Comment: Online pricing debate will run and run

Comment: Online pricing debate will run and run

Even the largest hotel groups are having to assess their relationships with the powerful OTAs, says Abta chairman Noel Josephides

When I started out in travel, in the very early '70s, life was much easier and simpler.

There were scheduled carriers and charter carriers. If you went on holiday you either went for one or two weeks. If you wanted three weeks you had to pay a flight supplement. If you wanted anything really different then you had to pay through the nose.

Life was much simpler for hoteliers too. The charter flight would arrive, disgorge the clients on a fixed day of the week and collect them one or two weeks later.

Hoteliers gave tour operators a special price and kept some rooms for themselves to sell at what was called 'rack-rates', which were expensive and never discounted.

Hoteliers generally resented tour operators, especially the mass-market companies, because they always felt they were being screwed down on price.

So, when the internet and the no-frills carriers came along, hoteliers could not believe their luck.

They assumed this would free them from the clutches of the tour operator. They could now market their hotels and have clients contact them directly. The clients would simply book a 'no-frills' flight for whatever duration they wanted, to marry up with the rooms.

Now that they were no longer so reliant on tour operators, they also turned to the likes of Expedia and At first this worked really well, in spite of the warnings from many traditional tour operators.

Lately, articles have started to appear in the Mail, Times and Telegraph reflecting the hoteliers' disappointment about how the relationship with the online players is developing.

According to the Times, the Bed and Breakfast Association has called on the Competition and Markets Authority to intervene to prevent from using its now-dominant position to 'bully' small, independent B&Bs and hotels.

Deep Concern

In a rather unexpected development, the online giant has agreed a settlement with the French, Italian and Swedish Authorities, apparently sanctioned by the EU, to prevent hotels from showing lower prices on their own websites than those being featured by!

The article goes on to say that the British Hospitality Association has also said that it is deeply concerned that online travel agents were 'stifling' competition.

The public, of course, has no idea that these online agents are demanding as much as 30% commission from hoteliers, which smaller establishments just cannot afford, or indeed that the online agents now seem to be dictating the price at which hotels can sell their own rooms.

The basic problem is that online travel agents, also partners of sites like TripAdvisor, are so rich and powerful that they always appear above the hotels' own sites in Google rankings. Even the largest hotel groups in the world cannot compete.

The public not only believes that it is getting the best deal but also believes it is accessing the hotels' own sites. Priceline, the American company that owns, is said to spend well over $2 billion per year on advertising on the likes of Google.

In the good old days, tour operators selling packages did of course market holidays where the individual price for the flight, the hotel, the transfer and the hire car was not visible; the few that remain still do so.

Tour operators do not compete with hoteliers - they help them market and allow them the freedom to sell the rooms they keep for themselves on an 'accommodation only' basis. Online travel agents, because they only sell 'accommodation only', compete directly with the hotel.

This will run and run.


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