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OTA Price Parity a wake-up call for operators

Wednesday 01, May 2019

Last month it made news headlines when the world’s two largest online travel agents (OTAs) were forcing price discounts on Australian accommodation operators, leaving a wake of confusion and distress across the industry.

ARAMA tipped off AccomNews who reported on March 3 that Expedia and Booking.com, the US online travel agents who together control the vast majority of online bookings worldwide, were pressuring operators into either setting discounted rates or matching the lowest rates of competitor OTAs.

In seeking ways to offer consumers the lowest price in the market, these sites would deploy tactics such as using rates initially bundled as special deals for wholesale distribution as a guide for parity which competitor OTAs would then demand to be matched.

This is just one example of forced rate parity which amounts to nothing but extortion. It is a brutal way to compete on price and it is detrimental to the industry, impacting individual operator margins.

The issue is compounded when OTAs threaten to ‘darken’ properties because they haven’t complied, by decreasing their online visibility and making it more difficult for customers to find them.

These tactics simply can’t be ignored and it is a timely reminder for operators to limit their exposure to them.

A race to the bottom on price just to beat up another OTA competitor is unsustainable and will affect service and quality in Australian tourist accommodation.

Consumers certainly won’t be any better off. Imagine if the prices charged were suddenly controlled by an outside entity with no interest in the suitability or sustainability of a quality tourism product.

There is no denying that OTAs play an important role in helping international and domestic consumers discover properties, however there should never be a scenario where operators aren’t in control of their own pricing.

Failure to uphold market led pricing is detrimental to any business or industry. This is a view we have expressed to state and federal government and other industry stakeholders to protect the tourist accommodation and management rights industries.

Most operators are mums and dads who are caught between these huge OTAs duking it out for market share and the only way they can protect themselves is to raise the nightly rate to try to cover the additional costs.

We are confident that the Australian Competition and Consumer Commission (ACCC) will soon act against OTA rate parity following years of sustained industry pressure.

However, as we await fundamental changes to one of the biggest challenges the industry has faced, it has never been more important for operators to evaluate their marketing practices and encourage consumers to book direct.

Those with a high percentage of business generated through direct bookings to their property will minimise the impact of OTAs and avoid having to pay huge commissions.

We recently produced a step-by-step guide on how to put a stop to forced discounting. This is available via our website arama.com.au.

Trevor Rawnsley

CEO