back to article Online hotel bookings to be probed for price-fixing

The Office of Fair Trading (OFT) is investigating whether the sale of hotel room bookings on the internet breaches competition law, looking into whether an allegedly long-established pricing mechanism is anti-competitive. An online reseller of hotel rooms complained to the OFT about a practice it said was called 'rate parity', …

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Anonymous Coward

Minor issue

This isn't something that is going to bother me, nor is it very significant. If you simply phone the hotel direct then provided you know what you're doing you WILL get a lower room rate than through the webscraping ops.

What's a lot more significant is the morning "ring around" that virtually all hotels do.

In short you phone every hotel in the area and ask what their occupancy levels for that evening are. You then set your minimum room rate accordingly.

I've never heard of any hotel/chain that doesn't actively participate in this activity. Its been standard practice in the UK (and USA) for longer than I've been alive.

As an aside I can understand why hotels are so sensitive about online rates. I've seen the way arseholes like laterooms.com operate - they NEVER confirm that the room is available, nor do they confirm the rates WITH THE HOTEL. All the hotel gets is a fax (yes really) which has a number on it that nobody ever answers, so the upshot is you end up with guests turning up when you have no rooms and/or the room rate has increased due to high occupancy.

I've yet to find a webscraping operation that will give you a lower rate than the simple telephone and frankly I'd rather pay the hotel direct rather than some middleman who doesn't give a shit about you, the hotel or anything other than their commission. People that use them are idiots.

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Direct to hotel

I typically email the hotels or their head office directly. What is interesting is how many crappy sites get themselves higher in search results than the hotels' own websites. Many pretend that they are the hotel staff, offering their own contact details in place of those of the hotels.

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Happy

Shock booking/buying on the hintertubs

Isn't that cheap anymore.

In other news people cheat at online Poker.

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Stop

What happens...

"What happens when there is no price competition on hotels?"

Then companies have to compete on service and the customer wins.

No, can't have that happen, can we?

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It's never bothered me.

I've known about this practise for a long time. Technically it is not price fixing. The hotels set the retail price and all outlets have to sell at the same price, but some may have different commission levels. It's no different to selling books. Obviously many hotel bookings are bundled into a packages and in this case you can get the rooms cheaper but only as part of a package. When I book a hotel, I know that the price is going to be the same everywhere, so I don't waste time looking at different prices, I often book directly with the hotel and sometime you get a better service because the hotel makes more profit out of your booking!

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Megaphone

That dirty little secret

Very true. I have worked in IT for the hospitality industry for a number of years and "rate parity" has been the holy grail of hoteliers since the explosion of internet booking sites. They just repeat it as some kind of mantra normally followed by "control distribution channels". It definitively stinks of price fixing. Time to end it.

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Pint

Some misunderstanding here re Laterooms?

"pay the hotel direct" is exactly what happens when you book with Laterooms. At least, it has been every time I've used them, and it has always worked out fine for me and the hotelier. Expedia and friends are of course a different matter. [No I don't know how Laterooms make money, but I would be interested if anyone else has a better idea than Rizla]

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Anonymous Coward

Well this is from the hotel perspective..

We're all reading the Register so we all know how things like web booking SHOULD work. We're also all hopefully not naive enough to believe that all the various hotel management software packages work seamlessly with the latest webscraper booking site?

Laterooms.com from my experience are appallingly bad - oh and no you haven't "paid the hotel direct". Your credit card bill will clearly show who you paid and it isn't the hotel in most cases. Cardholder not present transactions (like no shows) are a nightmare in the industry incidentally.

The problem I have with webscrapers/late booking sites (from hotel management point of view) is that its impossible to contact the sods after 6pm - which (shurely shome shurprise) is when they're punting rooms left right and centre.

Use the webscrapers if you want but unless local area occupancy is high then you'll get a better rate direct. If local occupancy is very high then expect your "late" online booking to get ignored.

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Anonymous Coward

Nothing new here...

Their are many suppliers who remove thier products from retailers who sell below the rrp, its in a lot of supply contracts.

