Hotels and OTAs - an uneasy relationship
Members of our Hotel and Leisure Group attended the Annual Hotel Conference in Manchester last month where one of the sessions was on OTAs and their relationship with hotel owners. The consensus at
Members of our Hotel and Leisure Group attended the Annual Hotel Conference in Manchester last month where one of the sessions was on OTAs and their relationship with hotel owners. The consensus at the end of the session was that OTAs are a commercial reality (and some may say necessary evil) and since they are around to stay for the foreseeable future, OTAs and hotel owners need to find ways of working together effectively and co-operatively.
Nonetheless, two issues raised by hotel owners stuck – the price parity requirement and the fact that some OTAs no longer provide hotel owners with the email addresses of the hotel guest so that any communication prior to the stay has to be via the OTA.
1. Price Parity
Price parity clauses (= obligation of hotels to offer an OTA the same or better room prices as the hotel makes available on all other online and offline distribution channels, including its own website) have always been a hot topic, but have recently come under increased scrutiny by the competition authorities in the EU.
Following investigations by the French, Italian and Swedish competition authorities Booking.com, one of the largest OTAs has recently undertaken:
However importantly, Booking.com can still request price parity in relation to a hotel's own publicly available online room prices.
In the UK, a similar investigation was launched by the OFT in September 2010.
The OFT alleged that certain OTAs entered into separate arrangements with InterContinental Hotels which restricted the online travel agent's ability to discount the price for hotel room only accommodation. In January 2014, the case was originally settled following binding commitments from the parties involved to address the OFT's competition concerns, but was subsequently re-opened in October 2014 by the CMA following a successful appeal against the OFT's decision by Skyscanner, a price comparison and meta-search site operator who argued that the commitments offered were damaging to its business to the extent that restrictions on online advertisement of specific prices and discount information were concerned.
However, on 16 September 2015, the CMA announced its decision to close its investigation into pricing restrictions in hotel online booking again on the grounds of administrative priority.
The fact that Booking.com has in the meantime, as mentioned above, abandoned its price, availability and booking conditions parity provisions with respect to other OTAs in its terms with hotel partners across Europe (including in the UK) was one decisive factor in that decision.
This does not mean that the CMA is no longer interested in the topic though, since the CMA has opened a project to continue monitoring the pricing practices of OTAs which also covers monitoring the effects of the changes made by Booking.com and others, as well as the impact on competition and consumers of continuing rate parity restrictions.
2. Customer relationship
Another gripe of hotel owners is that OTAs have started to withhold guest email addresses so that any communication with the hotel guest prior to the stay has to be via the OTA. Whereas a hotel owner previously had access to the hotel guest's email address for further direct marketing, hotel owners now have to be more creative to get a guest's email address.
One way of achieving this would be to ask for the email address during check-in or at the end of the stay as part of the customer satisfaction feedback form.
3. What can a hotel owner do to entice customers to book directly rather than via an OTA?
Nonetheless, two issues raised by hotel owners stuck – the price parity requirement and the fact that some OTAs no longer provide hotel owners with the email addresses of the hotel guest so that any communication prior to the stay has to be via the OTA.
1. Price Parity
Price parity clauses (= obligation of hotels to offer an OTA the same or better room prices as the hotel makes available on all other online and offline distribution channels, including its own website) have always been a hot topic, but have recently come under increased scrutiny by the competition authorities in the EU.
Following investigations by the French, Italian and Swedish competition authorities Booking.com, one of the largest OTAs has recently undertaken:
- not to apply parity terms regarding price and other conditions in relation to Booking.com's competitors, ie a hotel is free to sell a hotel room cheaper through another OTA;
- not to apply parity terms with respect to the number and type of available rooms;
- not to require parity with respect to room prices or other conditions as regards offline sales – this allows hotels to offer cheaper rates to hotel guests offline, although in the digital age that we live in, the benefit of this will be limited;
- not to require price parity regarding guest room or other conditions that are not available to the general public and are offered by the hotel to certain customers or customer groups only.
However importantly, Booking.com can still request price parity in relation to a hotel's own publicly available online room prices.
In the UK, a similar investigation was launched by the OFT in September 2010.
The OFT alleged that certain OTAs entered into separate arrangements with InterContinental Hotels which restricted the online travel agent's ability to discount the price for hotel room only accommodation. In January 2014, the case was originally settled following binding commitments from the parties involved to address the OFT's competition concerns, but was subsequently re-opened in October 2014 by the CMA following a successful appeal against the OFT's decision by Skyscanner, a price comparison and meta-search site operator who argued that the commitments offered were damaging to its business to the extent that restrictions on online advertisement of specific prices and discount information were concerned.
However, on 16 September 2015, the CMA announced its decision to close its investigation into pricing restrictions in hotel online booking again on the grounds of administrative priority.
The fact that Booking.com has in the meantime, as mentioned above, abandoned its price, availability and booking conditions parity provisions with respect to other OTAs in its terms with hotel partners across Europe (including in the UK) was one decisive factor in that decision.
This does not mean that the CMA is no longer interested in the topic though, since the CMA has opened a project to continue monitoring the pricing practices of OTAs which also covers monitoring the effects of the changes made by Booking.com and others, as well as the impact on competition and consumers of continuing rate parity restrictions.
2. Customer relationship
Another gripe of hotel owners is that OTAs have started to withhold guest email addresses so that any communication with the hotel guest prior to the stay has to be via the OTA. Whereas a hotel owner previously had access to the hotel guest's email address for further direct marketing, hotel owners now have to be more creative to get a guest's email address.
One way of achieving this would be to ask for the email address during check-in or at the end of the stay as part of the customer satisfaction feedback form.
3. What can a hotel owner do to entice customers to book directly rather than via an OTA?
- Although price is an important factor, the use of the OTAs websites and in particular ease of booking is one of the main reasons why OTAs are so successful. When comparing the customer experience during the booking process, OTAs often win hands down. Their websites are straight forward to use and are very well laid out whereas hotels' own websites can be a source of frustration, either because it is impossible to find the information you are looking for or the booking process is cumbersome. Admittedly, not every hotel owner will have the financial means to have an elaborate website, but in the end what a customer really wants is a website that works and is easy to use, ie something that even a basic website should be able to deliver.
- Make the stay memorable for the hotel guest and go for the repeat business. Even though hotel owners may not have the initial contact with the hotel guest, it is the hotel staff that is providing the service, so once the hotel guest is through the door make sure that you do everything to make him/her want to come back.
- Use the opportunity to get the hotel guest's email address while they are staying with you. This could be done during check-in or at the end of the stay as part of the customer satisfaction survey and will allow the hotel owners to do further direct marketing that could even be customised taking into account his/her preferences and interests.