Saturday, August 18, 2018

Scathing talk on damaging impact of online giants

Expedia, Priceline and Airbnb were called out in Canberra as huge problems for the Australian accommodation industry by CEO Richard Munro. What’s your take?

As part of an inquiry into impacts on local businesses from global internet-based competition, Munro argues that while tourism is a $52.9bn industry in Australia, multi-national internet corporations are making huge profits in Australia’s accom sector but paying little-to-no tax in this country. 

He said: “Our members have been forced to swallow constant increases in commissions imposed on them by Expedia and Priceline, rising from 5-10 percent to the point where many operators are now paying 20-25 percent per room booked.

“Expedia and Priceline – who command almost 85 percent of all online accommodation bookings in Australia”, “pay little or no tax in Australia and employ very few Australians.”

“Airbnb is facilitating non-compliant accommodation – by and large, its properties do not meet the same standards our members have to meet for building fire safety, they do not have the same insurance coverage, they do not comply with planning laws and they are not required to provide disability access.

“On top of this, Airbnb employs very few people in Australia compared to our industry and it has constantly dodged questions about how much tax – if any – it pays in Australia.”

Do you agree with Munro’s sentiment that “this is not a level-playing field”?

In response, Australian Resident Accommodation Managers Association CEO Trevor Rawnsley told accomnews that there needs to be differentiation between overseas- and Australia-based agencies.

“There are a number of Australia-owned agencies that have local offices, pay taxes and employ Australians,” he said.

“Every industry has competition. The focus should not be on the problem but rather the solution. Property managers should be forming strategic partnerships with reputable and reliable, local OTAs that are established in the local market and providing a service in Australia to Australians.

“As for the Airbnb issue, if the problem is a lack of regulation in short-term accommodation, then the solution is management rights.

“All management rights properties need to be able to be identified – and therefore licensed, and all management rights properties need to be registered with the local authorities,” adds Rawnsley, “so if all properties offering short-term accommodation were made to follow the same rules, the issues would be resolved.”

Read Richard Munro’s full opening statement below. 

The following is the opening statement which was delivered by the Chief Executive Officer of the Accommodation Association of Australia, Richard Munro, in Canberra today to the House of Representatives Committee on Industry, Innovation, Science and Resources Committee as part of its inquiry into impacts on local businesses from global internet-based competition:

“Good morning – and thank you for the opportunity to appear here today.

I congratulate Minister Laundy for calling for this inquiry as this particular topic is very important to our members, in fact the results of our annual survey of over 450 businesses across Australia rank the issue of impact of global internet companies on their business as the number one area of concern.

For your reference, the Accommodation Association of Australia is the national industry body for Australia’s accommodation industry. Members of the Accommodation Association include major hotels, resorts, motels, motor inns, serviced and holiday apartments, bed and breakfasts, guesthouses, backpackers and timeshare establishments in metropolitan, regional and rural Australia, across all states and territories. The Association’s members include major hotel and motel chains, and serviced apartment groups. The Association’s membership base includes almost 2000 properties and more than 110,000 guest rooms.

Operators of accommodation businesses are one of the most important components of Australia’s tourism industry. Tourism directly contributes $52.9 billion to Australia’s gross domestic product, 3.2 per cent of Australia’s total GDP.

There are 580,200 people directly employed in the Australian tourism industry – 4.9 per cent of total employment.

There are 4445 tourism accommodation establishments in Australia and there are 82,800 people employed in the accommodation industry.

We are an industry that is primarily small business, even though we have large brands in our membership. In fact over half of our members identify themselves as independent and 80% are based in regional areas outside of the CBD and typically are around 30 rooms employing circa 10 local staff in their community. We are long term investors who literally establish a business for 50 years or more, a high risk in such a dynamic market.

We are adopters of technology to make our businesses more efficient and welcome high speed connectivity for our members who are located all over Australia, including island resorts to Voyagers in the centre of our country.

