OTAs under scrutiny from UK competition commission

UK: The Competition and Markets Authority (CMA) is to investigate hotel booking sites.

The UK’s competition watchdog said it was “concerned about the clarity, accuracy and presentation of information on sites”. The investigation will look at issues including hidden charges, search results, and discount claims. If it finds sites are misleading consumers and breaking consumer law, it could take enforcement action.

The CMA has written to OTAs across the sector, asking for evidence from both the websites and hotels, as well as seeking consumer input. CMA chief executive Andrea Coscelli said: “Around 70 per cent of people who shopped around for hotels last year used these sites and they should all be confident they have chosen the best accommodation for their needs and are getting a good deal.”

The investigation will look into how search results are ranked, and whether this is linked to the commission that hotels pay. The CMA also wants more information on whether extra charges, such as taxes and booking fees, are clearly displayed. It is also looking at the way sites display how many rooms are left or how many people are viewing a particular hotel.

The CMA says it is concerned this can be used for “pressure selling”, creating a “false impression of room availability or rush customers into making a booking decision”.

Nisha Arora, a senior director at the CMA, said: “We are concerned about the clarity and accuracy of these sites. Rather than helping consumers they may actually be making it more difficult for them.”

She said that the suggestions offered by such sites were not ranked solely on the preferences entered by the user: “When you put in your criteria – which room you want, when you want to stay – they are listed in a certain order. This is not just influenced by consumer preference but by commission – commercial considerations – and consumers might not be aware of this.”

The CMA is looking at the messages that claim to state the last time at which a similar room was booked, and those that claim a number of others are looking at the same hotel. Arora said the CMA wanted to hear how the sites gathered the information for these claims.

Coscelli said: “In today’s increasingly busy world, sites like this offer real potential to help holiday-makers save time and money searching for their ideal get-away. To do this, sites need to give their customers information that is clear, accurate and presented in a way that enables people to choose the best deal for them. But we are concerned that this is not happening and that the information on sites may in fact be making it difficult for people to make the right choice.”

The CMA expects to report back on the investigation by next spring. Any enforcement action could include asking for websites to undertake to change their practices, obtaining a court order for them to do so or, if there is a breach of an order, a significant fine.

Ufi Ibrahim, the chief executive of the British Hospitality Association, said: “The BHA has had lengthy discussions with the CMA about consumer transparency and is  delighted that the CMA is now opening an investigation into the behaviour of online hotel booking sites. Many of our members have been concerned about the vast power of online booking agencies often charging 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. Contract terms also often include ‘narrow parity’ clauses, which restrict  a hotel’s ability to offer a lower price on the hotel website than that offered to the online travel agent with which it has an agreement.”
“The online booking industry is dominated by only two companies who own 80 per cent of the European market. Expedia owns brands including hotels.com, Trivago and Travelocity while Priceline Group owns companies such as Booking,com, Kayak and Agoga. Another company HRS owns a further 12 per cent. This means that this is difficult for others to break into the market. The BHA, in submissions to the CMA, has advocated for greater transparency from OTAs, citing increases in prices for consumers and misleading information by websites. Our objective is to not to hinder the growth of the online marketplace but to deliver a fair digital market,” added Ibrahim.

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