Have you ever wondered what is going on with hotel prices? Everyone is advertising that they have the lowest prices on their website, but the prices are exactly the same to the penny? This is called “rate parity” that companies such as InterContinental Hotels Group has required its OTA (Online Travel Agents) partners to adhere.
The Office of the Fair Trading (OFT) in the UK has been investigating this issue and has just released a preliminary report. They are also soliciting comments from companies and individuals about this practice. You can read more about this on BBC’s website here and on OFT’s website here.
The inquiry started when Skoosh.com complained to OFT that the travel providers were pressuring it to adhere to the “rate parity” and not to lower the prices its charges to the customers by cutting its commission.
The commission that agents such as Expedia get for hotel bookings can be rather large, as I recently found out by having a look at the charge that the hotel put though to Expedia for my stay. The Expedia’s margin on that booking was 25%. You can read this piece here.
Of course, these OTA’s are already “discounting” hotels by offering large cashback amounts and coupons that you can use to lower your total price significantly. You can read more about getting cashback for your hotel stays here and I just wrote a piece about hotel discount coupons that you can use with number of OTA’s that you can access here.
This is nothing but price fixing by IHG, Expedia and Booking.com. And it benefits all these actors. They can keep their margins up and the IHG can keep advertising that the lowest prices can always be found on their branded websites that is rarely the case if you dig any deeper.