The European Commission and 10 national competition authorities (including the UK Competition & Markets Authority) have published a report on competition in the online hotel booking sector. The report presents the results of a monitoring exercise aimed at assessing the impact of the various competition enforcement measures adopted by EU member states, notably the prohibition of ‘wide price parity’ clauses by the large online travel agents (“OTAs”).
A wide price parity clause prevents a hotel from offering cheaper prices on its own website or through any other OTA. Narrow price parity clauses, which prevent a hotel from offering cheaper prices on its own website but allow it to price differentiate through other OTAs, were not prohibited in most member states.
The report finds that the enforcement measures “have generally improved conditions for competition and led to more choice for consumers”.
Drilling down into the results, almost half the hotels that responded to the survey (47%) were unaware of the changes and that they now have greater freedom to price differentiate. The vast majority (79%) said had not price differentiated between OTAs. Various reasons were given for this, including that the hotels saw no reason to treat different OTAs differently; because the contract did not allow it; for fear of penalisation by the OTA not given the best price; for reasons of practicality; or because they did not want the hotel’s own website to appear more expensive. The results of a data scraping exercise were more positive and show that the switch from wide to narrow price parity clauses by Booking.com and Expedia produced a positive effect on room price differentiation between OTAs.
The European Competition Network (the Commission and all EU national competition authorities) will keep the sector under review.
You can access the report here: http://ec.europa.eu/competition/ecn/hotel_monitoring_report_en.pdf
On the back of the report, the UK CMA has said it will not prioritise further investigation on the application of competition law to pricing practices in this sector at this stage.
Separately, in October 2016 the European Commission and EU consumer protection authorities launched a coordinated screening of 352 price comparison and travel booking websites across the EU. A press release issued today indicates they found that prices were not reliable on 235 websites, two thirds of the sites checked. For example, additional price elements were added at a late stage of the booking process without clearly informing the consumer or promotional prices did not correspond to any available service. These websites have been asked to ensure they comply with consumer protection legislation.
Hotels and OTAs should keep their agreements/commercial terms under review – both to ensure competition (and consumer) law compliance and from a commercial perspective. The changes resulting from the competition enforcement action should allow greater scope for hotels and OTAs to negotiate preferential commission rates in exchange for lower room prices.
The results of the exercise suggest that measures applied to the parity clauses, namely (a) allowing large online travel agents to use narrow parity clauses, and (b) prohibiting online travel agents from using them altogether, have generally improved conditions for competition and led to more choice for consumers.