Business

OFT moves to try to boost competitive hotel deals online

Holiday Inn
Image caption Holiday Inn's owner, IHG, will be able to tout its hotels in the UK via the internet

The OFT has made a move to try to help people access discounts when booking online, after closing an investigation into competition practice between three companies.

It investigated online agents Booking.com, Expedia and hotel group InterContinental Hotels (IHG).

The probe initially suspected the deals infringed competition law as they limited price competition.

But it has now allowed such deals subject to certain conditions.

The OFT has enabled online agents to discount the hotel's room price, to promote more competitive pricing.

Previously, the websites were unable to offer discounts.

Under the conditions, the OFT said consumers must first sign up to a membership scheme with a hotel, either of the agents, or another online agent.

Customers must have also previously booked one room at the full rate with the online agent or hotel, to be eligible for future discounts, said the OFT.

Booking.com and Expedia are two of the UK's largest online travel agents.

The OFT launched its investigation in 2010 to look at allegations that there could be agreements and concerted practices resulting in fixed or minimum resale prices.

Further monopoly?

Whether or not the move will open up competition and drive down prices is subject to some debate.

Gaucho Rasmussen, enforcement director at the OFT, said he had looked at the conditions "very, very carefully".

He said: "We did some consumer research and a significant amount of people would shop around and use smaller websites and new starters."

Mr Rasmussen said the OFT had carried out two consultations and the decision was the best outcome.

He said as the market kept changing, smaller websites could innovate and find a way to keep ahead.

'Baffled'

Dorian Harris, founder of discount booking website Skoosh, said he did not think the move would open up the market and push prices down.

He said: "I am baffled by the outcome."

Smaller companies, such as Skoosh, could not afford to change their marketing strategy and hotel contracts to accommodate the OFT's conditions, so would struggle to offer the discounts, he said.

Mr Harris says the conditions would discourage new consumers from using smaller, unknown websites rather than Booking.com or Expedia: "The OFT have not understood the market. It is a huge failure in assessment."

He said consumers would not want to pay for a full-rate room, to qualify for the discount rooms, from a new website such as Skoosh.

They would instead prefer to get the discount straight away from larger websites, such as Expedia, where customers would most probably have already bought a premium-rate hotel room from, to qualify.

He said the conditions would reinforce Booking.com or Expedia's dominance, adding the OFT had "pandered to the interests" of the two big companies.

The OFT's Mr Rasmussen acknowledged there was a chance the set-up could lead to further monopoly, but he said the OFT would be monitoring movements in the market.

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