OFT clears way for cheaper hotel room discounts

By Luke Nicholls

- Last updated on GMT

Related tags: Otas, Hotel

Fair deal? The OFT has laid the groundwork for OTAs to compete more aggressively over the price of hotel rooms
Fair deal? The OFT has laid the groundwork for OTAs to compete more aggressively over the price of hotel rooms
Online travel agents (OTAs) and hotels will now be able to offer greater discounts on online bookings after an investigation from the Office of Fair Trading (OFT) into competition practices.

The investigation, launched in 2012, focused on concerns that two of the biggest OTAs – Booking.com and Expedia – had separate agreements with the world’s largest hotel group, IHG, which restricted each OTA’s ability to offer discounts on room-only accommodation.

But the regulator has today closed that investigation after accepting formal commitments regarding price parity from all three firms, meaning all other OTAs and hotels will now be able to offer discounts on headline room-only rates.

"The travel industry, fuelled by the internet, has seen significant changes in recent years, and we want to ensure those changes continue to work in consumers' interests,” said Ann Pope, director of OFT Services, Infrastructure and Public Markets Group.

"That is why we are pleased to have secured this outcome which, by allowing OTAs and hotels to offer discounts, should increase competition and mean travellers across Europe can benefit from reductions on hotel accommodation throughout the UK.

"By shopping around, people can compare the different discounts offered by hotels and OTAs, and ensure they get the best deal."

Conditional offers

It is now expected that more online firms will be able to enter the market and offer discounts. But the cheaper price offers must follow certain conditions.

Consumers must sign up to a membership scheme of an OTA or hotel to be able to view specific discounts, and they must make at least one non-discounted booking to be eligible for future discounts.

The discounts offered by OTAs will be funded through their commission or margins.

LateRooms commission increase

While today’s announcement will come as welcome news for travellers and hoteliers alike, it comes in the same month that another major OTA, LateRooms.com, has ramped up its own commission rates.

In an email sent out to all of its UK-based hotel clients (see extract below), the booking website revealed it has increased rates from 15 to 17 per cent across the board.

LateRooms

Jim Hay, owner of Cauldburn House bed and breakfast in West Lothian, Scotland, believes this latest commission hike raises more questions than answers. He told BigHospitality: “If LateRooms is needing to increase its commission by 2 per cent to its hotel partners due to increased costs and investment as they suggest, does this mean that the competition in the OTA sector is tightening?

“If they were increasing market share then LateRooms would surely be able to fund these out of increased income generated from room sales without having to take a bigger slice of the rate .

“If the hotels sector continues to allow the OTAs to become the preferred intermediary between the customer and the hotel we will all see a massive loss of control over our own businesses in the near future.

“The OTAs will become the franchisors of the independent hotels sector in the same way that the corporate hotel groups control their franchisee operators. The agents will use their power, knowledge and control to squeeze every last percentile out of their ‘partners’ pockets in the same way that the supermarkets can do with their suppliers if left unhindered.”

Giving OTA's the boot

Earlier this week, BigHospitality also spoke to the co-founder of a new booking website that allows hotels to ‘bid’ for guests, who believes the current Online Travel Agency (OTA) model is an ‘unsustainable, tangled web that only serves the intermediates’. 

Polish entrepreneur Mark Bradshaw said hotels in the UK are being ‘bullied’ by the likes of LateRooms, but his new booking platform, Bidroom, will ‘wipe the slate clean’ by being the first to offer a free-of-charge reverse auction model. Read more about that here.

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