I am here today to further highlight two of the biggest challenges confronting our industry today, both of which stem from global internet-based competition:

  1. The damaging impact of online travel agencies, specifically the two online global giants – Expedia and Priceline – who command almost 85 per cent of all online accommodation bookings in Australia, and they pay little or no tax in Australia and employ very few Australians; and
  2. The lack of regulation which covers Airbnb and other sharing economy platforms which facilitate the provision of tourism accommodation – which contrasts with traditional hotels, motels and serviced apartments…our members.

Our submission goes into our views in more detail, but briefly, our members have been forced to swallow constant increases in commissions imposed on them by Expedia and Priceline, rising from 5-10 per cent to the point where many operators are now paying 20-25 per cent per room booked.

But, the biggest concern, by far, among our members about the conduct of online travel agencies centres on room-rates. One of the standard clauses in commercial agreements which exist between a hotel and either Expedia or Priceline is that the hotel must not publicly advertise – including on its own website – a room-rate which is lower than that which is being displayed for their property on Expedia or Priceline online travel agency websites, which the likes of wotif, hotels.com and booking.com. This is known as “price parity” – and it is hindering consumers from accessing lower room-rates from hotels, motels, serviced apartments and other tourism accommodation properties.

Given this, the Accommodation Association strongly supports banning such price parity clauses, as some overseas countries have. A matter I believe that was discussed with this Committee by the ACCC

I’m conscious of time, so in relation to our members second largest concern, Airbnb, I’ll be brief.

Airbnb is facilitating non-compliant accommodation – by and large, its properties do not meet the same standards our members have to meet for building fire safety, they do not have the same insurance coverage, they do not comply with planning laws and they are not required to provide disability access. This is not a level-playing field. On top of this, Airbnb employs very few people in Australia compared to our industry and it has constantly dodged questions about how much tax – if any – it pays in Australia.

They operate in an opaque way avoiding current legislation

Thank you and I would be pleased to take questions.”

About Rosie Clarke

Rosie Clarke
Rosie Clarke is the editor of Resort News and Accom Management Guide as well at their digital home, accomnews. You can reach her at any time with questions or submissions.

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21 comments

  1. Suggest that all members refuse to pay more than 10% commission. If this means not doing business with Expedia and Priceline so be it. They are ones that need content and without it they will not offer what buyers want. Buyers will seek OTA’s that have the range of quality content.

    You need commission parity across all platforms and distribution channels.

    You need to control OTA’s not the other way around.

    If all members band together (without collusion) you will force their hand, they need you. May be some pain before gain but you will win.

    • Hi Peter

      I can’t say I agree with your idea of commission parity, it goes against everything that a free market is supposed to stand for. What’s needed IMO is the removal of the parity clause between the properties and the OTA’s altogether. The ACCC’s pitiful decision of August 2016 resulted in an outcome that made little to no difference at all. By forcing the properties to publish their own online rates in parity with what they offer to each individual OTA (just not between the OTA’s) meant nothing changed at all. If a room is $100 on their own site, under that decision, it’s still $100 for all the OTA’s. It was a stupid and uneducated decision.

      I doubt if after 10 years we haven’t been able to get AAA Members to band together that it’ll ever happen now, this requires a regulatory fix, and it may end up being one where the properties become defacto tax collectors for the Government – but would that be a bad thing after all?

      Besides the debacle of commissions there are many other issues that the OTA’s cause properties and even traditional travel agents, now that they are using the OTA booking engines for what would normally have been booked directly with the properties. The harsh reality is that the properties themselves are doing most of the grunt work that Travel Agents traditionally performed to ‘earn’ their commission in the first place, such as reconciling accounts, chasing payments, chasing guest details that haven’t been provided correctly or at all (having to wait up for late arrivals because insufficient contact details have been provided), dealing with fraudulent use of credit cards… the list goes on.

