Hotel pricing strategy: 6 key facts we learned about Australia’s rate parity ruling

  Posted in Distribution

The Australian Competition and Consumer Commission (ACCC) has reported that Expedia and Booking.com have agreed to relax the rules around hotel pricing by amending their contracts with Australian accommodation providers.

But with so many news headlines around the topic, understanding the key facts on the new ruling for Australia’s hotel and accommodation market, and what it means for rate parity in the land Down Under, can be tricky.

Here are 6 key facts we learned about the ruling:

1. The investigation was led by the Australian Competition and Consumer Commission (the ACCC) and had a niche purpose.

The purpose of the investigation was to assess parity clauses between accommodation providers and online travel agents, so the Commission could better understand the impact of volume and price parity clauses used by online travel agents, and how price parity clauses operate with last room availability clauses.

Parity clauses tend to require that accommodation providers offer the best price and availability to online travel sites. In exchange, accommodation providers benefit from the broad reach that online travel sites spend so many marketing dollars on.

The ACCC wanted to assess whether these arrangements were raising any competition issues.

2. Over 500 responses were received from Australia’s hotel and travel industry.

The ACCC asked Australian accommodation providers for specific information about their dealings with online travel sites. They did this through a range of targeted market enquiries, including an online questionnaire.

After reviewing over 500 responses and speaking with industry participants, the ACCC felt they had sufficient information to understand the key issues around price parity and room availability clauses by online travel sites.

3. An agreement was reached with specific conditions.

The ACCC came to an agreement with all the largest online travel sites used in Australia for Australian accommodation, which is intended to remove barriers to price competition between major online travel sites for hotel bookings. The association says this will allow competitors and consumers to negotiate better deals directly with the accommodation provider, without breaching their contracts.

The agreements extend to the largest online travel sites used in Australia for Australian accommodation including Booking.com, Wotif.com, Hotels.com, and Expedia.com.

4. The Australian Competition and Consumer Commission believes its decision is good news for hoteliers.

Hoteliers can now offer better deals to phone bookings, walk-ins, and guest loyalty groups.

“Australian accommodation providers will now be able to tailor their offers to better meet the needs of their customers and their own businesses requirements. They will now be able to offer lower rates through telephone bookings and walk-ins, offer special rates and deals to customer loyalty groups, in addition to offering deals via Expedia and Booking.com,” says ACCC chairman Rod Sims.

Additionally, online travel agents will be able to compete with each other on price.

“The ACCC is pleased Booking.com and Expedia have agreed to amend the parity clauses in their contracts, because it will increase the incentive for them to compete with each other and allow consumers to shop around to get the best deal,” Sims adds.

5. Expedia and Booking.com have already amended contracts with Australian accommodation providers.

As of 1 September 2016, Expedia (which includes Wotif.com) and Booking.com have proactively removed contractual requirements for Australian accommodation providers to:

  • offer room rates that are equal to or lower than those offered on any other online travel agent
  • offer room rates that are equal to or lower than those offered on an accommodation provider’s offline channels
  • make all remaining room inventory available
  • offer the same number and same type of rooms offered to any other online travel agent.

6. Accommodation associations in Australia feel the ACCC has overlooked the number one way guests book hotels.

While cautiously welcoming the opportunity to contribute to the investigation, both the Accommodation Association of Australia and Tourism Accommodation Australia, believe the decision does not go far enough.

Richard Munro from the Accommodation Association of Australia says: “The ACCC has seemingly overlooked the fact the internet is easily the number-one way consumers book accommodation.”
Tourism Accommodation Australia CEO, Carol Giuseppi, adds that the agreement “…doesn’t go far enough to protect hotels and consumers.”

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