Booking a holiday has gone the way of Christmas shopping. Spenders who used to browse high streets in search of a bargain now scarcely leave their sofa – pressing fingers to keypads rather than noses to shop windows. While nobody can begrudge anyone plumping for convenience – after all, with 70% of holiday bookings coming from the likes of Trivago, Expedia, and Booking.com, it’s something we’re all guilty of – the question to ask is whether or not, amid soaring popularity and traffic numbers, these online travel agents are playing fair.
To help answer this, and in light of its year-long market study of online comparison tools, the Competition & Markets Authority (CMA) has launched an investigation into hotel booking sites voicing concerns over their clarity, accuracy and presentation of information.
The consumer watchdog feels that online agents may be stopping holidaymakers finding the deal that is genuinely best for them and potentially breaching consumer law in the process.
It’s a step that’s sure to have broad repercussions on pub inns that list available rooms on such sites despite its primary aim being to rectify issues in consumer experience.
While the likes of Trivago, TripAdvisor and Booking.com have agreed to work with the CMA, none were able to expand upon comments outlining their intention to co-operate with the investigation when asked.
Deemed long overdue by the Association of Independent Tour Operators (AITO), the investigation, which is at a very early, information-gathering, stage will look into claims of practices including the ranking of hotels, high-pressure sales tactics such as giving false impressions of room availability, discount claims and hidden charges.
Upon launching the investigation, Andrea Coscelli, CMA chief executive, expressed concerns that booking sites were not presenting information clearly and thus may be hindering holidaymakers in making the “right choice” when booking hotels.
Responding to news of the investigation, chief executive of the British Hospitality Association (BHA) Ufi Ibrahim says: “Many of our members have been concerned about the vast power of online booking agencies, high rates of commission, use of misleading information, pressure selling and a lack of transparency. In the process, guests are paying more than they should for rooms.”
Pub sector body, the British Beer & Pub Association, says it plans to discuss the issue with its members and “will consider whether to submit a response in due course.”
Gripe over commission
While hoteliers across the pub industry have already applauded the CMA action, Simon Heaton of the Shibden Mill Inn – overall winner in the Great British Pub Awards 2015 and Best Freehouse category winner – describes his experience with Booking.com as “seamless”. But he told The Morning Advertiser that he welcomed the investigation and that his “main gripe” is around the commission such sites take. He also expresses concerns over exactly how level the digital landscape is.
Heaton feels that pubs, which typically have fewer rooms – the Shibden Mill Inn has 11 in total – are at the mercy of the “big boys” because bigger accommodation chains can “screw booking sites down on commission and hold a monopoly”, suggesting that sites offer consumers hotel choices based on revenue rather than ratings.
Ibrahim also expresses concerns about the stranglehold large companies have on the accommodation industry and the seemingly unfair competition that smaller inn and pub owners, such as Heaton, are forced to navigate.
Ibrahim says: “The online booking industry is dominated by only two companies that own 80% of the European market. Expedia owns brands including hotels.com, Trivago and Travelocity, while Priceline Group owns companies such as Booking.com, Kayak and Agoda. Another company – HRS – owns a further 12%. This means it is difficult for others to break into the market.”
The CMA investigation offers pub owners who use the likes of TripAdvisor, Trivago, and Booking.com a chance to voice their concerns. Many have already made the most of this opportunity, with the commission charged by these sites for a listing becoming a recurring theme.
Paul Nunny, director of Cask Marque – which heads up the pub room booking website Stay in a Pub – says: “Online travel agents are a marketing tool, but there is a significant cost and these costs are rising.
“Recent research showed that 55% of pubs pay a commission of between 11% and 15% and a more worrying 35% pay 16% to 20%. With an average room rate being £80, the OTA (online travel agent) could take £16 plus VAT on a booking.”
Similar concerns are raised by Mark Simpson founder of Boost Hospitality who believes the CMA’s investigation is “massive”, expressing concerns not only over commission but over how it influences online visibility.
He says: “When you sign up to these sites, the basic commission rate is 15%, but if you’re in a very crowded area, Scarborough for instance has over 400 businesses, they give you the ability to increase your ranking by paying them more commission.
“So the more commission you pay them, the higher the ranking.”
After four years of managing his family’s hotel in Scarborough, Simpson founded Boost Hospitality with the aim of helping independent hospitality businesses in his area – such as pubs, guest houses and hotels – increase direct bookings and avoid commission where possible.
“The Scarborough branch of the British Hospitality Association used to meet once a month and I noticed that the topic of these meetings would always come back to online travel agents and how they were taking up a lot of income.”
Simpson’s aim is to draw upon his experience in sales and marketing to help smaller businesses better understand the world of digital marketing, social media, and Google AdWords.
“For the 30 to 40 age group, social media and computers are second nature. But a huge number of the people who run guest houses are over 45, and it’s like a whole new world.
“I started up a Facebook page, a community for Boost Hospitality and discovered that the angst around online booking sites extended far beyond Scarborough and Whitby.
“They say a human’s attention span is less than a goldfish. These booking sites take advantage of that using really clever marketing techniques. The website and the user interface are perfect.” Via advertising budgets that dwarf those of smaller businesses, booking sites can top Google searches for hotels. “We all know people will just click on the first thing they see,” he adds.
The desired outcome
Despite the soaring costs, however, it’s widely acknowledged that such sites are essential for pub owners looking to make the most of their rooms. Reforming rather than removing booking sites appears to be the desired outcome.
Nunny says booking sites “are necessary if pubs want to gain access to a wider audience,” with Simpson acknowledging that owners who don’t use booking sites risk “leaving money on the table”.
While the best-case scenarios outlined by pub owners range from flat rates of commission to increasing the access that pub owners have to account management teams at the likes of Booking.com and TripAdvisor – the very fact the investigation is taking place is in itself is a shot across the bows for online booking sites.
Simpson concludes: “Even if the CMA does nothing, the big impact will be that people now are aware of what’s going on.” However, should the CMA find that site practices or claims are misleading or in breach of consumer law, it could take enforcement action.
Association of Licensed Multiple Retailers (ALMR) chief executive Kate Nicholls says: “The CMA’s investigation into the activities of online travel agencies is a welcome one and the ALMR will be liaising closely with them to represent the interests of our members. Accommodation in pubs is an increasingly important revenue stream and both businesses and customers need transparency and reliability if this part of the sector is to flourish.
“As the UK’s HOTREC (umbrella association of hotels, restaurants, pubs and cafés) representative, the ALMR has been pushing for an inquiry into online travel agencies’ practices across Europe. We have a great chance to promote pub accommodation and see these offers grow to become worthwhile alternatives to hotels, but only if we have a consistent level playing field.”
Whatever the outcome, booking sites face much more scrutiny than ever before. So watch this space.