A hotel in California has filed a lawsuit accusing Expedia Inc of using ‘bait and switch’ tactics, which see it attracting customers with offers at hotels not signed to its portfolio, then offering alternatives which are.
The online travel agent said that it was investigating the allegations, which came as Hotrec released a report claiming a “huge imbalance” in hotel distribution in Europe, with the OTAs dominating.
In California the complaint said that Expedia offered customers deals for hotels which were not bookable on any of its family of sites, in this case the Buckeye Tree Lodge and the Sequoia Village Inn. When clicked, consumers were told that there was no vacancy and offered alternative hotels in the region.
The complaint said: “Expedia’s website falsely shows that there is no availability at the hotel, but then pushes the consumers to ‘deals’ at Expedia’s nearby member hotels, who pay Expedia a fee for every room booked through its website. Expedia’s deceit is brazen. Expedia posts fake telephone numbers for Buckeye Tree Lodge and other Class Member hotels to divert callers to Expedia’s own operators, who then try to book the consumers at Expedia member hotels.”
It added: “The deception starts even before consumers visit the websites. Defendants purchase false and misleading advertisements on internet search engines like Google, to funnel traffic to their websites. For example, when a consumer uses Google to search for the Buckeye Tree Lodge, the engine’s top result returns an advertisement purchased by defendants to ‘Book Buckeye Tree Lodge’ and promising ‘Incredible Offers on Great Hotels. Buckeye Tree Lodge.”
Expedia Inc said: “We value our relationships with hoteliers and take allegations such as these seriously. We are investigating the allegations and whether our standard practices were followed. However, the value of our marketplace as a fair and effective way to connect hoteliers and travellers is our number one priority.”
A source close to Hotel Analyst, which declined to be named, said: “I think one could say two things. One is that Expedia and Booking.com will obviously be looking very hard at alternative pricing models as the crack down on ‘best available rate’ restrictions continues across Europe. Secondly these new models are themselves more likely than ever before to be challenged by hotel groups and smaller OTAs who now feel that Expedia/Booking.com are more vulnerable to challenge than before as the regulators and governments have them ‘on file’.”
Bait and switch tactics are well-known online. At the time of going to press fashion retailer Zara was facing a class-action lawsuit in the US over claims that it listed prices in Euros, only to convert them at checkout to dollars at a higher price that that day’s currency conversion.
The suit came as OTAs came under fire from Hotrec in Europe, which said that there was an increasing dependency of hotels on the intermediaries, with nearly one out of four overnights generated through by them last year.
A report by the hotel owners’ group said that the three biggest OTAs were dominating, with a common market share of 92%. The most dominant player was The Priceline Group with a share of over 60%.
Hotrec said that, in parallel to the rise of the share of OTAs in hotel bookings, the share of direct bookings had dropped to 55%. The booking trends show that online platforms are gaining more and more control over the hotel distribution market.
Moreover, it said, two players – Booking.com and the Expedia Group – managed to further increase their market shares in Europe (together being responsible for almost 80% of hotel bookings via OTAs), while the third biggest market player (the HRS group) lost ground over the last two years.
It said: “On an OTA market with around 200.000 hotels (75% of them being micro enterprises with fewer than 10 employees) on one side and currently two real dominant players on the other side, there is no need for further explanation on who is in the driving seat”.
Christian de Barrin, CEO Hotrec, said: “The study clearly shows that online platforms are steadily acquiring bigger and bigger shares in hotel bookings, while the hotels’ own distribution channels are on a decline making dependency on OTAs growing. The situation is especially critical as it seems that the OTA market tends to become a duopolistic (or even monopolistic?) one in Europe, with one player (Booking.com) controlling closely two thirds of the market.”
HA Perspective [by Katherine Doggrell]: At the time of writing, the Buckeye Tree Lodge and its sister site were no longer listed on Expedia Inc’s sites, assuming that the complaint is accurate and the hotels were listed – images from it suggest this was the case. What is likely is that the story has generated the most almighty billboard-style effect for the two small hotels.
But this is to play devil’s advocate. Real advocates would say that offering something for sale which you don’t have for sale – even if you say that, in fact, you do not have it for sale after all – is illegal. Tactics such as these are rife online – this correspondent fell foul of the classic ‘oh heavens, it’s not on discount in store, only online, yet we have run out online, but have plenty on the rack over there…’ scam only this year, perpetrated by a retailer of over a century’s standing. Europe takes a stern view of such actions, much as it does with the OTAs, yet, as Hotrec noted, if change is happening, it’s happening very slowly.
Whether this is the action of a rogue employee or standard operating practice is yet to be ascertained. What it does illustrate is that the someone at the OTAs is continuing to take inspiration from the FMCG market and not the hotel market and, legality allowing, the hotel sector should be doing the same.