Breaking news from the UK indicates there may be changes to hotel rates offered through online travel agencies (OTA) in the next year. InterContinental Hotels Group (IHG), Expedia.com and Booking.com have been the focus of a multi-year price fixing investigation. These companies have now proposed a remedy to end the price-fixing investigation.
In brief, the OTA Skoosh.com filed a complaint with the UK Office of Fair Trading claiming IHG, Expedia.com and Booking.com violated fair trade practices by fixing the hotel room rates offered to consumers. The complaint centers around the inability for an OTA to offer a lower rate to consumers by using a portion of the OTA commission to discount the hotel room to a lower rate than other OTAs and lower than the rate on the hotel chain’s own websites.
The Office of Fair Trading (OFT) said online travel agencies Expedia and Booking.com, and Intercontinental Hotels Group, which runs Holiday Inn and Crowne Plaza hotels, had outlined proposals to end price-fixing deals that limited consumer discounts.
The OFT alleged that the online travel agencies (OTAs) entered into separate agreements with IHG “which restricted each OTA’s ability to discount the rate at which room-only hotel accommodation bookings are offered to consumers”.
On Friday, the OFT said the firms would relax restrictions so that OTAs could undercut the hotel group. However, the agreement only applies to certain customers – those on loyalty schemes or who have made at least one previous booking with the agent. This means InterContinental, the world’s largest hotel group, will retain more influence over the headline price offered to first time consumers.
The probe, which has been running for almost three years, has also been opened up for public consultation.
Although the OFT has limited the scope of its investigation to a few major companies, it said on Friday that “the investigation is likely to have wider implications as the alleged practices are potentially widespread in distribution arrangements in the industry.”
UK The Telegraph – August 9, 2013
The issue with room rate parity from the consumer perspective is outlined in this July 2012 piece from the Telegraph.
Clive Maxwell, chief executive of the OFT, stressed the watchdog’s findings were “provisional”.
OFT investigators have been scrutinizing the practices of IHG, Expedia and Booking.com between 2007 and 2010.
“We want people to benefit fully from being able to shop around online and get a better deal from discounters that are prepared to share their commission with customers,” Mr Maxwell said.
James Hollins, analyst with Investec, dismissed the allegations as a “nuisance” and a “red herring”.
However, Blink Booking, a mobile-only hotel booking service, backed up the claims, saying: “We’ve long believed that the big online travel agents have been guilty of denying consumers the best prices – and that hotels’ hands are tied by price parity agreements. The online travel market may appear to offer plenty of choice and competition, but the reality is that there are lots of different shop windows selling the same rooms at the same prices – with those prices agreed through parity deals between the big groups and the big OTAs [online travel agents].”
Room Rate Best Rate Guarantees
For several years most major hotel chains have offered some type of Best Rate Guarantee claim that the hotel chain websites will have the lowest room rate available online. This means that the publicly available room rate found on IHG websites will not be higher than rates found through other sites like Expedia.com, Booking.com and Hotels.com.
The Best Price Guarantee is our promise that the best hotel room prices for any InterContinental Hotels Group (IHG) property can be found directly on our Web sites. If you find a lower room price (room rate) with a lower total room cost (including all taxes and fees) on a publicly available competing Web site for the same hotel, type of accommodations and rate restrictions on the same date(s), we’ll not only match that lower room price, we’ll give you your first night’s room price free, subject to the Best Price Guarantee Terms and Conditions. It’s that simple.
IHG guarantees its websites have the lowest room rate and if you find the same room on a publicly available competing website, then your first night is free.
I have stayed for free at an IHG property this year with a successful Best Rate Guarantee claim. I have had approved Best Rate Guarantee claims over the past year with most major hotel chains to receive discount rates, free nights and more:
- Best Western ($100 gift card – discontinued in 2012), I’m not sure Best Western even offers a BRG claim anymore. The links have been removed from the website.
- Choice Hotels (free night),
- Club Carlson (25% off lower rate)
- Hilton Hotels ($50 gift card) – I have not claimed a Hilton BRG.
- Hyatt Gold Passport (20% off lower rate) – Note: Hyatt and Starwood are only two chains allowing BRG claim without first booking hotel on the chain’s website.
- Marriott (25% off lower rate) – I had three Marriott BRG claims approved last month on stays that also earned a free night during the stay two times and earn free hotel night category 1-5 certificate.
- Starwood Hotels (10% off lower rate or 2,000 Starpoints and match lower rate). Note: SPG allows BRG claim without first booking hotel reservation. I have earned tens of thousands of Starpoints with BRG claims.
What is the future of Best Rate Guarantees with this UK ruling?
There is not sufficient information yet to determine the impact of room parity changes in the UK with this price-fixing settlement. One of the provisions I read may provide a loophole for the hotel chains to deny BRG claims from OTA sites with lower room rates.
On Friday, the OFT said the firms would relax restrictions so that OTAs could undercut the hotel group. However, the agreement only applies to certain customers – those on loyalty schemes or who have made at least one previous booking with the agent. This means InterContinental, the world’s largest hotel group, will retain more influence over the headline price offered to first time consumers.
UK The Telegraph – August 9, 2013
Restricting the lower rates at Online Travel Agencies to customers who are members of loyalty programs or who have made a previous booking with the OTA indicates these rates are not publicly available and will not be eligible for a Best Rate Guarantee claim with IHG as the program terms currently exist.
This looks to me like a loophole to protect the hotel chain from rampant Best Rate Guarantee claims (they are not too hard to find at present based on my regular use of BRG claims for discount hotel travel).
Time will tell how this settlement impacts Best Rate Guarantee policies and consumers. This adds a new dimension to hotel rates if preferred clients with online travel agencies can book a lower room rate than the hotel chain websites offer.
OTA bookings may increase if consumers find there are lower rates than the hotel chain websites offer and the discount rate offers more value than the hotel loyalty program benefits of IHG Rewards Club and other loyalty schemes.
Ric Garrido, writer and owner of Loyalty Traveler, shares news and views on hotels, hotel loyalty programs and vacation destinations for frequent guests.
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