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Viraj Kuwar • 1 year ago

Hello there, this topic is really interesting when it comes to hotel revenue. What if there is an OTA that charges the least commission rates in the entire market ( like below 15% ) , this way they help out hotels in increasing their revenue.Is it true that hotels are allowed to give a lesser price to an OTA charging a lesser commission rate because then it would be better if they would join those OTA's instead?

David Weston • 1 year ago

Viraj, Yes a hotel can give different prices to different OTAs, so all else being equal an OTA charging less commission would be more attractive to hotels. However, the key hurdle no smaller OTA can climb is the $10 Billion (yes, Billion) spent by the biggest OTAs on advertising - mainly online marketing and mainly Google. So that vast spend, and the "highjacking" of hotel names by big OTAs by bidding on them with Google, means that the big OTAs are able to "deliver" more sales to hotels than any smaller rival OTA could.

Al • 1 year ago

That's the OTA game in a nutshell: pay off Google to the tune of $10bn for the privilege of owning all internet traffic seeking accommodation, then introduce a highly unethical clause in your contract preventing properties from competing on rates. Why on earth is this still allowed? It positively scams and rips off customers and accommodation providers alike.

Good article David, thanks.
A struggling accommodation provider.

David Tarsh • 1 year ago

Where I'm perplexed is by the response of hotel front desks if you as a consumer ring up and ask for a better price than is advertised on Expedia or Booking.com, pointing out that it must be better for the hotel to give you a 5 % or 10% discount for booking with them over the phone. I recently had just such a conversation with a hotel and the response I received was: "we don't mind which way you book"!

Why can't the hotel industry give the best deals to loyal customers booking directly, the next best deals to customers booking in person and let this practice become common knowledge? Surely if that happened, the smaller properties would wrest back some margin and more control over their destinies... or am I missing something?

David Weston • 1 year ago

David, the issue with front desk staff at large or group hotels may be training, or their lack of authority to vary prices. As per my reply to Alex below, hotels working with OTAs DO have the legal freedom to offer a lower rate to phone bookers or closed user groups like loyalty scheme members.
But I do agree that many hotels are not helping themselves- I have personally found hotels offering lower rates via an OTA than on their own website(!) Hotels need to do more in some cases to push direct bookings. Often it can seem easier just to rely on OTAs, but then what happens when they do 80% of your bookings and then demand a commission hike?
Keep control of your own business and never become over-reliant on any one agent.

Alex stuart • 1 year ago

The reason they can't give you a discount when you call is because of the rate parity clause in their contract e.g. you could be a mystery caller from one of the OTA's.

David Weston • 1 year ago

Alex, in fact hotels cannot be prevented by OTAs from offering lower rates directly to phone callers or within closed-user groups ( eg my email to past clients or loyalty schemes). They can use “rate parity “ clauses to stop hotels giving better rates ONLINE.

David Tarsh • 1 year ago

Alex

There is some important language here. I thought that the rate parity clauses were about the DISPLAY of prices on websites but what you are saying is that goes further to the ENFORCEMENT of pricing to the point at which I, as a consumer, am materially impacted because I can't shop around effectively and negotiate my own arrangement.

This does indeed look like an unlawful anti-competitive practice.

If this happened to me seeking to book a hotel in Austria, is it prima facie evidence that could be submitted to the EU competition authorities, enabling them to take action against the hotel and the large OTA in question... with the result that either or both could be fined 10% of their worldwide turnover?

David Weston • 1 year ago

David, yes the OTAs enforce their rate parity clauses- we see many emails from giant OTAs to small B&Bs saying that if they continue offering lower rates online, they will suffer reduced visibility in future searches and hence lower sales through the OTA. Members tell us they find these emails intimidating and threatening.
Sadly the U.K. CMA has no powers to fine OTAs for anti-competitive behaviour, but there are powers at EU level. We have been giving evidence in Brussels as the European Commission is currently working on regulating the fairness of “platform-to-business” contracts; these are currently grotesquely one-sided and unfair.

David Tarsh • 1 year ago

Surely such an email is prima facie evidence of an unlawful anti competitive practice and a hotel in receipt of one ought to be able to turn the tables on any OTA who sends it by pointing out that if it suffers a lowering in its ranking or de-listing or other sanction that it may feel inclined to turn over the email to the competition authorities

David Weston • 1 year ago

The emails are carefully worded - no doubt by lawyers! Their meaning and intention is clear however: stop undercutting our gross prices, or we will reduce your sales. (And members have also told us that that has indeed happened to them: the OTA tweaks its algorithm and your property falls to page four of searches. OTAs claim they don’t do this...)
We have passed copies of such emails to the CMA.
Any hotel or B&B receiving such an email should send it to the CMA, or to us to forward to them.

Paul Sawbridge • 1 year ago

Weston is absolutely right. The OTAs are abusing their market position and the CMA is helping them to do that. OTA commissions are probably double what they would be if there was fair competition. The consumer is effectively paying through the nose to support these giant overseas corporations. It is time for the CMA to stop kicking this can down the road.

David Weston • 1 year ago

Thank you Paul! We think so. We believe that if competition had been wholly fair, the two dominant OTAs would never have achieved $100 billion in value - more than the top four global hotel groups combined

David Tarsh • 1 year ago

David

Point taken but what is the situation regarding rates quoted over the phone or in an email exchange with the hotel's prospective client directly?

David Weston • 1 year ago

You can quote and book better direct rates by phone despite any OTA rate parity clause.
As for a 1-1 email negotiation, I am not a legal expert but would argue that this is a personal negotiation between principal (hotel) and customer (guest), and therefore outside any legal agreements about advertising of rates online.

David Tarsh • 1 year ago

That's what I thought - so shouldn't the game be all about hotels training their staff to take phone bookings, recording the calls and making better offers over the phone. That way, they have the chance to shift the balance of power, don't they?

Alex stuart • 1 year ago

especially if as David W suggests this isn't against their contract T's / C's but I fear the OTAs will take a very dim view of this action!