      Add to this all the misleading advertising from these overseas giants and the public have been brainwashed into thinking they will get a better deal using these sites. Property owners are receiving less and less revenue every day and as a result, are employing less people every day in our tourism industry.

      This needs to stop and it needs to be stopped now!

      The parity clauses need to be made illegal full-stop. The OTA’s will then need to use their services and advertising prowess to compete like everyone else. If they want to reduce their prices to compete like everyone else has too, that is up to them. But whichever way the government tackles this, and they need to tackle it, it needs to include a method of extracting appropriate taxes from these international monoliths.

      One idea I heard recently was a suggestion to require all advertising in Australia of all products and services (not just the tourism industry) where more than 5% of the profits leave the country, the actual percentage and where it goes should have to be declared in the advertisement (with minimum font size regulations).

      Happy to hear others ideas

      • Agree Kane. Travel agents now using OTA’s to book their clients drive me insane. Then most of them want us to charge back the account and wait weeks to get paid. I just flatly refuse to charge back and tell them I have to have a credit card to charge for the stay. I try my best to educate these agents to support small business by booking direct and tell them how the OTA’s are tax dodgers etc but it falls on deaf ears. I’m sure they get kick backs /bonuses from the OTA’s.

        • Of course they get a kickback, some sort of commission split I imagine.

          On top of everything everyone here has talked about so far… there is Onyx Centresource sending everyone claims for commissions that are for the same bookings made via Expedia or your GDS provider where commissiosn have already been paid! This is double dipping at it’s ugliest and yet another source of reconciliation pain for us all.

          I would like to see the AAoA develop some sort of partnership program with (I assume there is a Travel Agents Association?) so that the entire industry can get on board here. Together we have the power to deliver great products to our own industry, we can support many thousands of jobs and small business owners, and continue to contribute to our local communities and economies. Why would we leave it in the hands of multinational conglomerates that have no emotional attachment with the Australian economy or way of life of life to dictate how we should all operate?

          Maybe also the AAoA could develop their own Members Only OTA, commission free but funded by way of a flat fee per year per room at each property. Say $5 per room. Got 20 rooms, $100 p/yr.

          There should be ample rooms throughout AAoA member properties to support the design, implementation and ongoing support of such a site. If you increased the fee to $20 per room per year… then you also have ample funding to market the site properly to the public in such a way that it discourages their use of the regular OTA’s. This would help increase AAoA Membership as non-members would need to joint eh Association before their property can be listed.

          Just an idea…

  2. Prices on my website are cheaper than those that appear on the OTS’s. I don’t care what the agreement says these faceless people will not dictate how I run my business. The consumer is blinded by their relentless blanket advertising into thinking booking with them is cheaper. I say to these people when I explain that it is cheaper to book direct how can it be cheaper when you involve a third party? They have more ads on tv now than funeral insurance!

  3. Our area of complaint with booking.com is that commission is charged on the room price including GST however there is no GST recoverable from their charges which in fact increases the commission percentage as there is no financial benefit to the property from the GST charge.

  4. The unfairness of Airbnb being accepted by government and local government without any regulation or planning approval or the paying of their fair share of taxes is not acceptable.
    The consequences will be drastic for small to medium size operators, as they will just drop out of the game rather than fight to survive.
    We recently withdrew from Star ratings because they wanted us to pay an excessive membership, then they have not offered any support to members to help fight against the plague of unregulated accommodation of questionable quality.

    • Hi there Birchwood Devonport Accommodation.
      We were disappointed with the Tasmanian’s Governments policy in relation to AirBNB and intend to circle back and address the issue, we did have many meetings with the Premier, but we need more work on that State.
      On Star Ratings – they are not a lobbyist group and that program is now owned by the State Industry Tourism Associations.

