Online travel agencies have been effectively holding Europe’s hotel industry hostage for years, thanks to rate parity agreements that put a stranglehold on the free market. However, this could be about to change, after a House of Lords EU Internal Market Sub-Committee report Online Platforms and the Digital Single Market detailed claims that OTAs have been intimidating hotels into providing better rates, as well as posting misleading messages about vacancies and using ‘shell websites’ that pose as the hotel website to take bookings, often at a higher rate.
The report findings, which also showed that OTAs have been misleading customers with price fixing, fake reviews and doctored search options, has led to calls for greater market transparency and plans mooted for a European Kitemark on trust.
Researching for my upcoming honeymoon, I’ve seen some of these tactics in practice, watching as holiday prices and room rates fluctuated without reason on destinations I regularly viewed. Remarketing campaigns kept trying to entice me to book, while messages of ‘only X rooms left’ tried to create a sense of urgency. Comparing the price on the hotel’s own site with that being offered elsewhere highlighted the price discrepancies.
European Union rebukes OTAs
The EU Internal Market Sub-Committee report has shown that online travel agencies have been using information provided by browsers online via web cookies to target customers with a pricing proposition that is tantamount to robbery. Some OTAs have been found bumping up prices for people viewing a particular holiday multiple times. Others advertise one rate, only for additional fees for credit card payments, taxes and “service charges” to creep in at check out.
The U.K. market has been quick to react, with the House of Lords Select Committee calling for action to redress the balance of power in the online travel market.
Ufi Ibrahim, chief executive of the British Hospitality Association (BHA), has welcomed the EU report and the House of Lords backing, calling for an urgent review of OTA practices.
She said: “These OTAs wield vast power and hold our industry hostage by commanding punitive rates of commission. We are pleased that this influential committee is proposing Europe-wide steps to enable our industry to challenge anti-competitive online practices when they arise. The BHA calls upon on the government and policy makers in the European Commission to support our lobbying in this area and get engaged — this is a significant step forward for our industry, and we want to see the momentum continue.”
Personal Pricing & Rate Parity Agreements
The EU report will add fuel to the ongoing campaigns by big chain hotel brands such as Marriott and Hilton, which advertise that it is better to book direct. See Eric Stoessel’s recent article, “Loyalty Pricing Can Work for More Than Just Marriott, Hilton.”
Both Marriott and Hilton have rolled out advertising campaigns that advocate dealing directly with your hotel to get the best price, with more big brand names adopting the “book direct” approach, including Hyatt and Starwood.
But what happens if your property is tied into a rate parity agreement with one or more OTAs? Such agreements demand that the best available rate (BAR) is made available to them also, leaving hotels with little to no room to maneuver. Or is there?
Duetto has long been advocating the move to “personal pricing,” providing a 1-to-1 approach to guest engagement and pricing. Using this pricing approach, you can tailor your offer to the customer. But how does that fit with rate parity?
BAR is the best available rate to everyman; it does not have to be the best available rate full stop. Gated rates, available only to reward members, frequent stayers or gym members, provide hotels with the key to navigating around rate parity. Tailor your offers, including value-added bolt-ons such as spa treatments, breakfast and dinner, a round of golf, or other peripheral services available on-property, and you will entice your guest to book direct.
The Marriott and Hilton campaigns truly mark a sea change in hotel pricing and hotel loyalty. Reward your guests and they will reward you back — by no longer shopping around for a better price. After all, as the EU report has found, a better price is not always to be trusted.
- When Should an OTA Get Your Best Rate?
- European Hotels Need to Break from OTA Stranglehold
- Calculating the Real Cost of Third Party Distribution
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