What does the Office of Fair Trading ruling against InterContinental and Expedia actually mean?

You may have seen something in press over the weekend about the provisional ruling from the Office of Fair Trading on Friday in a complaint against InterContinental Hotels Group (IHG), the brand owner for Holiday Inn, Crowne Plaza etc.

Put simply, a small travel website called skoosh.com complained that IHG was forbidding it from discounting IHG hotel rooms on its website, by reducing its own commission and passing on the saving to customers. The OFT investigated and found that Expedia and booking.com (who had been picked out as guinea pigs) had entered into a potentially illegal deal with IHG that they would not discount IHG rooms.

OFT

Price fixing is always a difficult issue in an agency business. Many companies believe, for example, that if they appoint agents to sell a product on their behalf, they should have the ability to control the price that agent charges.

IHG was not, however, acting like a manufacturer who appoints a single agent to sell in a certain territory. They let pretty much any online travel agent list their hotels. The key issue is – should the online travel agent be allowed to discount the hotel (by giving away some of their commission)?

IHG said no, the Office of Fair Trading has said ‘probably not, but we’re so convinced we’re forcing through a remedy’ (effectively).

The OFT also claims that this strategy stops new entrants successfully entering the hotel booking market. This is a line which definitely does make sense – who would bother starting up a company to compete with Expedia etc, knowing that they could not compete on price?

IHG has made a proposal. They will let Expedia discount their hotel rooms but ONLY to registered users of the site or someone who has already bought from that site. Any member of the public visiting the booking site anonymously would still see the higher price (ie the standard price which matches that on IHG’s website).

Interestingly, IHG has one of the strongest ‘Best Rate Guarantees’ in the industry. If you book a room with them and find it cheaper online within 24 hours, your room is free (or the first night is free on a longer stay). This guarantee obviously has to go in the bin if IHG’s remedy proposal is not accepted. As it stands, the Best Rate Guarantee could continue under IHG’s proposal as their rules exclude ‘membership sites’ or rates not visible to the general public.

There will be now be a three month consultation process, during which the OFT and the three companies involved in the case will consider their responses to the IHG proposal. The OFT’s statement on this consultation process is here.

The end result of this case will definitely change the online booking landscape in the UK, although it is not fully clear how. Would hotels pull their rooms off other websites rather than have that site discount? Perhaps they would increase benefits for booking directly. Already, most chains – Hilton a bit less so than the rest – do NOT give any elite benefits or points on stays booked via third party sites.

The official OFT ruling is here if you want to know more. Other press coverage worth a look is here, here (FT, requires subscription) and here.

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Comments

  1. A complete fiddle. For next year my trip to California means I got a 1/3 off using travelrepublic for the HI SF civic and nearly half off with hotels4u for the HI LAX.. screeenscrapers are your friend for the savvy. But I guess there is a swath of people who go straight to expedia/booking.com etc believing their price promise (and hence allowing claims under Expedias BRG!)

    I am sure these sites love this price rigging to maintain their margins of 20-25%!

    • Hi Daniel. I’m curious, how do you screen scrape? Do you use a special tool? Are the results better than using a price comparison website like hotelscombined.com etc.?

  2. Do you still earn points/qualifying nights by going through a 3rd party site?

    • Generally not with the big boys, especially if the agent has a wholesale deal with the chain. If a small agent just books a room via the normal agency channels for the standard agent commission, you should get it – you will always get points on rooms booked via corporate travel agents, for instance.

      You will get points on qualifying spend outside the room rate, though. Hilton is generally seen as the best chain for letting you have your status benefits (eg upgrade, breakfast) on an agency stay, but I don’t have any direct experience of this myself.

      • Thunderbirds says:

        Raffles have you received the notification of 100% bonus points for Ambassador menbers. My e-mail just arrived.

        • Ironically, not only did I not get it, but when I log in I don’t get the offer! Someone has sent it across though.

          • Just had an email about this offer today too – I’m a mere Plat though, not an Ambassador. Will definitely consider it though, the rate sounds semi reasonable. Buying points used to count towards status previously, not sure if that’s the case any more though?

          • There is a post on this tomorrow, it got pushed back because of Call of Duty!

      • Re Hilton, I had 4 or 5 stays this year with them as a Gold, all booked though a corporate TA, and got all points and bonuses associated

    • I managed to get Club Carlson points on a booking I made via booking.com in Gdansk, intially they wouldn’t add my Club Carlson number onto the booking but I persauded them to add it.

      Got Hilton points on corporate travel agent bookings at Hilton before but for bookings made via websites like Hotels.com / Expedia Hilton are always happy to accept my Silver card (which doesn’t get me any benefits) and the bookings appear when I log into Hilton Hhonors but I don’t get any points.

      Had to stay in London the other weekend and booked a Hilton using onhotels.com, the rate was about £100 cheaper than on the Hilton website and included breakfast which the Hilton website one didn’t, giving up a few Hilton points but saving a £100 and getting a free breakfast seemed like a good deal to me.

  3. Airmiles / AVIOS have been discounting IHG properties for years. When I asked about the IHG price promise I was “reminded” that AVIOS is not open to members of the public or available in all countries….. So as posted, the notion that IHG will sell rooms at the lowest price on their own web site is not correct.

    • I had the “not available in all countries” argument presented to me when I made a valid, best price guarantee claim. My argument that it doesn’t say that in the T&C’s and that “members of the public” must mean residents of one’s own country, as it doesn’t mean “worldwide”, was ignored. I was minded to complain to the advertising standards agency but haven’t got round to it yet, maybe a referral to the OFT is also appropriate given this news. Any thoughts ?