European and national competition regulator interest in hotel prices and price parity clauses continues. On 5 July 2017, the UK Competition and Markets Authority (CMA) published a one page memo, intended to educate hotels on how they could agree to offer lower prices between different online travel agents.
Before the regulatory intervention of the last few years, hotels would often have to offer their best price contractually to one of the larger or dominant online travel agents. This in turn would lock that price and prevent the hotel offering lower prices to other agents. This resulted in a lack of price competition in the market. These types of clauses were known as ‘wide’ price parity clauses. As a result of regulatory intervention, the largest online travel agents entered into commitments in summer 2015 not to enforce wide price parity clauses. Instead those online travel agents who were in a position of market power have only been able to use ‘narrow’ price parity clauses. In these narrow clauses, whilst the hotel cannot offer a lower price itself to that which it provides the online travel agent, it can offer a lower price to other online travel agents.
The memorandum from the CMA is a reminder to hotels that because of legal intervention from the regulators, larger online travel agents who are likely to be in a position of market power, can no longer insist on these wide price parity clauses and can no longer demand them for hotels to feature on their websites.
Previously back in April this year, the European Commission released its report which was made in conjunction with 10 national competition authorities on the issue. Their goal was to monitor the effect of their interventions over price parity clauses throughout Europe to see whether prices had dropped and whether new entrants or smaller websites now had a greater market share. The report found that whilst conditions were generally better, many hotels were not aware they could offer lower prices elsewhere than to the larger websites, likely as a result of the now historical price parity commitments. Hence the link between this finding and the CMA’s recent memo can clearly be drawn.
The report concludes on the sobering note that price competition has not flourished in the way expected and that the Commission and the Members State regulators would continue to work with hotels and online travel agents to create a competitive market landscape. However, the Commission hopes that the short time between the surveys and research it carried out, and the ban on the ‘wide’ clauses for the larger websites, means it is just a matter of time before a more beneficial effect is seen in the market.