More variation in hotel options after relaxation of conditions of hotel-booking websites
There is more competition and there are more options for consumers in the online hotel-booking sector. That is the main conclusion of a study that the Netherlands Authority for Consumers and Markets (ACM) has carried out with nine other competition authorities in Europe and with the European Commission. Under pressure from a number of authorities, Booking.com and Expedia in 2014 relaxed their conditions for participating hotels. ACM and the other authorities carried out a joint study into the effects of this measure.
The European study also revealed that nearly 50% of the investigated hotels (in the Netherlands, 40%) were unaware that the conditions of hotel-booking websites had been relaxed. So far, they have thus not been able to take advantage of the latitude that they had been given. Michiel Denkers, Director of the Competition Department of ACM, explains: “Because of the relaxed conditions of these online hotel-booking websites, hotels are able to vary more in their pricing strategies. As a result, competition between the various hotel-booking websites will increase, which, in turn, means that consumers will have more options to choose from. We are calling on the hotels to take advantage of this latitude.”
What was the problem?
Booking.com and Expedia had previously demanded of hotels always to offer on their platform the lowest price for an overnight stay. In practice, this meant that hotels were not allowed to offer a lower price on their own websites or on any other booking website. Competition authorities across Europe had concerns that this ‘lowest price guarantee’ would harm competition between the various booking websites. New booking websites or platforms would thus have no latitude in order to attract customers. This would strengthen the position of the current platforms, and they would subsequently be able to ask a higher commission fee. This would result in fewer options and higher prices for consumers.
How has this been resolved?
Under pressure from several European competition authorities, Booking.com and Expedia relaxed their conditions in 2014. Hotels are not allowed to offer a lower price for their hotel rooms on their own websites. However, hotels are allowed to offer a lower price on other booking websites. This will create competition between the various booking websites. With this latitude, hotels are able to adopt a more competitive pricing strategy. Consumers will ultimately benefit from this.
ACM’s involvement
ACM was in favor of a coordinated European approach against the booking websites to increase competition between the various websites. The findings of the study into the effects of the measure now reveal that this approach has indeed led to increased competition and thus to more options for consumers.
‘Online consumers’ is one of ACM’s main priorities. In that context, ACM also looks into online platforms such as hotel-booking websites but also websites for meal-delivery providers like Thuisbezorgd. ACM takes into account the convenience that these platforms offer, their market positions, and the conditions that they impose on participating parties. In such dynamic markets, all participants should have equal opportunities so that businesses and consumers will have sufficient options.