Two conflicting logics

Distribution agreements between hotel groups and online booking websites are under the surveillance of competition authorities, who are beginning to question the legitimacy of the rules established between the two parties.

Does an obligation imposed by hotel groups preventing online agencies from selling at a price lower than that on the website act as a barrier to competition? Is this practice harmful to consumers who believe they are getting a bargain by using online sites? Not at all! – insist commercial directors, hand on heart. By respecting "tariff parity" between different distribution channels, the hotel chain and competing online sites, hotel brands eliminate price distortions from existing when the same room is booked in the same place at the same time. This "price freedom" - widespread since the 2001 and 2003 crises - leads to confusion and the consumer belief that one will always be paying more by booking directly through the hotel's website. Nothing is preventing price rivalry between brands present in the same market: competition logic is respected, stress hotel chains.

Customers and discount websites are not of the same opinion. They feel that the price freedom is being threatened. They esteem that preventing discounters from sacrificing a part of their margins for the benefit of consumers is deplorable. Down with those Best Available Rates set in stone! Naturally, consumers would rather distributers fought with each other keeping them under pressure to lower their prices and offer the best rates. Another logic arises; that of an even more deregulated market.

The question would be almost secondary and it would suffice to let judges resolve the controversy were we not in the current context of increasing scarcity in large cities, something which is leading to alarming situations. The relationship between different hotel groups and online distributers is not exempt from demonstrations of power. The conflict between IHG, Choice and other groups against Expedia and consorts is proof. The balance achieved through these types of agreements is done so at the expense of smaller independent hotel groups who do not have the means of imposing these barriers. Online booking agencies have been quick to understand that they could go pretty far, dictating their conditions and reaping benefits along the way. It is the economic model of the independent hotel sector which is in great danger.

Moreover, we cannot ignore that the lack of hotel capacity in large destinations, favoured by internet sites, pushes prices up and leads to the temptation of a collusion between all the players in one place. This shall not occur! – guarantee Revenue Managers, but just the possibility of a tacit agreement would discredit an entire profession. It's not the moment. It always comes back to the logic of fair prices, which must be used as a reference. This price must thus be orientated and justified by the markets, encourage investment and the incite supply creation. Even more than the debate on distribution agreements, it's the cruel lack of new hotel capacity which should mobilise us.