There are many in travel who believe that the politically correct term of ‘price parity’ – which describes the practice of charging the same rate across all channels and punishing those that don’t comply – is actually industry spin for rate fixing, which is illegal just about everywhere.
And they have a powerful argument; suppliers or online travel agents using market power to prevent competitors from charging a lower rate for an identical product – that certainly sounds like anti-competitive behaviour.
Yet governments around the world continue to skirt the issue and two rulings by anti-competition authorities on either side of the globe in the past seven days show what a mess the pricing and selling of hotel rooms has become.
The first involves the successful action by Skyscanner to stop Expedia and Booking.com partnering with InterContinental Hotels Group to offer exclusive rates to a closed user group.
Britain’s Competition and Markets Authority ruled this was anti-competitive behaviour because the rates weren’t available to all, including Skyscanner customers.
But another take is that the judgement itself promotes anti-competitive behaviour because it effectively endorses rate parity by saying hoteliers have to make the same rates available to everyone.
And if consumers find the same rate wherever they turn, where is the competition in that?
Then yesterday in Sydney the Australian Competition and Consumer Commission ruled that Expedia’s purchase of local market leader Wotif.com, could proceed, sparking a furious reaction from Australia’s hotel industry.
Their main gripe was that the alliance would reduce competition and lead to an increase in the commission rates hoteliers pay online travel agents to sell their rooms.
Wotif is at a market low 12%, Expedia’s commission is much higher, so the hotelier’s logic holds.
However, the reality is that Wotif’s commission needs to increase so it can properly compete with the well-funded rivals that have been hammering its Aussie market share.
Underneath the bluster (higher commissions are bad for the consumer – how?) hotel industry spokesman Bradley Woods also flagged worries about rate parity, which the ACCC has yet to address but may one day soon be forced to do so.
“The hotel and accommodation industry is also concerned about the emergence of rate clauses into hotel and OTA contracts by which OTAs demand that hotels not be allowed to offer better rates to consumers through their own hotel owned websites or booking systems,” Mr Woods said.
“We have already raised the issue with the ACCC and will now take the matter further with the Commonwealth government and ACCC as it is clearly contrary to Australia’s competition and consumer law principles.”
So keep your eye out for that – however it could be a case of ‘careful what you wish for’ because the ACCC may in fact find that suppliers do not have the right to control the price at which their products are sold by online travel agents.
Because that would be anti-competitive.
“The supplier does not have a monopoly on price,” John Guscic, MD of Webjet, said back in 2012.
“We price our hotels as we see fit. We sell at a price I determine. That’s competition.”
Or, as one respondent to that initial story asked: “What’s the point of having a price discovery tool like the Internet if all product suppliers charge the same rate?”