UK hotel site Skoosh is attempting to draw Priceline-owned brand Booking.com into a bitter and very open fight over room rate policy.
In a series of articles on the Skoosh company blog, director Dorian Harris has accused Booking.com of asking hoteliers that partner with both companies to raise rates to those of Booking.com.
In some circles this is called a rate parity strategy, others give it a far more inflammatory term for a practice that some regulators are well known to frown on: price fixing.
Harris claims other large hotel sites in the same vein as Booking.com have also carried out similar tactics.
In an open letter to Booking.com CEO Kees Koolen, Harris writes:
“Earlier this year we started getting some calls from angry and confused hoteliers insisting that we were selling their rooms too cheaply. I called them back to work out what was going on and they mostly told me that Booking.com had been on to them threatening all sorts of nonsense if they didn’t either remove their hotels from Skoosh or force Skoosh to raise its prices.”
Faced, inevitably, with absolute silence from Koolen, Harris wrote a second open letter to general counsel and managing director at Booking.com in the Netherlands, Rutger Prakke.
Reiterating the accusations and questioning the logic around such activity, Harris went on:
“I’m not judge and jury here. I’m concerned for my business, my industry and ecommerce as a whole. If rate parity is allowed to take hold, I see a time where there is absolutely no discounting online at all. It doesn’t matter where anyone goes to shop for a product, the price will be the same. As I’ve said elsewhere, that all sounds very Cold War to me.”
Harris says he is in dialogue with the UK’s Office of Fair Trading over the issue and is getting regular updates as to the progress of an investigation into his claims.
Priceline is not adding any further comment at this stage, directing only to a statement Prakke recently gave to the Sunday Times:
“We are not aware of infringing any law and we have not been advised by any regulatory authority that rate parity constitutes anticompetitive behaviour.  It’s a free world and hotels can sign up or sign off with us as they wish.â€
This is not the first time Harris has chosen to grind his axe publicly, publishing the contents of an email to PR agency Siren in late-August 2010 over another disagreement.
Harris says the reason for issuing open letters to the likes of Booking.com is in the hope that it will “spark a public debate” over the wider issue of comparison and transparency of prices.
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About Kevin May
Are we talking about rate parity on the retail side or the net rate side here? It would seem to me that the hotels would be interested in leveling the playing field and finding rate parity in the net rates that they offer to their retail partners, so they offer the same hotel room to Skoosh, Booking, and Expedia for $75 and it is up to the retailer to apply a mark up. If Skoosh wants to lower the price then they can do that assuming they are willing to eat into their margin. Am I missing something?
Stephen, under the ‘law of rate parity’ there is no open discounting. No eating into margins. Everyone displaying hotels rates openly to the consumer must sell at exactly the same price.
Thanks Dorian. That clarifies it for me. I can understand the brand wanting to maintain consistency across sales channels. Lego, for example, has price parity across all retailers so whether you buy a Lego product from Wal-mart or the exclusive toy store, it’s the same price. Certainly makes it easier for the consumer but doesn’t provide any marketing benefit to the retailer because there is no exclusivity in pricing or price advantage.
Given your model, I can see why rate parity would be a bad thing for you.
Dorian: In the U.S. — and I don’t know about Europe — the hotels insist on rate parity, but the online travel agencies sell the rooms for widely divergent total prices, depending on the booking fees they charge. So very few, as you say, display “hotel rates openly to the consumer” … “at exactly the same price.”
Rate parity would certainly make things easy for the consumer in one way. You’d never need to shop around again. It wouldn’t matter where you did your shopping because all branded goods would be exactly the same price in ‘competing’ retail stores. As with Lego already it seems (except they only have a price floor, at least).
I know there’s more to commerce than price but its pretty core. I literally cannot imagine what the market place would look like without price competition. I haven’t seen that economic model. Or, as I’ve said, not since the Cold War.
Dennis, you’re right, rate parity is more widespread in the U.S. I’ve spoken with the U.S.D.O.J. and there’s a difference stance out there although a watching one it sounds like.
Right now there are companies discounting on sites in the U.S. but they’re really not contractually allowed to. Nor are they allowed to play around with services fees. Again, under the law of parity it has to be exactly the same price.
The crux of this discussion, is dealing with the parity issue as well as the behavior adopted by some of the largest distributors towards hotels and how hotels decide to price their rooms.
I have always been a strong believer in creating an equal play ground for my distributors, but when I decide to offer any single distributor advantageous terms for a specified time frame to bolster sales – why should I have to shoulder offensive behavior from other distributors.
The only way hoteliers can avoid this is to start pumping money into promoting their own distribution, and closing down third party distributors….. but who has the balls to take this step 100%.
Interesting to see what time will bring… but one thing is certain hoteliers have to maintain control over their inventory and how it gets distributed.
Hotels can easily get rateparity with our Channel Manager Cubilis.com – Manage your bookingpartners within 1 central screen,
as soon a booking has been made, all bookingsites automaticly will be updated. With our commission-free bookingengine (included in Cubilis), you can get direct bookings on your own hotelwebsite.
Less administration, safe time, get more direct bookings, connect more bookingpartners, get more control, get more revenue !
@vincent – as it’s marginally relevant to the topic, i’ll let this go up.
but really, not meant to be a plug machine here…
ok, tnx – sorry, but it was only a reply on the RATEPARITY issue, as on getting more direct bookings – Hotels need a tool to do this easily .. Tnx Kevin -
The most astonishing aspect of this story is that big old giant booking.com is sending out people to “threaten all sort of nonsense” to small hoteliers if they don’t align on a relatively small site (sorry Dorian just comparing size – wish you all the best)???
Have they got nothing else to do or is Skoosh such a major threat? The only reason why a hotelier would publish lower rates somewhere else is precisely that it’s still a small channel. If it gets bigger, they will naturally align.
is clear that OTA are beginning to protect their ‘turf’ in response to competition next year.
rate parity is very bad news for consumers as well as the middle man in the online industry.
For anyone interested there’s going to be a meeting in London next week held by the law firm DLA Piper to discuss the case under review at the Office of Fair Trading.
Details: http://www.dlapiper.com/hospitality-and-leisure-price-fixing-or-perfect-competition-how-hotels-can-avoid-being-caught-out-02-10-2011/
That meeting next week with DLA piper sounds very interesting. The attendance list alone could well be revealing…