World’s Largest Hotel Chain Gives Pricing Power Back to Booking Sites
General view of the former 18th century Hotel-Dieu hospital transformed in a new five star luxury InterContinental Hotel in Marseille, April 25, 2013. Jean-Paul Pelissier / Reuters
This is potentially a GAME-CHANGER. A decade ago hotels finally took back control over pricing after Hotels.com and Expedia were under-cutting the rates on hotels’ own websites. Under pressure from regulators, InterContinental Hotels is starting to hand that power back to the online travel agencies.
Britain’s InterContinental Hotels Group will give online travel agents Expedia.com and Priceline.Com Inc’s Booking.com more leeway to cut room rates in a bid to assuage watchdog charges it was limiting competition.
The Office of Fair Trade last year accused IHG, whose portfolio includes Holiday Inn and Crowne Plaza, of concluding agreements that effectively set a bottom for prices by getting the websites to agree not to use cuts in their own commission to reduce the prices they offered.
The case is viewed as a test case for the sector as a whole and was in response to a complaint from another website, Skoosh.com, which said that a number of hotel chains were preventing it from offering such discounted prices on room-only accommodation.
Industry watchers say InterContinental, like other hotel groups, is trying to keep some control of the market prices of its rooms so that its own web sales are not sharply undercut by agencies like Booking.com, Expedia or Skoosh.
But the OFT concluded last year after an investigation that such contracts between hoteliers and agents could be limiting consumers’ ability to find better deals.
The compromise proposed on Friday effectively allows the agencies again to choose to undercut the hotel group, but only for certain types of customers – those on loyalty schemes or who have made at least one previous booking with the agent.
That will allow InterContinental, the world’s largest hotel group, to retain more influence at least over the headline price offered to first time consumers.
The OFT said in its report last month that the practice it was concerned by was widespread in an industry where UK hotel bookings through online agents totaled about 849 million pounds ($1.3 billion) in 2010.
IHG, which has said it believed its previous arrangements did not breach competition laws, on Friday said it had worked closely with the OFT to agree the new commitments, which are designed to bring an end to the investigation without finding it infringed any competition rules or the imposition of any fine.
OFT senior director Ann Pope said: “The OFT is consulting on whether these commitments offer an immediate and effective means of injecting some meaningful price competition into the online offering of room only hotel accommodation bookings where, in our provisional view, none may exist.”
The agreement is open to consultation until September 13.
(The story is refiled to correct timing of OFT charge in paras 2, 5)
(Reporting by Paul Sandle; editing by Patrick Graham and Keiron Henderson)