Question is where is the colusion? price fixing requires competitors to agree prices not resellers and suppliers. If this were a case of [hotel and hotel] or [reseller and reseller] there may be a case but at present I think not.

They really need to ban supermarkets from using 'price watch' tactics, I dont see that as helpful. I see it as price matching, or price fixing. In reality they could sell it cheaper, but because the competition does not they do not. hence the price is fixed (or pegged to the competition).

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Silver badge
Paris Hilton

Not really 'price fixing'...

The argument about price-fixing could be used in any business that sells a commodity product.

An example... you have a group of cattle ranchers who are bringing their herd to auction. Would you call it price fixing if the ranchers decide not to sell their herds because the market prices at auction are too low and they'd be selling their cattle at a loss?

Looking at the hotel industry...

If they are being forced to sell a limited number of rooms at a loss, so that they can get more visibility, it means that they will have to sell more rooms at a higher price than their minimum price so that they can remain profitable. Hotels publish a set Rack Rate which is the 'list price' of the room even though they will sell rooms for less. Also note that they will increase the price of the rooms based on availability within the region. So if there's a large convention in town and all of the hotels are going to be booked, then they will sell the rooms at a rate closer to the published rack rate. Now is this price fixing or collusion if all of the hotels do this independently because of market pressure? (Supply and Demand.)

There's nothing wrong here unless Hilton, Hyatt, etc ... all go in to a back room and agree that they won't offer a room to a reseller for x% points off rack.

Its also not illegal if Hilton says that they aren't going to offer any rooms to a reseller for less than %40 of rack rate, and then other hotels do the same. We saw this in the airline industry with baggage fees....

Paris because well she's a Hilton...

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Not online that's the problems

My mum recently had a hotel ring her up to cancel my mum and dad's holiday booking at the last minute because they'd decided to refurbish instead. But never fear! Here, have a voucher for a 30% discount next time you book with us...

So my mum checks online 3 months later (having rearranged their holiday plans) and see's it's 50 quid a night. Excellent she thinks, I can have 3 nights for 100 quid. So because she can't use the voucher online as it came direct from the hotel, she rings up and tries to book. "Ok, for three nights that's...159 quid please" says the woman.. My mum explained that she had a voucher and the hotelier told her that the price included the 30% discount. When my mum queried how that was mathematically possible the only response was that "They do deals online sometimes..."

Mum told them to get stuffed, i'm never booking with you again - you're incompetent and tried to forget about it, but they're now being hounded by head office trying to get a statement for "An internal investigation..."

Spooky.

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Good

Always a positive for the consumer.

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Stop

This is not price fixing

Price fixing is where major players accross an industry get together and agree prices for their products.

This is simply the hotel owners wanting to sell their rooms at the price they want to, which can be subject to change when and where they want. It's not like the hotel booking sites buy all the hotel rooms up and then sell them at a profit. They are just acting as an agent who takes their cut.

The only reason small hotel owners have to use room booking sites is because they wouldn't get the same exposure on the internet if they did it themselves and the reason for that is because the room booking sites are so numerous and huge they blot everything else out. If they want to look into anti competition, they could start there.

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Anonymous Coward

Brief guide to buying a room

Tiny bit off-topic but meh.

Sounds a bit strange but the industry calls it selling rooms so remember you are buying a ROOM for a defined period.

Strange emphasis you may think? Well internally the industry is totally focused on occupancy rate. Selling guests other products is secondary - obviously as you can't sell people stuff when they're elsewhere. Every GM in every chain is verging on paranoiac regarding occupancy rates. To anyone in the industry - yes I know the other metrics but if your occupancy rates are consistently below competing hotels then you're toast anyway.

So if you can't move the hotel on room rate alone then consider the bar/restaurant to get a decent deal. Hotels will typically make a 300% gross margin on food/drink and in most cases the main revenue cost driver is labour - ie you need bar/restaurant staff anyway so you can do deals there easily. Apart from anything else hotels love doing deals that keep customers on-site - both for revenue reasons and for CRM reasons.

Even budget hotels will do deals - and by "budget" I mean hotels that routinely sell at £30-40.

Use webscraping rates as a bargaining tool - in most cases reception staff will have no clue what the hotel is charging online, head receptionist will though. He/she is the one who will know.

