The United Kingdom's Office of Fair Trading (OFT) issued a Statement of Objections this Tuesday alleging that industry giants Booking.com B.V., Expedia, Inc. and InterContinental Hotels Group violated the UK’s Competition Act of 1998. The Statement of Objections will not be made public, but from OFT’s comments, it’s rate parity and best rate guarantees that are causing the trouble.
Requiring on-line travel agents (OTAs) to honor a hotel supplier’s best rate guarantee (at retail) and requiring hoteliers to provide inventory to distributors at the same price across all distribution channels are as close to universal practice in this industry as I have seen. And now, OFT appears to consider them by a less salubrious name: price-fixing. However, the Statement of Objections is not “the final word." It is a sort of pre-trial opinion in which OFT provides official notice of a “proposed infringement [of the Competition Act 1998] decision” and the parties to the dispute may make written and oral arguments to be considered before final decision is rendered.
OFT’s statement was issued at the end of an investigation begun in 2010 after a complaint was made by Skoosh, a small British OTA. Skoosh contacted OFT after Skoosh’s own hotel suppliers demanded that Skoosh raise its retail rates to a certain figure (among other allegations). The hoteliers, of course, were apparently acting to meet pressure applied by Booking and Expedia not to violate what was almost certainly a contractually required rate parity obligation of some sort. In effect, Skoosh raised concerns with OFT that rate parity and best rate guarantees operate together to artificially fix prices in the marketplace and therefore act as a barrier to competition, particularly for new or smaller players, like Skoosh, who might be willing to undersell the larger OTAs to grow its business.
If OFT formally issues a finding of an infringement, despite its jurisdiction being limited to the UK, the finding will cause--at a minimum--a shift in the way a significant majority of the hospitality industry conducts its distribution business, as well as the amount of competition in the marketplace. The Internet, after all, is international. So please stay tuned!
Washington hotel owners, operators and suppliers enjoyed two days of learning, socializing and recognizing their colleagues' successes at the recent Washington Lodging Association's 2011 Annual Conference at the incredible Tulalip Resort and Spa. This year's Conference featured a variety of presentations on workforce challenges, recent changes to the ADA, revenue management, fraud prevention and social media.
Last week the Seattle Hotel Association presented the 6th installment of its annual symposium and economic forecast. Like years past, this year's program featured a terrific line up of local and regional experts, including Matthew Gardner (Gardner Economics), Vail Brown (STR), Lee McCabe (Expedia), Chris Kraus (PKF) and Tom Norwalk and Jerri Lane (Seattle King County Convention and Visitor's Bureau). Local general managers and directors of sales and marketing have come to rely on the Association's annual symposium as an important part of their annual budgeting process.
Greg Duff founded and chairs Foster Garvey’s national Hospitality, Travel & Tourism group. His practice largely focuses on operations-oriented matters faced by hospitality industry members, including sales and marketing, distribution and e-commerce, procurement and technology. Greg also serves as counsel and legal advisor to many of the hospitality industry’s associations and trade groups, including AH&LA, HFTP and HSMAI.