Britain’s Office of Fair Trading has just delivered a major blow to major online hotel booking players Booking.com and Expedia, along with hotel giant IHG Group.
According to a report by The Guardian, an investigation by OFT allegedly reveals the entities prevent competitive discounting, thereby blocking any further discounting of rooms to consumers
The OFT has opened a consultation on commitments proposed by Booking.com BV (Booking.com), Expedia Inc (Expedia) and InterContinental Hotels Group plc (IHG), designed to address its competition concerns in relation to the online offering of room only hotel accommodation bookings by online travel agents.
The three businesses under investigation are proposing to address the OFT’s concerns by giving formal commitments that would relax existing restrictions so that OTAs can provide discounts on the rate at which room only hotel accommodation bookings are offered. Under the proposed commitments, OTAs would be free to use their commission revenue or margin to fund discounts to consumers who meet certain criteria.
These proposed commitments follow an OFT Statement of Objections issued on 31 July 2012. This alleged that Booking.com and Expedia each entered into separate agreements with IHG that restricted each OTA’s ability to discount the rate at which room only hotel accommodation bookings are offered to consumers. The OFT limited the scope of its investigation to a small number of major companies, with a view to achieving a swift and effective outcome. However, the investigation is likely to have wider implications as the alleged practices are potentially widespread in distribution arrangements in the industry.
Ann Pope, senior director in the OFT’s Services, Infrastructure and Public Markets group, said, “The OFT is consulting on whether these commitments offer an immediate and effective means of injecting some meaningful price competition into the online offering of room only hotel accommodation bookings where, in our provisional view, none may exist. Under the proposed commitments, OTAs would be able to offer discounts off hotel room bookings to qualifying consumers. The OFT would now like to hear the views of all interested parties before it makes its decision on whether to accept the commitments.”
At the crux of this situation is the fact hotels are forced into a rate parity vacuum by some online booking agencies in a sort of “guarantee” system whereby Expedia or other companies are litrerally guaranteed the best possible price, thereby warding off any competition save the most visible marketing channels competing.