There's really no reason (other than events) to pay the asking price for hotel rooms in the UK. If the staff can't move on price then go for a meal bundled in (if you know chain/hotel). Other possibilities are free movies on demand/internet.

A lot of the time you'll find that due to beancounter metric nonsense the hotel will throw in meals rather than reduce rates. Abuse it ;)

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Stop

Some mis-information in here

Sites such as laterooms.com, booking.com or lastminute.com all work directly with the hotels listed on their sites, the hotels are provided with tools to update and maintain their rates directly and once a booking is made the details are passed to the hotel concerned. I don't know about all of them but laterooms definitely don't take any money from the booker, the details are securely passed on to the hotel who take payment, if you see a different name on you credit card bill it's more than likely that the hotels registered name and trading name are different.

I would be interested to hear from John Naismith who claims to be a hotelier, who does he think takes the money when a booking comes through from Laterooms 'cos if he's not taking the money either I'm getting me one of those free rooms at his hotel. And just to let you know John, many of these sites offer 24/7 call centers for both bookers and hoteliers.

The idea that these large sites use some kind of screen scraping to take rates directly from hoteliers sites without their knowledge is preposterous

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Grenade

LateRooms, Booking com

Never read so much rubbish in one El Reg thread for a long while. Being retired, my wife and I use, and have used, Booking com and to lesser extent, LateRooms, for several years, for hotel bookings throughout the UK and Europe.

On not one single occasion out of over 100 in the past five years has our credit card been charged to Booking com or LateRooms.

The "hoteliers" posting on here are anything but. So just what are they hoping to gain from such fictions????

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Anonymous Coward

"John Naismith ... claims to be a hotelier"

Does he? I don't see that particular claim anywhere ? However, let's put that to one side.

He does however remind me of a John Naismith whose IT-related contributions I have read elsewhere, a gentleman with quite strongly held opinions. Maybe his knowledge of this field comes from the IT side of things rather than the hotel side of things?

As others have already pointed out, he's definitely wrong about Laterooms payment mechanism here, and anyone who doubts that can refer to the Laterooms website, where on the front page it says: "And we'll never, ever charge you a booking fee, whether you're going for business, pleasure, or just a decent night's sleep. Just book online or by phone, secure the booking with a credit card and pay the hotel on departure."

PAY THE HOTEL ON DEPARTURE, it says.

John's also wrong (in my experience over several years) about the practicality of contacting Laterooms in an evening; they've never let me down as a customer, either before or after the TUI takeover.

I also know a little about the hotelier's side of Laterooms, as an acquaintance over some years of a small independent hotelier who used to rely (quite happily) on laterooms.

I'm still interested in knowing how Laterooms actually make money.

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Anonymous Coward

Where the anti-competiveness really lies.

As a hotelier I can confirm that you should always be able to get the best rates and up to date availability by calling the hotel directly.

If we need to take £50 for a room as a minimum, then on Laterooms for example, we would need to advertise at £59 to cover their commission charges. Whereas, another online agency may charge less commission and we could for example advertise on their website for £55.

However, Laterooms and others are insisting that they get the cheapest rate available anywhere on the web, a practise that is surely an abuse of their position.

The agency that is adverising at £55 is working on 9% commission and Laterooms or one of the other big agencies is working on 15%.

By insisting that they get the cheapest rate and given the hotelier needs £50, it is forcing the price to be £59 and not allowing the smaller agency (Skoosh perhaps?) to be competitive and advertise at a lower rate.

That is anti-competitve! It is an abuse of power by the big guys to stop the little guys competing.

Of course if you phone directly to the hotel the price you should be looking for is £50. Now armed with that knowledge, just pick up the phone.

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Dorian Harris and a desperate attempt . . .

Stunned to read Mr. Harris' statement that price parity represents the equivalent to price fixing. As CEO and owner of an online travel site he should know better, and probably does. For me it sounds like a very smart PR effort desperately trying to convince the media and his likely declining customer base that Skoosh provides the lowest rates; so low that hoteliers call him begging to raise his rates! Nice try.

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