostel operators – allegedly included articles requesting access to all online hostel inventory and rates including a hostel’s own website, a change in definition of service fee in regards to GST and the consent for use of propriety owned trademarks and brands.
The recent Check-In.com financial collapse, of course, is also a great worry for accommodation providers. The ease with which a company can go into receivership owing clients and service providers millions is quite frightening especially when the name can be revitalised by a change of ownership (but not the debts) and carry on as if nothing untoward had ever happened.
Trust accounts, well known in the strata title management sector, is surely the way of protecting funds paid by guests due to accommodation providers. Because of the international structure of OTAs, regulatory authorities have been loathe to explore such possible safeguards. But if such a regulation, Australia-wide, was imposed, OTAs would have to abide by it.
The other alternative would be a fidelity fund. The Australian Federation of Travel Agents has recently been awarded a grant of $2.8 million by Consumer Affairs ministers for the development and implementation of a new accreditation scheme to replace the one that worked successfully for decades. Why should this not apply to online booking agents as well?
Travel Click Holidays was an Association of British Travel Agents member with an ATOL licence but those who had purchased flights or accommodation only through the OTA may face difficulty obtaining a refund, as the ATOL scheme only covers package holidays.
Check-In’s accommodation providers and guests had no protection at all.
With all the problems associated with dealing with OTAs, it is small wonder one of the key issues for accommodation managers is to implement strategies to reduce OTA dependency.
Roomkey was set up in 2012 by Marriott, Hilton, Hyatt, InterContinental and Wyndham to do just that.
Many providers are bucking the “system” by holding fast with competitive rates. A consistency in pricing conveys an affinity between service offering, quality and value. They are leaving flash sales to needs based campaigns rather than having year round sales. Rate parity is the crux of any strong rates based strategy, so accommodation providers must ensure that the rates they feature directly are as good, if not better, than those featured through OTAs.
One of the keys is to reward advance direct bookings. A number of providers are becoming known as the accommodation business that offers the best rates (or add ons) on advance purchase bookings rather than being the cheapest last minute accommodation, highlighting the urgency and benefits of booking today.
It doesn’t mean a provider has to abandon last minute top ups but they need to be cautious as to how these are marketed.
Commissions charged by OTAs would appear to be almost “pluck a figure out of the air” strategies ranging from as low as 8% to an over-the-top 25% in cases reported to Resort News. No accommodation business can sustain commissions of 25% unless their guests are being overcharged.
With the sophisticated, technologically advanced mobility of today’s travellers are you not better to invest more heavily into a superbly performing website and SEO prominence than to continually submit to the constantly changing terms and conditions of the OTAs?
AccomNews is not affiliated with any government agency, body or political party. We are an independently owned, family-operated magazine.
