French Hotels Ignite Price-Fixing Fire

GLOBAL REPORT—The practice of rate parity in the global hotel industry has again come under fire, this time in France, where the country’s biggest hotel employer's union went to France's competition authority to argue against what it calls “anti-competitive” practices.

A number of experts in the distribution field—including one source who has been called on to testify in related cases filed in the U.S.—said the rate-parity issue is a contentious one and that hotels and third-party distribution partners should be preparing a plan B in the event rate parity is deemed price fixing.

“There are a wide variety of issues as well as different legal precedence in the U.S. and the U.K., which makes it a very volatile situation depending on the jurisdiction,” said Robert Cole, founder of RockCheetah consulting group and former director of hotel distribution with The Sabre Group. “There are lawsuits, lawyers involved, misinformation—just crazy, crazy stuff spinning around.”

“Local governments and courts will make whatever decisions suit their needs, and I think it's a mistake to bet on an outcome favorable to your side, whichever it is, without also taking steps to manage if the outcome isn't what you hope,” added Tim Peter of Tim Peter & Associates e-commerce and Internet marketing consulting firm.

The most recent complaint in France names Priceline’s Booking.com, Expedia and Hotel Reservation Service, alleging the sites are breaking French and European competition rules by forcing hotels to give them their lowest rates and then barring them from offering discounted rates elsewhere.

"The online hotel booking platforms have become a crucial channel of distribution for French hotels, notably the smaller ones," Union des Métiers et des Industries de l'Hôtellerie President Roland Héguytold The Telegraph.

“The advantages offered by these platforms have gradually been canceled out by the harmful effects of commercial practices that violate European and French competition laws,” he said, adding the industry has experienced “a radical hardening of contractual clauses imposed on hoteliers who, given the structure of the market, are in no position to refuse them.”

Adam Anderson, Expedia’s director of industry relations, told Hotel News Now that consumers benefit from the competitive pressure provided by online travel agencies on hotel prices through the increased transparency and comparability on the hotel market. 

“We have taken note of the media reports that the French hotel association UMIH has raised some concerns related to the online booking of hotel rooms with the French Competition Authority,” said Anderson. “Contrary to what UMIH is suggesting, we at Expedia are convinced that we are providing consumer benefits by giving access to the lowest prices and providing consumers with an accessible virtual marketplace where they can easily compare and contrast travel options in one place.

“Expedia would like to highlight that in none of the ongoing investigations by governmental agencies in Europe has there been a finding whatsoever establishing that any law has in fact been broken,” he added. “Expedia is cooperating fully with the regulators involved.”

Evolution of rate parity
Because both sides, hotels and OTAs, have found ways around rate parity—such as “fenced” deals offered only to a select audience (last-minute, mobile only, loyalty members, app subscribers)—many argue true rate parity doesn’t even exist.

Cindy Estis Green, CEO of Kalibri Labs, said rate parity is difficult to implement consistently for many reasons, in spite of contracts that require it. Green said the practice may evolve into a condition that is less rigid and defined between hotels and vendors.

“The reality is that we aren't even close to full parity; if rates were all in parity, there would be much less of a need for metasearch and they are the vendors in high-growth mode,” she said. “Of course, consumers use metasearch for more than price searching, but it is still a good portion of the user base.”

Peter said hotels should employ a sophisticated channel-management strategy where they can effectively evaluate offering OTAs less inventory. However, that comes with a tradeoff, he said.

“A trade-off between more favorable terms or more favorable placement on the site,” he said. “Hotels that find themselves in a position where a specific OTA represents a significant proportion of their business need to decide whether they can afford lower placement while they also look to diversify their sources of business. It's always a bad idea to depend too heavily on any one source.”

If hoteliers consider the terms of any agreement “bad," as UMIH’s Héguy suggests, they can withhold offering that OTA inventory, Peter said. Sign agreements “only if there is no better alternative” and immediately look for alternatives, including more brand-direct business, more mobile, more group and a more diverse set of OTA partners, he said.

“Hotels most interested in truly taking control of their overall distribution must put in the effort to develop a robust sales-and-marketing operation or risk finding themselves in the same position with some other partner down the road,” he said. “Only then will they be in a better position to avoid—or at minimum, successfully weather—the mudslinging, lawsuits, public misconceptions or whatever other new challenges rise up.”