Questions and answers – onlineboking of hotel rooms

During 2016 the Swedish Competition Authority and nine other competition authorities, together with the European Commission, performed a monitoring exercise of the effects of various investigations conducted by European competition authorities into the online booking of hotel rooms. The results of the monitoring exercise have now been made public in a report written by the Swedish Competition Authority jointly with the other competition authorities and the European Commission.

Read the report: Report on the monotoring exercise carried out int the online hotel booking sector by EU competition authorities in 2016

Questions and answers

Why has the Swedish Competition Authority taken part in the monitoring exercise?

The Swedish Competition Authority has been part of the monitoring exercise because the authority made decisions in 2015 in two investigations of two online travel agencies in Sweden, Booking.com (dnr 596/2013) and Expedia (dnr 595/2013).

The investigations by the Swedish Competition Authority concerned so-called conditions of price parity that the online travel agencies used in their contracts with Swedish hotels. In brief, the conditions meant a prohibition against the hotels offering better prices in other sales channels than the prices that the hotels offered through the online travel agencies. This meant that the hotels could not offer consumers a lower price either through a competing online travel agency (so-called wide price parity) or through their own sales channels, e.g., their own websites (so-called narrow price parity). Similar conditions of parity were also applied in regard to other conditions relating to rooms or booking conditions, such as terms of cancellation or breakfast being included in the price of the room.

The case relating to Booking.com was closed through a decision to accept a voluntary commitment from Booking.com. As regards Expedia, the case was closed when the company changed its contractual terms and conditions.

Read more about the Swedish Competition Authority’s decision to accept the commitment of Booking.com

Read more about the Swedish Competition Authority’s decision to end the investigation of Expedia

What are the changes in the market from these changed contractual terms and conditions?

The changes that Booking.com and Expedia made to their contracts in 2015 mean that Booking.com and Expedia no longer apply conditions of wide price parity in relation to other online travel agencies. This means that hotels can post different prices at Booking.com, Expedia, and other online travel agencies. However, Booking.com and Expedia still apply conditions that restrict hotels from posting lower prices on their own online sales channels, i.e. narrow price parity.

The requirement of parity for other conditions is no longer applied.

More information on the decisions is available in the Swedish Competition Authority’s fact sheet about the decisions

Why has a joint monitoring exercise been performed by several different national competition authorities and the European Commission?

The contractual terms and conditions in question have been investigated by several national competition authorities within the EU. The Swedish Competition Authority’s investigations of Booking.com and Expedia were done in conjunction with the competition authorities in France and Italy, coordinated by the European Commission.

Booking.com and Expedia made changes to their contracts simultaneously throughout the entire EEA. The competition authorities in Sweden, France and Italy made the assessment that these changes were sufficient to overcome the competition problems identified and therefore closed their investigations.

Some other Member States made a different assessment.

In Germany, the investigation by the competition authority against the online travel agencies HRS and Booking.com led to a decision to prohibit them from applying any conditions of parity. This prohibition not only include price parity in relation to other online travel agencies, but also conditions of price parity against the hotels’ own online sales channels. In France and Austria, corresponding total prohibitions have been implemented through legislative changes. A similar legislative change is being discussed in Italy.

With the aim of analysing the effects of the various interventions, the competition authorities and the European Commission decided to perform a broad, coordinated monitoring exercise of how the conditions for the online booking of hotel rooms have developed in the ten Member States involved in the monitoring exercise.

How has the monitoring exercise been performed?

The ten national competition authorities have, together with the European Commission, collected data and information from various market players such as hotels, large hotel chains, several different online travel agencies and so-called meta search sites.

A survey has been performed among 16,000 hotels in the Member States in question, including about 1000 hotels in Sweden. Questionnaires have been sent to twenty online travel agencies, nineteen hotel chains and eleven meta search sites.

In addition, data on hotel pricing at online travel agencies have been collected from one or more large meta search sites. Price data have also been collected from the websites of the online travel agencies Booking.com, Expedia and HRS.

The Swedish Competition Authority has, together with other competition authorities, participated in the collection and analysis of the data.
What are the main results of the monitoring exercise?

Because of differences in the market conditions in the different Member States, it is hard to draw far-reaching conclusions by comparing the development in the different countries. However, the following results are particularly interesting:

In most of the countries involved in the monitoring exercise it is now more common than before that hotels post different prices at different online travel agencies, or that the hotels have different product offerings at different online travel agencies. These are important steps toward better conditions for competition between online travel agencies.

The commission rates that the online travel agencies charge to the hotels in the Member States in question have been relatively stable or slightly decreasing over the period from January 2014 to June 2016. The majority of the hotels in the electronic survey answered that there had been no significant change in the commission rates after the changes to the contractual terms and conditions.

The monitoring exercise shows that more knowledge is needed among the hotels about the changes made in the contractual terms and conditions and what they mean for hotels. Many hotels are not aware of the changes made and what they mean for their opportunities to post different prices in different channels.

Based on the results of the monitoring exercise, the Director Generals of the competition authorities in the European Competition Network, ECN, decided at a meeting in February 2017 to keep the development of the online booking of hotel rooms under review to give the market more time to adapt to the changes that the past investigations have resulted in, in order to evaluate competition within the online hotel booking sector again in due course.

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