  5. My complaint with the likes of HomeAway.com formerly Stayz.com is similar to the others, they “remind” me to get Bookers instead of Lookers by lowering my room rates? They have no jolly idea the costs to run my small business!! As well they “remind” me to ensure the room is cleaned and fresh linen on the bed before my next guest arrives???? I’ve run this business 22 years and I have had numerous return business from International as well as Aussie guests, I don’t need these clowns to tell me how to run my business, and what to charge!! They’ve never run a business, I’m convinced they wouldn’t have a clue. Likewise they charge exorbitant fees including GST which I’m sure never gets returned to our government here, how can we convince people to book direct for a better deal?

  6. Hmm, I’m an advocate of OTA’s such as Booking.com, Expedia etc. As a small country privately owned resort, without them we’d be in trouble. The OTA’s rank high on the generic search radar so first port of call is not your property, it’s where they find your property. Why? They pay search engines like Google & Bing the big $$ in advertising in order to gain the top spot on search results. Our own website is maintained professionally by the writer and has relevant content, key words and so forth, and to a large degree it, in itself, draws about 25% of all our bookings. However, unless we fund Google adwords, we will never reach #1 through a generic search and even if we did, would never be able to compete. The OTA’s on the other hand drive about 75% of all our bookings (Booking.com / Priceline) being 60% of those). We pay 15% commission to all the OTA’s, yet i keep hearing they’re charging 20% – not sure where this is coming from; the only company i’ve ever known to charge accommodation providers 20% is Discover Australia – an online Australian owned travel company! As for price parity, take a look at how the OTA’s work in the background. They don’t appear to be competing with the accommodation provider, rather, they appear more to squabble between themselves. They compete with other OTA’s and whilst they may show a lower price than accommodation provider, they still, as in our case at least, pay us our default rates. How? Because they are locked in to our channel management system so what seems to be happening here is that if the OTA displays a cheaper price, then they take the tumble in order to gain the booking. All up, i’d rather pay the OTA 15% than to attempt to go it alone. It’s a fair price to pay.

    AirBnB on the other hand is a different matter. Absolutely correct that there is little to no regulation and because of that AirBnB is a runaway train. As mentioned, we are a small provider, tucked away in the hills and seemingly too far away from anything bar a few competitors withing 20 klms of us. Not so anymore! There are now literally hundreds of properties within coo-wee of us, all AirBnB. These aren’t beds available on someones farm or in a private home, these are whole houses. It seems as though the original concept of AirBnB has flown out the window. Now, people are leaving their homes in droves, advertising the once family home up on AirBnB and relocating elsewhere. This is what’s killing the accommodation industry, make no mistake. Why pay thousands in commercial rates, insurance and local / state compliance when you can slap on a coat of paint and simply post on AirBnB?

    • Thank you Phil for putting it so clearly. Whilst I don’t like paying 12 – 15 % commission to the OTA’s they do advertise our property and achieve viewing that would be too costly for us to do on our own. Unfortunately the Australian public are not made aware that the Air BnB properties are often time-bombs with no regulation on fire safety, pool standards, health standards and crowding standards that we as business owners have to adhere to. I am in the Shoalhaven where there is some 800+ holiday homes that are always overcrowded during Nov/Dec/Jan. Due to the influx of tourists the council in their infinite wisdom have declared they are considering proposing a bed-tax on all commercially operated accommodation providers in the area. Not one of those Air Bnb properties is considered a commercial venture so they are not included in this money grab by council. If the council looked at the model of the Bass Strait Council they would be able to charge Air BnB properties for compliance and additional waste bins that could give them in excess of $1mil revenue each year. The added sad toll of Air BnB is that we played host to three families during Oct/Nov/Dec at taxpayers expense in the form of emergency housing as their land lords cut their leases to take advantage of $$$ Summer trade. I’m not sure what we can do as an industry but there certainly needs to be more action taken to protect both the hard working business owner who provides accommodation for their livelihood and the more vulnerable citizens of our community.

