Commerce Commission decision not enough to help NZ hoteliers

On October 28th 2016, the New Zealand Commerce Commission ended an investigation into rate parity clauses that Expedia and Booking.com have with New Zealand accommodation operators.

Previously the contracts stated that NZ operators had to advertise all rooms at the best rate with the online travel agents (OTAs).

What was the decision?

The concessions that the NZ Commerce Commission laid out in their decision, allows NZ accommodation operators to offer lower prices than those advertised on Booking.com and Expedia. It also rules that NZ operators no longer have to offer all available rooms on Expedia and Booking.com.

Why is it not enough?

Many New Zealand accommodation operators are arguing that the decision did not go far enough in stamping out anti-competitive behaviour by the two largest OTAs globally.

Properties still face ‘narrow’ rate parity clauses, where a property can not advertise lower rates through any channels, online or offline. The lower rates can only be offered via direct contact with the customer. These can only be via phone calls, walk-ins or emails. Those channels collectively account for less than 2% of the total booking market.

In the wake of this decision, smaller independent properties are the most impacted by the existing rate parity clauses. Larger groups like Hilton and Copthorne with closed member loyalty schemes can continue to offer deals that are not present on Expedia or Booking.com channels.

Why the lack of consultation with NZ Industry Groups?

Neither Hospitality NZ or Tourism Industry Aotearoa (TIA), two bodies who represent New Zealand accommodation operators, were consulted by the Commerce Commission during the decision-making process.

What is happening overseas?

So, to summarise, the current state of play in Europe and the US:

>  France – All (broad and narrow) rate parity outlawed. Previous clauses were considered “anti-competitive”

> Germany – Broad rate parity outlawed and Booking.com’s narrow rate parity clauses outlawed.

> Italy, Sweden – Broad rate parity outlawed.

> Elsewhere in Europe – Booking.com and Expedia elect against enforcing broad rate parity. On July 13th 2016, it was announced that regulators in the UK, Belgium, the Czech Republic, France, Germany, Hungary, Ireland, Italy, the Netherlands and Sweden have begun participation in a European Commission project to monitor pricing issues in the hotel sector.

> USA – rate parity clauses still in effect.

What should we consider going forward?

Although OTAs do offer a huge global channel for accommodation operators, the operators do pay for it. It is reported that around $150 million is paid in commissions by operators on bookings to OTAs every year. The accommodation industry has complained that there has been no direct benefit to the industry here in NZ, with the funds just going overseas.

If we look overseas to Europe and Canada, the dominance by Expedia and Booking.com has meant that commission rates on each booking are as high as 25%, increased from the original 10%. Currently, commission rates in New Zealand sit at around 15%, so there are justified fears that this may increase.

With Tourism being our largest and fastest growing industry, is New Zealand giving away too much to offshore interests unnecessarily?

Nik Kiddle, an operator in Queenstown is gathering interest within the industry. If interested contact him at  [email protected]