Industry groups that represent small and medium sized accommodation providers have welcomed a renewed interest by the Australian Competition and Consumer Commission into concerns about pricing practices in the online travel agency market.
The corporate regulator is asking operators of hotels and other accommodation providers to fill out a questionnaire about their concerns about “price parity” clauses imposed by online travel giants, including Expedia and Priceline.
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“Price parity” clauses refer to provisions in the contracts hotels agree to when dealing with online booking agencies that effectively restrict them from offering discounted rates on their own websites.
Concerns about the issue have escalated following Expedia’s takeover of Wotif last year, while an increasing number of hotels are starting to offer perks for customers who make direct bookings with them rather than through online booking sites.
The ACCC is asking for submissions about the issue using an online questionnaire, which will help the watchdog access whether these arrangements raise any competition issues.
“The consultation will assist the ACCC to broaden its understanding of the impact of volume and price parity clauses used by online travel agents, and how price parity clauses operate with last room availability clauses,” the regulator said.
Richard Munro, chief executive of Accommodation Association of Australia, told SmartCompany this morning small and medium sized accommodation providers had been particularly affected by the issue of price parity.
“Non-branded ones in particular which don’t have the negotiating power of larger brand groups,” he says.
Munro says concerns about a lack of competition in the online travel agency market were raised at the time of Expedia’s takeover of Wotif.com last year.
“These were amplified when operators were recently notified that the other dominant player in the market, Priceline (Booking.com), would increase the commission rate that it charges accommodation operators from 12% to 15%,” he says.
“With the dominant collective market share that the two leading players have among Australian operators, our industry is facing a similar scenario to the dominance that the two major supermarket chains have in Australia’s retail sector.”
Munro says the association wants the ACCC to focus on the nature of these agreements and rate parity clauses in those agreements.
He says the strength of online travel agents (OTAs) had become more apparent recent years and this had resulted in increased costs as well as onerous terms and conditions for accommodation providers.
It also often means their own inventory is not in their control.
“When that much inventory is exposed and not in your control, that’s a real concern for us,” he says.
Munro says there has been some precedence globally for getting rid of price parity clauses, citing Germany and France as examples for the ACCC to look at.
Carol Giuseppi, chief executive of Tourism Accommodation Australia, told SmartCompany this morning she also welcomes the ACCC’s inquiry into online travel agencies and rate parity.
“Ultimately the accommodation sector is concerned that the removal of rate parity between OTAs will only reinforce the market power of the two largest OTAs in the market,” she says
“We would however welcome the removal of rate parity between OTAs and hotels which would ensure that there is clarity around the hotels role in setting the price and the sales conditions.”