June 26, 2017
Expedia loses hotel rate parity case in France
Expedia has been fined €1 million by a French court and ordered to cease demanding “tariff parity” from hotels following an appeal brought by the government in Paris.Read more
In today’s highly competitive world, hotels need to accept OTAs as an essential partner in their distribution process. The real issue is that certain OTA players have become so big that they have started to dominate the market, leveraging their market size to effectively dictate terms to hotel suppliers and customers alike.
At the European level, this is currently happening with industry giants Expedia Inc. and Booking.com, both of whom are major suppliers of business to the majority of European hotels. Recent analysis from Nomura claims that these two companies collectively control over 65 % of European indirect online hotel sales, although certain other, more regionally focused, companies (particularly HRS/hotel.de) do have significant critical mass in particular markets (in this case Germany). If hotels want to profit from the phenomenal growth in the online sale of hotel rooms, they have to do business with one or more of a very small number of highly influential (or should we say “dominant”) companies.
Unfortunately, abuse often goes hand in hand with dominance. Facing increased regulatory scrutiny in both the UK and the US in relation to allegations of price fixing, Expedia Inc. is trying to transform its previously precious merchant model by push suppliers into accepting an agency model even though ultimately, the hotel will end up paying a higher price for each reservation delivered.
Similarly, Booking.com, previously regarded as the most supplier-friendly of the OTAs, has started to dictate far more stringent terms and conditions to its hotel suppliers as it has grown in power. For example, the company has started recently restricting hotels’ access to previously available guest contact details, in effect ensuring that the customer’s relationship is with the OTA rather than with the hotel itself. In addition, Booking. com has now started retaining cancelled room inventory to ensure that these rooms are subsequently resold through the system and that it receives its commission.
However, it is regional player HRS that has so far been the most blatant in terms of (ab)using its market position. Shortly after its takeover of competitor hotel.de, which in effect gave it control over nearly two-thirds of the German online hotel market, the company calmly announced that not only would it charge hotels a higher commission in the future, but if a company wanted to be distributed through the system, it had to provide both best available rate and last-room availability. Anyone who was not willing to comply could take their business elsewhere.
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