July 03, 2015

OTAs see chaos when rate parity ends


Consumers will be the biggest losers if hotels are granted unprecedented control to dictate prices across all online channels when the French government commences implementing its proposed "Macron" Bill in August this year, says OTA association ETTSA.

The French Hotels Association claims that the Bill will promote discounting of hotel rooms by ending price parity. Instead the legislation gives hotels a "mandate" contract where they will control all pricing and availability for all online reservation platforms and online travel agents' (OTAs) sales channels.

Price parity, which allows OTAs to have access to prices as low as those available on hotels' own channels and ensures OTAs can remain competitive, is set to end. In its place is a licence for hotels to increase prices, which is being fast-tracked through the French legislature.

"There will be no price competition if hotels determine all prices. Hotels will unfairly favour their own channels for the lowest pricing and availability, which will substantially reduce competition and consumer choice. It will lead to higher prices as there are no incentives for hotels to discount if they can eliminate all competition across distribution channels," said Christoph Klenner, Secretary General of the European Technology and Travel Services Association (ETTSA), adding: "Control over pricing and the ability to restrict supply will undoubtedly lead to anti-competitive behaviour."

The "loi Macron" is set to cause chaos and legal uncertainty during the peak holiday season in August, when every hotel contract with an online reservation platform, including those without price parity provisions, will effectively be cancelled in the middle of summer immediately after entry into force.

"This Bill is being rushed through way too quickly. The French Senate has not given adequate attention to its negative consequences," stressed Mr Klenner.

The wholesale abrogation of valid and negotiated existing contracts is a dangerous precedent. The loi Macron is a signal to other industries that the French government does not respect the right of business and citizens to trust business arrangements that all parties have agreed to.

"This Bill promises to cause a nightmare scenario for online travel agents and hotels who will face huge legal uncertainty because overnight all agreements will have to be re-negotiated. This is an appalling situation for industry and consumers to face on the eve of huge summer bookings. Consumers may find that their ability to book French hotels online has suddenly vanished, seemingly without explanation," pointed out Mr Klenner.

Online travel agents created a revolution in opening global markets to hotels without them having to make any investment in innovation or capability. Hotels are now seeking to free-ride on OTA investments and legislate their pricing under the pretence that this will increase competition. It will lead to less investment in innovation by OTAs, and therefore less visibility for independent hotels in particular.

"This is an unsustainable situation where the consumer will lose out in the end," concluded Mr Klenner.

The European Technology and Travel Services Association (ETTSA) was established in 2009 to represent and promote the interests of global distribution systems ("GDSs") and online travel agencies ("OTAs") to policy-makers, opinion formers, consumer groups and all other relevant European stakeholders. Its OTA Members include Expedia, lastminute.com, eBookers/Orbitz, Opodo, Go Voyages, eDreams, and Travellink, which represent the vast majority of OTA travel sales in the European Union.

Read also "Booking.com alarmed by France’s new hotel rate parity plans"