The Competition and Markets Authority has launched an investigation into hotel booking websites, citing concerns about the “clarity, accuracy and presentation of information on sites”.
The investigation is the third time that the CMA, formerly the Office of Fair Trading, has looked at the online selling of hotel rooms, with observers expecting a change to some of the OTA’s practices.
The CMA will look at how commission payments affect search results, pressure selling – including claims about how many rooms may be left – discounts claims and hidden charges, such as taxes or booking fees.
Andrea Coscelli, CEO, CMA, said: “Around 70% of people who shopped around for hotels last year used these sites and they should all be confident they have chosen the best accommodation for their needs and are getting a good deal. In today’s increasingly busy world, sites like this offer real potential to help holiday-makers save time and money searching for their ideal get-away.
“To do this, sites need to give their customers information that is clear, accurate and presented in a way that enables people to choose the best deal for them. But we are concerned that this is not happening and that the information on sites may in fact be making it difficult for people to make the right choice.”
Kristian Valk, co-founder & CEO, Hotelchamp, said: “The CMA’s decision to investigate the accuracy of booking sites comes at a crucial time for the hotel industry. With hotels becoming increasingly dependent on these third-party booking websites, they are unable to compete directly with the sorts of strong-arm tactics the investigation hopes to uncover.
“With hotels having to pay higher and higher commission rates, it’s inevitable that they’re forced to pass these rising costs onto consumers simply to stay afloat. This investigation is a real win not only for consumers, but also for the hotels that strive to provide them with legitimate value. By bringing more transparency to the industry, this will allow hoteliers to compete on a more level playing field – offering what is right for the guest, not the middleman.”
Triptease COO James Osmond said: “We are delighted to see the CMA investigating pressure sales and misinformation by online travel agencies. For a decade the OTAs have spent billions creating a false impression that the best place to book is always with them. It isn’t any more. When you take into account the opportunity for upgrades, extra benefits and the best rates, booking directly with a hotel is best.
“We’ve seen first-hand how hotels and consumers have suffered at the hands of pressure sales and misinformation spread by OTAs. Their marketing might has left many hoteliers, particularly independents, with little opportunity but to work with them and pay hefty commissions. We hope this investigation with make their voices heard and ensure that both the hospitality industry and UK consumers will once again be operating on a level playing field.
News of the investigation came as Expedia, Inc, saw a fall of 18% after the announcement of its third quarter results. The company, which said it welcomed further discussion with the CMA, cut its forecast full year Ebitda growth to the single-digit range, from a previous forecast of 10% to 15%, citing “challenged” performance at Trivago, a slowdown in domestic room nights booked and natural disasters leading to more cancellations and refunds.
CEO Mark Okerstrom said: “We are not at all satisfied with our Q3 performance …our sights are clearly aimed at the longer-term opportunity ahead.
“Going forward, you should expect to see us lean more aggressively than previously contemplated into marketing, technology, and supply investments through the remainder of the year and throughout 2018.”
Okerstrom added: “We will become much more customer centric. Putting the A back into OTA. Over the last 20 years we’ve put the power of research and booking into the hands of customers around the world. With the digital age, we made researching and booking travel exponentially better, but we still have a long way to go in truly alleviating customer pain points.”
We now await the CMA’s thoughts on how painful booking is for the customer.
HA Perspective [by Katherine Doggrell]: Conversing with the CMA is a reasonably regular activity for the OTAs and thus far the result has been nothing very much – although we can at least thank the then-OFT in part for the rise of loyalty programmes.
Charlie Osmond, chief tease, Triptease, told us: “The fact that this has come up again clearly means the CMA felt it had unresolved business. It would be surprising if there weren’t actions as a result of this.”
While the hotel sector has found much to rejoice about in this latest investigation, it is worth noting that, in the drive to direct, many of the to-be-investigated practices have been adopted by hotels themselves. Osmond responded that, while most hotels “would like to provide dynamic messaging [of the ‘only one room left’ variety] they don’t want to give the customer a cardiac arrest. They are focused on service. To me, this investigation is about really specific behaviour. Some OTAs can give the impression that there is one room left, but really it is only one room left through the OTA – which is really specific messaging and not true.
“With discounts, there is a certain amount of confusion which the OTAs allow to exist, knowing that customers do not always read all the terms and conditions.”
As for the next move, Osmond commented that, depending on the CMA’s conclusions, Europe could once again look at the OTAs, with the likely result being different practices depending on the country. Osmond drew attention to the difference in applying taxes when shopping on the high street – at the till in the US, but on the shelf in Europe. Homogenisation across country borders has been rejected by many voters, now we could see the OTAs – and global operators – forced to think regional, not global.
Additional comment [by Andrew Sangster]: I used to work for the Campaign for Real Ale, a consumer pressure group focused on protecting Britain’s cask ale beer style. Aside from the fun to be had visiting at least two breweries a month while in my early 20s, I got to see first-hand what ill-considered government regulation can do to an industry. In particular, the 33 or so investigations into beer and brewing by regulators in the Post War period, culminating in what many now see as the flawed Beer Orders introduced in 1989, created a much more consolidated industry.
The then Monopolies and Mergers Commission, a forerunner of the CMA, took particular umbrage with vertical integration. In challenging a situation where six brewers held sway in the industry, we now have an effective duopoly in beer. My warning to hoteliers from this is simple: be careful what you wish for.
There is no doubt that OTAs are sharp operators – you simply don’t get to get that big that fast by being nice all the time. But there are problems with believing they are always in the wrong.
Effective merchandising does require consumers to believe there is scarcity and that booking needs to be done now. Saying there is only one room left should not be regarded as being bad if it in fact leads to a sale (saying there are no rooms left is a different matter for the hotelier). Do hoteliers really want to make OTAs less effective?