Following the recent bans of rate parity in Austria and France, hotel industry analysts said the European Union and commercial courts are entering the rate-parity fray against OTAs, political uneasiness and traditional hoteliers.
REPORT FROM EUROPE—The battle to abolish rate parity across online travel agencies and the hotel industry is heating up across Europe.
In July 2015, France unveiled its rate-parity ban, which allowed French hoteliers to offer lower prices for rooms across all distribution channels than the prices advertised by OTAs. Emmanuel Macron—France’s current president and then French minister of economy, industry and digital affairs—designed the law to increase growth, competition and equality of economic opportunities.
Mostly across Europe, the national competition authorities of individual countries have taken up the rate-parity fight. But sources said the European Union, which represents 27 countries, is taking a lot more interest in the issue.
Dan Roskis, a Paris-based partner at law firm Eversheds Sutherland, said the French national competition authority closed its investigation into the practices of Booking.com after the company accepted to amend its own policy. But France then decided to ban rate parity completely.
Other national competition authorities, such as in Italy and Sweden, have negotiated commitments with Booking.com that define “most-favored nation” rate-parity clauses.
Italy could be the next, Roskis said, with the general momentum resulting in rate parity being questioned by the European Union and throughout Europe.
“The main debate is if settlements are reached only at the national level, are they consistent with one another?” Roskis said. “The French, Swedish and Italian national competition authorities’ positions were consistent with one another, but in Germany, where the company being investigated was HRS, the (December 2013) decision was not. If the (German) Bundeskartellamt had investigated an online travel agency with significant market shares in other European countries, then it might have adopted the same framework.”
Before the recent round of court actions, European hoteliers could put a lower price on an OTA website, while not allowing other OTAs to do likewise and not having a cheaper rate on their own websites.
Following the Bundeskartellamt decision in Germany, hotels there then were able to offer lower prices than those displayed on Booking.com on another OTA website but still not on their own sites.
Roskis said a key player in leveling the rate-parity playing field is commercial courts, which are now hearing legal cases and have greater power than national competition authorities. He added the French competition authority’s decision was made moot when France fully banned rate parity.
“Courts are not necessarily bound by competition authorities, especially where it comes to settlements,” Roskis said.
He added commercial courts could have a bigger impact on rate parity going forward and “might decide on a solution that goes further.”
“That is what happened in France, where the Paris commercial courts said rate-parity clauses show a ‘significant imbalance’ between the rights and obligations of the parties,” Roskis said. “Breaches would be a more far-reaching civil offense as part of commercial law, not competition law.”
Future battle lines might be within the EU, Roskis said, where the favored idea is to give consumers more choice and provide individual nations more consistency across their legislation.
“We hope to see more cooperation between the European Commission and national competition authorities,” he said. “The EU, however, always has been aware of what is happening at the level of the national competition authorities. This is for sure, that the European Commission is now on board and aligned, and there is a quite significant number of precedents now, too.”
Laurent Bougras, director of Réservation En Direct, better known by its booking platform FairBooking—which was set up by hotel owners in 2013 as an alternative to OTAs—said hoteliers “naturally benefit from rate parity.”
Bougras said he is not sure Macron is still focused on the issue now that he is France’s president. He added he is convinced the major OTAs will continue to put pressure on hoteliers, especially those at independent hotels and small chains.
“Macron was not ready to sign this ban, because Booking.com and its lobby told him it would decrease the number of tourists in France,” Bougras said.
Roskis said Macron has always been very sensitive to and aware of matters of competition, but will not be as deeply involved now.
“For him it may not be a day-to-day priority, but the French law will most likely be implemented,” Roskis said. “The full prohibition of all rate-parity policies, wide and narrow, is welcomed by hotels. … French union UMIH still publicly claims the market power of Booking.com remains very strong, especially in relation to small individual hotels.”
Following the attacks in Paris in November 2015 and in Nice, France, in July 2016, Bougras said OTAs put pressure on hoteliers to integrate booking platforms from OTAs to ensure more prominent rankings on search-engine results.
Bougras added are many remaining pieces for hoteliers to keep their eyes on. Many OTA room rates might likely still undercut those of hotels, in what would be a flagrant disregard of the law in countries banning and reeling in OTA sites.
Bougras said FairBooking has had to continue its denouncements of such contract pressure in Europe and the contracts themselves coming from the OTAs.
“We have to educate hoteliers, and consumers that they now have the power,” he said. “We have to make sure hoteliers see the contracts that they can sign, not the ones they are told they have to sign.”
Bougras said lawyers and politicians across Europe are constantly being lobbied by OTA companies. Booking.com’s share of the European market will rise from 50% to approximately 80% in the next three years, he said, but the power for significant rate-parity change is in the hands of travelers.
“Europe is so liberal, nothing will change,” he said. “It is ultimately consumers that will have to change.”
And while France led the rate-parity movement in Europe, it might retreat to the sidelines, Bougras said.
“Macron is very sensitive to lobbyists from tourism,” he said. “He wants France to be the first tourism destination within two years, and if they come via TripAdvisor, Airbnb, I think for him that will just be numbers, business growth.”
Bougras—a former revenue and e-commerce manager at Astotel Hotel Group, which has 16 properties all in Paris—said revenue managers need to become profit managers, not revenue ones.
“Twenty years ago, it was all about direct channels, now it’s all distribution, and all (revenue managers) know is distribution,” he said. “There is a massive distinction between distribution management, which is easy, and profit management, which needs science.”
Detlev Remy, an associate professor at SIT Singapore and former program manager and lecturer for marketing and revenue management at Les Roches International School of Hotel Management, said hoteliers still have much work to do, but the general atmosphere of European politics is not helping the situation.
“The hotel industry has no strong lobby and, secondly, the EU does not want to impose more regulations, as there is strong resistance from the member states against more regulations from Brussels,” Remy said.
Remy said it is difficult to guess what will happen next.
“Officially, the hotel managers say, ‘Get rid of rate parity,’ but behind closed doors they feel the benefits,” he said.
In the United Kingdom, the Competition and Markets Authority closed its investigation into OTAs in September 2015, seemingly satisfied with the changes in practices and policies implemented by OTAs, according to sources, while the EU is also conducting investigations into other areas of alleged online pricing disparities.
On 5 July, the CMA released new guidance stating that “hotels can choose to offer a lower price on other OTAs than they offer on Expedia and/or Booking.com … (and) hotels can also decide to offer other OTAs better availability or conditions (such as room extras or ‘breakfast included’) than on Expedia and/or Booking.com.”
Claire Stockford, partner at law firm Shepherd & Wedderburn said the “EU is conducting an ongoing investigation into hotel pricing … looking into agreements between hotels and tour operators and how they discriminate on the basis of customer location, rather than OTAs specifically.”
Another interesting development, according to Stockford, is the EU’s decision to fine Google €2.4 billion ($2.8 billion) for allegedly breaching EU antitrust rules.
“The focus of this decision is on Google Shopping, which is about products rather than services such as travel, but it is another example of the keen interest that the (European) Commission is taking in e-commerce at the moment,” Stockford said.