We’ve all heard of the ‘discount’ room websites where you can compare prices and find the ‘best’ one. However, are these websites really what they seem and do they really offer any discount from the normal price, at all?
A recent and on-going investigation into ‘price fixing’ between hotel chains and discount websites, such as, Expedia and Booking.com are being accused of doing just that due to the following reasons:
- Dorian Harris, CEO of discount site Skoosh.com stated websites and hotels were working together to fix prices and claimed they prevented competition by keeping room prices high
- OFT actually launched the independent investigation back in 2010 and will report findings shortly
- Booking.com, Expedia and the hotel chain InterContinental hotel have all offered to commit to new measures, which enable greater discounts
This is quite a revelation and perhaps illustrates that instead of customers receiving a discount for rooms across hotels, they are indeed paying the equivalent of the normal price or in some cases more due to the higher price fixing. If these ‘discount’ websites didn’t exist then it’s possible to say that the cost of staying overnight in certain hotels would be cheaper in general.
How Does Price Fixing Benefit Both Parties?
When hotels find that they have spare rooms available on certain dates, they will sell the remaining capacity onto estate agents and ‘discount’ booking agencies, who then mark-up their prices by approximately 25% before offering the rooms to the public. Both the hotels and ‘discount’ websites benefit considerably in financial terms.
Not only does this method of price fixing earn hotels an increase in revenue, these high prices also help to protect reputations of hotels, which allow them to keep their prices high. In addition, competition is also kept to a minimum due to the discounted websites and high price fixing, which for consumers is a shocking revelation as they offer a false sense of actual discount. In my book, this is fraud towards consumers and false advertising.
Potential Cost to Hoteliers
Mr Harris, an hotelier, stated that on one occasion he tried to beat competition by offering available rooms on Skoosh.com at a smaller mark-up than 25%, which in turn cost him 70% of his overall business, as other hotel chains demanded he should raise the prices of rooms in order to stay in line with the rest of the hotel industry.
This is rather a catch 22 situation for Mr Harris and many others will perhaps find themselves in the same or a similar situation. By no means does this excuse the revelations of price fixing, however, it does make you realise why some will find it very difficult to get out of the whole mess.
There are many hotels that are not included on any of the discount websites, and therefore, may find their hotels less full, but they have more control of their prices and how much to charge their customers.
What Can Be Done?
Even though Booking.com, Expedia and the InterContinental hotel chain have offered to take new measure, by providing even ‘better’ discounts, can this be a trustworthy gesture and will consumers be put off by past revelations of ‘price fixing’. I wouldn’t be surprised if they lose many customers by dealing directly with hotels and trying to receive a discount through contacting the hotel.
One way of tackling this issue is to come down hard on those fixing prices and to keep check of what prices are and what they should actually be. One way to do this would be to randomly select hotels that are on ‘discount’ websites and those who are not in order to compare. Obviously star rating and location has to come into play, but this would give independent bodies the opportunity to squash the problem.