    • Phill, if it were only so.
      In my experience despite being locked into a channel management system we get slammed around when the OTA’s enter the squabble between themselves you describe. When OTA No1 discovers cheaper pricing from a competing OTA No2, OTA No1 then retaliates against us the supplier shoving us to the last page for example or even de-listing – despite exact same pricing being pushed out to all OTA’s – the issue of parity bites in hard. As for the 15% plus GST rate – it is excessive. Outside our complex I see workers marching the streets arguing for a modest couple of percent wage increase while we sit back and see OTA’s whack on 5% at a heart beat.
      And then suggest we drop rates by a minimum 20% to join their latest “Sale” while as Kane says we do the grunt work that Travel Agents traditionally performed to ‘earn’ their commission in the first place

  7. Thank you to all of you for getting involved in the debate, it is wonderful to see the engagement in what I think are game changers for all of us.

    The AAoA is taking up our members issues to government to make change that will improve the operating environment of your business.

    We appreciate your support of our association and ask that if you haven’t already, please join us so that we have the strength in numbers to win this fight!

    If you feel strongly about the OTA and AirBNB issue, or for that matter any issue that effects your businesses such as payroll tax, the “toilet tax”, among many, we are striving to make a change.

    Support the Association that supports your business and ask about our many member benefits that will save your business money.

    Thanks Accom news, I will continue to monitor the industry feedback and look forward to hearing from our members.

  8. Accept you remarks Kane, totally agree regarding rates.
    Commission’s, well, perhaps you are right, free market should prevail and up to each property to either opt in or opt out to an OTA’s offer.
    It would seem the biggest beef is the GST not being paid to Govt, commission on the full rate including GST and the Airbnb onslaught.
    The other post regarding what OTA’s provide property owners sounds reasonable and for 15% commission they are getting more than what they could on the own efforts for their property in their location. Each property has it own unique needs and solutions.

    • Hi Peter

      If what you say is accurate, then I would agree wholeheartedly with you.

      However I like to keep things in perspective and I only want to deal in facts so I need to declare that on the topic of tax evasion I am a little uneducated. I understood the claims that the OTA’s were not paying taxes in Australia related to shortfalls in company profit taxes and other related company taxes, but not GST. If it’s GST as well then that’s a whole different kettle of fish.

      I would have thought the Tax Office & ACCC would be crawling all over their books with federal warrants issued in the US & Netherlands and people would be behind bars if they were found to be collecting but not paying GST in Australia. But I am happy to be proven wrong if anyone has actual evidence of this and not just hearsay from social media or “Fake News” sites.

      With regards to AirBNB this would be a state jurisdiction issue I imagine, and therefore would require State Government/Administration intervention in each State/Territory. Not local Councils – oh what could possibly go wrong there???

      Local councils need to stick to Rates, Rubbish & Roads and stop pretending to be more than they were ever meant to be. Council involvement should be limited to compliance checks just like the local Heath Inspectors do in food businesses, but please don’t let them loose with the regulatory pen on our industry, that’s a recipe for disaster. But of course, you can’t ask them to check the compliance of anything if there is no regulation there for them to comply with!

      It would be nice if the states got together and developed a common framework of regulations for AirBNB and all other sharing platform operators (Uber, UberEats etc…) but I don’t see that happening any day soon.

  9. 1. The overseas OTA’s should be investigated by ACCC with regards to “price fixing” and heavily fined.
    2. The ATO in conjunction with the Federal Department of Tourism needs to introduce legislation whereas the overseas OTA’s do pay tax “a tourism” tax needs to be introduced. However we need advocates in the Department of Tourism that actually cares.
    3. Note many properties are classified as “holiday homes” that may also be on Airbnb, and many are making the shift to do both Airbnb and OTA’s and I notice that the traditional accommodation facilities are getting pushed further back into pages and the OTA’s also offer these new “holiday homes” these offers with a higher price/commission structure to get moved up the list in accommodation.

    There is a lot to consider, but we need advocates not just article after article.

