The French have a reputation for revolutions. Once again it’s France that revolts against the supremacy of the powerful Online Travel Agencies. Last year one of the country’s biggest players in hospitality started a petition on their website of hoteliers against OTA practices. Last month the ‘Gauls’ went to the barricades again.
Rate Parity = Price Fixing?
France’s biggest hotel industry union (UMIH) files a complaint against Booking.com, Expedia and HRS at the nation’s competition regulator for breaking local and European rules. In short it comes down to the fact that the booking sites have become a too important channel, notably for the smaller hotels, who in the meantime are forced to sign contracts with “non-negotiable clauses” to offer the same prices and room quality on every other channel. This rate parity principle equates to to “price fixing” according to the union and is thus anti-competitive. It is worth mentioning that the Swiss, British and American competition authorities preceded them.
What do hoteliers think?
Our friends at Travolution published an article last month in which they let hoteliers speak their minds on this matter. A British GM complains:
“We have opened Pandora’s Box. For a small, independent hotel like us, it gives national and even European coverage that we wouldn’t ordinarily get, but our commission payments to Booking.com have gone from ￡14,000 to ￡22,000 in a year – and if I don’t pay it, somebody else will.”
Some of his colleagues have a more positive attitude towards the booking giants:
“When we have volume to sell and can sell it at the right price through the OTAs, the commission is worth it – especially if that customer becomes a direct customer in the future.”
At the same time there are many complaints on the OTA’s practice of Brand Hijacking: advertising on the hotel’s brand name in search engines. For an individual hotel it is nearly impossible to compete with the SEO power of the OTAs in the organic search results. The advertising on brand keywords makes it really hard for an individual hotelier to compete in the paid search results as well. Worst case scenario for hotel managers is that the OTA not only converts this initial direct client into an OTA client, but redirects him to another hotel in their offerings. In general hoteliers agree on the fact that OTAs are a fact of life now. They just got to get smart in when and how to use them.
All in all this is a typical David versus Goliath struggle, which can go on forever. The sentiment among hoteliers however is that OTAs are currently pushing the limits of accepted behavior. Complaints about the growing power of OTAs and their commercial practices are increasing. In the end every hotel would prefer to cut out the middle-man (and their commission) and get as many direct bookings as possible. There are a few strategies to reduce OTA dependency and increase direct bookings which I will list soon on this blog. The fact that Google is increasing the weight of user reviews in their search results looks also promising to hoteliers. I will elaborate more on how this can increase direct traffic to your website soon. In the meantime here’s some inspiration for how this website should look!
What are your experiences with OTAs? Let us know in the comments!
Afbeelding 1 (cc): Melfoody