The German regulator's ruling to reject Booking.com's reformed hotel rate practices as not going far enough could be a landmark decision if it holds up upon appeal and if other European countries follow Germany's lead. Booking.com may have the leverage to inhibit hotel partners from getting carried away on discounting but the ruling is a victory for consumers nonetheless.
Booking.com is in the process of rewriting a whole bunch of hotel contracts in Germany.
That’s because the German competition authority, Bundeskartellamt, ordered the company to ensure that its hotel partners are free to charge lower rates on their own websites than they give to Booking.com and others.
In so doing, the Germany regulator struck down in Germany an earlier reform of the rate parity clauses — established by Booking.com and Expedia across most of Europe — that allowed hotels to offer lower rates to various online travel agencies although not on the hotel websites.
In throwing out in Germany the so-called narrow rate parity clauses that were approved in France, Italy, Sweden, Ireland, the UK, Poland, Greece, Denmark, Hungary, the Netherlands and Switzerland, Germany becomes Booking.com’s harshest critic on competition grounds.
Given Germany’s leadership position in Europe, the ruling, which Booking.com plans to appeal, opens the door to some of the countries that approved the less-stringent provisions to revisit the issue and follow Germany’s lead.
In the interim, when the German ruling goes into effect January 31, Booking.com pledges to remove the narrow most-favored-nation clauses in its contracts with German hotels pending the outcome of the appeal and will immediately waive enforcement of existing penalties.
On the consumer front, Booking.com will maintain its best rate guarantee, meaning it will honor the lower rates on hotel websites when customers book hotels at higher rates on Booking.com, when such incidences occur and travelers bring it to the attention of Booking.com.
“We believe this decision is flawed because it does not recognize the immense benefits that online travel brands like Booking.com bring to both consumers and accommodations,” said Gillian Tans, president of Booking.com. “Companies like ours bring transparency, choice and value to global travelers by aggregating information for hundreds of thousands of properties.
“We do not only save consumers time and money, we serve as a highly cost-efficient marketing channel for most hotels that could not otherwise afford to market their brand to domestic and international consumers. Narrow parity was put in place to ensure that consumers don’t have to check hundreds of hotel websites in order to get the best price, allowing sites like Booking.com and others to achieve advertising efficiencies on behalf of hotels.”
The ruling will not just impact the Priceline Group’s Booking.com and its other brands. The German regulator is studying Expedia’s and other booking sites’ practices, as well.
Charlie Osmond, the CEO of London-based Triptease, which finds itself in a legal dispute with Booking.com, said the ruling in Germany “is a great win for consumers as hotels now have the freedom to offer the best prices direct. Wunderbar. The Bundeskartellamt has made it clear that Booking.com’s contracts were anti-competitive, even the compromises that Booking put forward demonstrated no apparent benefit to the consumer.”
Osmond argues that consumers are realizing that hotels prefer direct bookings. “We’re delighted that this ruling makes it possible for German hotels to incentivise direct bookings with lower prices. We believe that Booking.com wants to restrict competition in the market. They’ve tried to prevent hotels from offering better deals direct and attempted to restrict price transparency.”
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Photo Credit: Hotels in Germany are now free to offer lower rates on their own websites than they give to online travel agencies. Pictured is the Midtown Grill at the Berlin Marriott. Berlin Marriott
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