Business

Hotel rates could fall after competition inquiry

  • 9 August 2013
  • From the section Business
hotel front desk
Image caption Hotel room rates could be cheaper if the deal offered by Intercontinental and websites is accepted

Cheaper hotel rooms could be offered by booking websites after an investigation by the Office of Fair Trading (OFT) into agreements between hotels and online travel agents.

The OFT looked at allegations that Expedia and Booking.com had a pact with Intercontinental Hotels not to undercut its rates.

Intercontinental Hotels says it will now allow booking websites more freedom to discount prices.

The OFT is still investigating.

The commitment by the three companies has not yet been accepted. If it is, says the OFT, it should mean cheaper room rates and the investigation will close.

Intercontinental, which denies any anti-competitive behaviour, is the world's biggest hotel chain with brands including Holiday Inn and Crowne Plaza.

Expedia said it welcomed the commitment "which will enable the OFT to close its investigation without taking any action".

Legal action

The OFT said the previous agreement between the chain and the two booking sites, which are the biggest in the world, had effectively set a bottom level for discounts.

Within the travel business the practice of keeping prices at a pre-set level is talked about openly and is called "rate parity".

The effect is that a customer might look at several websites and see the similar prices advertised.

The case is seen as a test for other hotel chains that allow their rooms to be sold on such sites.

The complaint originally came from the booking website Skoosh.com, which said that a number of hotel companies were stopping it from selling room-only deals at discount prices.

It said last year that it had received calls and emails from hotels threatening legal action over its discounts.

Consultation

The three parties involved reached a compromise which allows websites to offer lower rates than the hotel company itself, but only to certain users - for those who have signed up to the site or those who have made a previous booking with the agent.

This means the hotel chains can keep some control over the price offered to first-time customers.

It also means that, if the deal is accepted by the OFT and other industry parties, Intercontinental Hotels will not face an extended investigation into the practice and will avoid any fine that might have resulted.

The value of UK hotel bookings through agents added up to £850m in 2010.

The OFT's senior director Ann Pope said: "The OFT is consulting on whether these commitments offer an immediate and effective means of injecting some meaningful price competition into the online offering of room only hotel accommodation bookings where, in our provisional view, none may exist."

The OFT is asking for interested parties to continue putting their views until the close of the consultation period on 13 September.

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