    • Hi Jenny
      We need action, we (the AAoA) are heavily involved with the government and policy making. Our submissions and appearances before committees on these matters are done on behalf of our members and the industry. We are, as far as I know, the most vocal and strong advocates for change in these two areas and the AAoA are owned by our members. The Federal and State Tourism Ministers know about this matter because we have written and met with them.
      We don’t want the tax to be applied to the OTA’s and simply have them pass it onto our members either.
      Please join the AAoA and become involved and informed, the more members we have the stronger our voice.

  10. Interesting reading all around.

    I think small independent operators, the Mums and Dad operators who are the backbone of the accommodation industry, particularly in regional areas, will disappear all together within a few years.

    Then the multinational accommodation properties who pay to be preferred suppliers of the OTA’s so they get a better ranking/position on OTA websites will get all the business. These guys are often not Australian owned either with profits going overseas. They also have the financial capacity to discount their tariffs below break even marks to force the competition out in one location while raking in the dollars elsewhere.

    The only way an independent operator can get bookings on OTA sites is if they are on the first or second page. Take a look and see who has all these positions. OTA’s and Multinationals.

    Sure we can pay a greater commission level to these OTA’s to try and get a better ranking on their sites, and discount our rates as that’s what we are always being told to do to get more bookings. Not all business is good business. Sometimes leaving a unit empty is cheaper than the overheads associated with having it occupied.

    Unlike Airbnb we pay award rates to all our staff, not a friend cash in hand to clean. Unlike public perception, casual employees in the hospitality industry received a pay rise in July last year, not a pay cut, as spouted by politicians. Only Full time and permanent part time Hospitality workers got a pay cut if they worked on weekends. Gee I wonder how many of them there are? The bulk of employees in our industry are casual. Just shows how much the Politicians know about the accommodation sector.

    Dont get me started on Airbnb, Uber, Airtasker etc. All unregulated online businesses who fall under the radar and can charge a fraction of costs a legit business needs to charge just to meet the regulatory requirements to open.

  11. AirBnB is the UBER equivalent of the accommodation industry, right? Didn’t a whole bunch of taxi drivers just get compensation of $400m because of UBER’s entry into the ride sharing industry? Only kidding (I think)

  12. My biggest issue with OTAs, is brand hijacking. Before these OTAs, if someone searched on our business name, then it would appear at the top of the search results. Now, all of the OTAs are paying google to advertise on our business name as the search keyword. This pushes our listing right down the search results, so far, that very few people will find it.

    This is made worse by the deceptive nature of the advertisements that OTAs put up. These look like an advertisement for our business, when in fact they are an advertisement for the OTA.

    People who are searching on our business name are qualified customers. These are people who have stayed with us before and just want to get our website or phone number, but with brand hijacking like this, it is almost impossible for our customers to do so.

    Our direct links from google to our website have tanked in the last few years, since booking.com started this trend. We have tried advertising on google adwords, but cannot compete, as they can afford to outbid us everytime. It doesn’t matter to them how much they spend, as they will get a much higher conversion rate than we will for our advertising dollars. For example, if we advertise on our name and a customer looks at our website, we might have a 20% conversion rate, as dates may be unavailable, or prices too high, or room selection not what they are looking for. However, if an OTA gets a click on a PPC advertisement, they will have a much higher conversion rate, as even if our property is unavailable, or unacceptable, the customer is now on their website and has a range of properties to look at and is quite likely to book.

    Many european jurisdictions have already banned brand hijacking such as this and large hotel chains, such as Hilton, have negotiated with OTAs and are not affected. Smaller players, such as us, don’t have the negotiating clout to tell OTAs what we will accept.

    I am not against OTAs in general. I think they have their place, particularly for unqualified customers who are researching a location and don’t know where to stay. This is where OTAs are good value. They have replaced the travel agent for this market segment, however, they need to leave our individual brands alone.

    • For more info, do a search on xotels brand hijacking for a really good description on brand hijacking (I was going to post a link, but the spam filter on this site won’t let me).

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