Accommodation providers brace themselves

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Accommodation hotspot: Central Queenstown

A Queenstown hotelier says the industry’s bracing itself for fee hikes after a ground-breaking Commerce Commission decision involving two global booking superpowers.

Villa del Lago owner Nik Kiddle says the commission’s agreement with online travel agencies Booking.com and Expedia.com, following an anti-competition investigation, means accommodation providers can’t advertise their best prices on their own websites.

Almost 30 “deeply concerned” accommodation providers in Queenstown met a Booking.com representative yesterday.

A request was made for individually-tailored contracts for those who wanted to offer their best rates online.

“But they said ‘no’,” Kiddle says.

“Basically, we have to do it their way, or we’re going to find ourselves dropping out of the online trade that we’re able to conduct.”

Kiddle says there are fears Booking.com and Expedia would increase their commissions from 15 per cent to 25 per cent, which has happened in other jurisdictions.

“That will happen here. They’re taking 15 per cent off 80 per cent of the accommodation business in New Zealand.

“If they increase their market dominance through this kind of collusion on price-fixing – which is what they’re doing, which I consider to be totally anti-competitive and it entrenches the power of this duopoly which is now operating as a cartel – if they’re able to do this and squash us out of that last remaining 20 per cent then … they’re not going to stop at a 15 per cent commission margin, they’re going to go up to 25 per cent.

“Everybody’s bracing themselves for that.”

Providers were told yesterday they would not, at this stage, face legal action if they advertised lower prices on their websites.

They would, however, no longer have their listings optimised by Booking.com, meaning those operators would find their properties buried in search results.

Kiddle says the providers’ contracts with the agencies are “open-ended” and while a mass boycott has been discussed, it would “cut our nose off to spite our face”.

“We would disappear from 60 per cent of the global effort in marketing New Zealand tourism, which is a big loss for us and for the tourist business in this country generally.”

The commission announced late last month it had reached an agreement with Booking.com and Expedia.com, having investigated whether parity clauses in the websites’ contracts with accommodation providers in New Zealand were “anti-competitive”.

Following the agreement, the agencies amended their contracts in line with Australia, meaning accommodation providers could offer lower rates or tailor special deals for “walk-ins, telephone bookings or loyalty members that are separate to the prices they advertise online”.

However, they could not offer rooms on their own websites at prices below those offered through either Expedia.com or Booking.com.

Kiddle says walk-ins and telephone bookings accounted for only about 2 per cent of the total business, and the two online travel companies took 80 per cent of all bookings through their respective websites.

Loyalty programmes were a potential solution for larger companies.

But in the case of small to medium-sized businesses, he says many travellers would stay with them only once and any loyalty discount would be hidden behind firewalls and therefore not found on search engines.

Kiddle says he understands the value brought to the business by the two websites, their affiliates and subsidiaries.

But he questions why they were “so afraid of competing in … the 20 per cent that’s left of the market?”

“Why can’t these multinationals cope with that?”

Kiddle says the group is lobbying to have the decision reviewed and doing its best to bring publicity to the issue so people understand “they’re not getting the most competitive price” by booking online.

“In fact, there are much better deals that are available, but we’re not allowed to advertise, so we want the public to know that.

“Ring us, email us or somehow send some smoke signals, but we’re not allowed to put it on the internet.”

The Otago Daily Times asked Commerce Minister Paul Goldsmith if he had asked for a briefing on the decision or if any other action was planned.

Goldsmith says if parties have concerns, they should contact the commission directly.

“The Commerce Commission is an independent regulator,” he says. “It would not be helpful to the process if I, as minister, commented on the outcome of each investigation.”

Otago Daily Times